Global mining giant BHP has proposed to buy rival Anglo American in a deal that could reshape the global mining industry and have implications for South Africa through several channels. For now, details on the structure of the deal and even a final price are missing, while there are many questions as to what the ultimate impact may be, if a final deal is even reached.

Reaction to the proposed deal has so far been largely negative, with many painting it as an indictment of SA’s poor investability. However, this may not be the case depending on the final outcome. SA shareholders could stand to benefit, even if the pool of large diversified stocks listed on the JSE is further diminished.

BASELINE VIEW: Until more details on the takeover emerge, the ultimate impact on South Africa will be speculative at best.  In terms of South Africa’s Balance of Payments, there are several permutations that could be net positive from a financial flows perspective, including a straight equity swap or a deal that involves significant short-term cash inflows into South African shareholders of Anglo.