Fractures within the South African government — along with global macroeconomic uncertainty — are weighing on dealmaking activity in the continent’s largest economy, according to one of the country’s top investment bankers.

Uncertainty about a key vote on South Africa’s budget and what it portends for South Africa’s coalition government have put a damper on business confidence, according to Yasmin Masithela, chief executive officer of Absa Group Ltd.’s corporate- and investment-banking unit. That’s weighed on M&A activity despite the fact that corporate cash piles remain near records, she said.

“There are hardly any infrastructure deals in the market,” Masithela said in an interview in Johannesburg. “We are not seeing it in our pipelines. We are actually not seeing big M&A deals, big infrastructure deals coming out in our pipelines in South Africa, in particular.”

The African National Congress (ANC) formed a coalition government with nine rivals, including the market-friendly Democratic Alliance (DA), after it lost its outright majority in elections last year. Ties between the ANC and DA have frayed since February over budget proposals to increase the value-added tax rate. The DA argues it does not do enough to fire up the economy.

“We always knew that the first budget would be the biggest test of the GNU,” Masithela said, adding that the protracted process, and lack of clarity has made corporates more reluctant to do deals. “We expected we would see consolidations in different markets of businesses, but no one’s going to be doing an M&A deal now because you need relative clarity.”

Investor sentiment has also taken a knock because of concerns over US president Donald Trump’s trade wars.

Masithela said clients are also not asking for short- or long-term financing because they want more certainty about the trajectory of their business before making such a move.

Absa CIB anticipates earnings growth will be in the “middle single-digit level,” this year, compared with 6% in 2024. It largely foresees that improved growth coming from other African markets it operates in including Ghana, Kenya and Nigeria, said Masithela.

“I’m actually quite optimistic and that’s why I think we will still see growth because the markets that we are in are pivoted to actually getting the benefit of growth,” she said.

Her division plans to leverage its expertise in renewables across the continent, especially in countries such as Zambia, Masithela said.

“Remember, we started the renewables business and got really good at it in South Africa, and we are seeing that journey in other parts of Africa,” Masithela said. “Our business has understood sovereign risk and the risk management protocols of sovereign risk. That’s why we remain optimistic around hitting our targets and hitting our budgets.”