Regional focus: Africa

In the first of a series focusing on Africa, we meet some of the lawyers working on deals in this exciting emerging market.

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Africa

How do you end up with a specialism in Africa-related work? Did you have a prior connection?

Joshua Siaw, director of Africa practice, White & Case: I’m originally from Ghana. When I went into the legal profession I was doing a seat in project finance and found it very interesting. Around that time Ghana discovered huge quantities of oil and gas. It already had a growing economy, political stability, cocoa and gold reserves, but never oil.

I had been doing a lot of oil and gas work in the Middle East, but I became interested in the opportunities in Africa following these oil and gas discoveries. It also coincided with the meltdown of the global financial markets and, despite the recession, there was strong growth in Africa, with seven of the 10 fastest-growing economies in the world on that continent.

So there were opportunities and doing more detailed research I found that it was a long-term opportunity.

John Kemkers, partner, Eversheds: My involvement came in a roundabout way – I was born and brought up there, then and came to the UK for my education. I specialised in property litigation in the UK in my early years as a lawyer, but I then moved to Abu Dhabi where I worked on disputes in the Middle East and North Africa.

Bowyer
Nina Bowyer

Nina Bowyer, co-head of Africa, Herbert Smith Freehills: It was opportunity rather than design – I started out in the UK before joined the team in Paris 15 years ago when there weren’t a lot of firms doing Africa work, and loved it! It can be challenging but it’s incredibly interesting.

Andrew Jones, head of Africa, Linklaters: A week after I qualified I was sent to Bamako in Mali at six hours’ notice to join a meeting with government. I’ve never looked back and have worked in over 30 countries since.

Speaking French and understanding some Portuguese has been helpful but not essential as I work with colleagues in Lisbon and Paris to cover the countries where those languages are spoken.

Kenneth Barry, partner, White & Case: I’m a private equity specialist. In the past I focused on Europe, acting for US and European-based private equity houses across sectors – anything from consumer goods to technology to oil and gas. Over the past few years I have started focusing more on Africa: it’s become a very interesting region for private equity houses.

Africa is obviously huge – are there any generalisations that can be made about doing business on such a diverse continent?

Jones: Apart from being huge in size, the main consideration is that there are 54 very different countries. So one really has to adapt to the particular way of doing business in each country. As a general matter, you need to spend time on the ground and meet people in person if you want to get deals done.

Are there key regions or particular countries law firms are focusing on right now?

Kemkers
John Kemkers

Kemkers: Africa is a big place and it’s difficult to generalise, but in Anglophone Africa the main focus has been on the major economies of Ghana and Nigeria in the West, and Kenya, Tanzania, Ethiopia and Uganda in the East. But it’s not just about those jurisdictions.

Barry: Nigeria has historically been a lightning rod for foreign capital, but the country is undergoing pressure which is driving capital elsewhere. Ethiopia and Kenya are interesting, and some of the Portuguese-speaking countries like Mozambique are coming into focus. The investment community is broadening its horizons beyond the traditional strongholds of Nigeria and South Africa.

Jones: We have also seen lots of activity in places like Cote d’Ivoire, DRC and Gabon. But some of the most exciting and interesting deals we have been doing have taken place in smaller countries.

Kemkers: For example, Rwanda has a smaller economy but oil and gas finds combined with a stable investment environment means there has been a lot of work there.

It sounds like there is work everywhere you look

Kemkers: Of course, the risk is you go after everything, when it’s better to focus on key jurisdictions that dovetail with your expertise.

What are the challenges of doing business in Africa?

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Joshua Siaw

Siaw: A lot of people mention corruption as a challenge: my view is that you will see corruption all over the world. You have countries in Africa where corruption is lower than in certain European countries, so you have to look at each jurisdiction individually.

Barry: It’s a region that’s not without its challenges, but for private equity investors looking for assets that can deliver strong returns, so long as they have the correct risk appetite it’s an exciting region.

How much risk is there, exactly?

Kemkers: Obviously, there are issues, but I’m involved in work in Iraq, which is as an unstable jurisdiction as you can find. You need to understand the political environment you’re working in.

Barry
Kenneth Barry

Barry: With certain regions in Africa there’s more of a well-trodden path than in others. Nigeria and South Africa are well-charted waters for investment, but we are seeing more activity in Kenya and Ethiopia at the moment. Is there greater risk than plain vanilla European or US investments? Certainly. But sometimes the risks are overstated and I don’t think they are insurmountable. Many of the large US and European private equity houses view Africa as perfectly investable continent. Despite concerns they may have, they see it as a high-growth region likely to develop further.

Energy and natural resources seems to be a major stream of Africa-related work for law firms – can you tell us a bit more?

Bowyer: Power really is the big story of the day, because it is fundamental in supporting a growing population.

Kemkers: Looking at it in a simplistic way, the development cycle of a country starts with energy and so the major economies have been developing their energy infrastructure. That means oil and gas, but also hydroelectric power and renewables. Once you’ve got the power you can build roads, schools – all the things that the countries investing in their future need.

Jones: Oil and gas was historically focused around North and West Africa but more recently there have been huge discoveries off East and Southern Africa.

Bowyer: ‘Diversification’ is the word that’s going round. For example, if you’re dependent on oil and gas, when prices are low you take a significant knock so Nigeria is trying to boost its mining resources. There’s also a huge push in things like solar energy.

What about future areas of work? What are the big new developments in Africa, or specific African countries, that lawyers are keeping an eye on?

Jones: Fintech and banking are attracting a lot of interest on top of the more traditional industries – there are a lot of exciting developments in this space and our clients rely on us to keep close to them and help them as they navigate new areas of work and business ideas.

Siaw: Another exciting area we’ll see more of is sovereign wealth funds, where countries use their oil and gas revenue to invest in non-oil and gas assets to start to diversify their economies. Nigeria’s sovereign wealth fund is investing in infrastructure and other products, for example. It’s a really positive trend. Countries are using the example of Norway. There are big opportunities for lawyers to advise sovereign wealth funds.

Are there any misconceptions about doing business in Africa?

Bowyer: There can sometimes be this view that if you are working in Africa it’s more easy-going; in fact, you have to be beyond reproach in the terms of your contract. It’s an absolute myth that everything is more lax: people in those jurisdictions are very strong on their legal skills. If they need to, they will find the thing you didn’t quite get right – I’ve seen some businesses come to us where they’ve got something small wrong when they were setting up their company property, and the whole thing is starting to unravel because of it.

“There can sometimes be this view that if you are working in Africa it’s more easy-going; in fact, you have to be beyond reproach” Nina Bowyer

Is there anything students can do to prepare themselves for this sort of work?

Siaw: I know a lot of people who end up doing work in Africa who have, after university or the Legal Practice Course or finishing their training contract, gone to the continent and done some charity work and got a feel for Africa. Going there, you see there is so much need, and it is one of those fields where you can have a big impact because a lot of the projects have a public good element and change the way people live. That is something that is quite rewarding and I think once people go to Africa and spend time on the ground they usually want to go back.

Barry: I always recommend junior lawyers get a broad breadth of experience so they have their eyes open before they start specialising. But we have a lot of junior lawyers who come in and are already interested in Africa and know it’s a huge growth opportunity.

Jones
Andrew Jones

Jones: Being culturally open-minded is important and you have to be interested in the politics and current affairs of the regions – so read a good paper or magazine regularly, keep on top of what is happening in the countries. And languages are always useful.

Is there any reading material you recommend?

Siaw: Read publications like Africa Business Magazine and The Africa Report: monthly publications that focus on opportunities in Africa and what’s going on from a business perspective.

Barry: The FT is good – you can set filters for Africa + private equity if you like. Private Equity Africa is a good online resource with a periodic hard copy material. More broadly, Google is your friend when it comes to understanding what’s going on politically. If you want to find out what’s going on with Zuma in South Africa you can jump online and see the press there as easily as in the UK.

“Private Equity Africa is a good online resource with a periodic hard copy material” Kenneth Barry

Bowyer: One of the advantages of working in a large corporate firm is that we have all the right articles spoon-fed to us.

The likes of PwC and EY do annual Africa reports by sector that give a good general overview – EY has an ‘attractiveness survey’, where they take soundings from industry decision-makers that is a good perception-based analysis of where’s good to invest.

What can young lawyers expect from Africa-related work?

Bowyer: You will never have a dull day. You will travel, you’re never recycling the same old thing, you can take your experience from one country to another and you can build up an interesting knowledge pool while making a tangible difference to people’s lives. You become quite a broadly skilled lawyer – we sometimes tend to overspecialise in the UK, but working on projects in Africa, I find myself getting involved with disputes, with tax, with employment issues. Of course, I have specialists within the firm to help me but these areas all form an intrinsic part of the projects I’m working in.

Siaw: I genuinely believe Africa presents one of the most exciting and rewarding opportunities for any prospective young lawyer, because the need is so great, the market is so dynamic and it’s somewhere where you can add value and make a difference.

Investment in renewable energy

renewistock_84766025_xlargeBy 2030 it is expected that about half of Africa’s projected 1.5 billion population will live in cities and by 2050 the number living in cities will hit 1.2 billion. To put this into context, Johannesburg was the only African city with more than one million inhabitants in 1960; now there are 35.

Population growth aside, Africa’s vast natural resources make it a compelling investment destination. For example, about 60 per cent of the world’s available arable land is in Africa. Beyond minerals, oil and gas the continent has natural advantages for investments in renewable energy, particularly wind and solar.

According to data compiled by Clean Energy Pipeline $29.9bn (£22.5bn) has been invested in renewable energy projects in Africa in the past five years.

Few transactions have come close to the size of those deals in the past two years, with the slowdown in China coupled with the slump in oil prices having a knock-on effect on the value and volume of deals taking place in the African energy and power space since 2013. Indeed, the number of deals fell from 85 to 55 between 2013 and 2015, while the value of those deals fell 76 per cent, from $21.6bn to $5.2bn. Over the same timeframe the average price of a barrel of Brent crude oil more than halved, going from $108.56 to $52.53, with the figure hovering around the $30-$40 mark in Q1 2016.

This poses a dilemma for oil-producing African states, which rely heavily on oil exports for their national income. Angola and Nigeria, for example, which are among the world’s top oil exporters, derive more than 90 per cent of their export revenues from oil sales.

Nigeria’s arbitration ambitions

nairistock_57684708_largeLondon and Singapore are still the main hubs for international arbitration, but Nigeria has been attempting to raise its status in the past few years. This is in part because Nigerian businesses are increasingly seeing arbitration as a viable means of dispute resolution.

“Arbitration is gaining widespread acceptance in Nigeria, largely due to increased commercial activity and the inflow of foreign direct investment,” says Uzoma Azikiwe, head of dispute resolution at Nigerian firm Udo Udoma &
Belo-Osagie.

“Typically, investors and sophisticated Nigerian businesses prefer arbitration to litigation. This is not surprising because the litigation process in Nigeria is protracted and businesses are keen to avoid delays and the attendant costs.

As part of this focus on arbitration, a court was launched in 2012 under the Lagos Court of Arbitration (LCA) Law.

“With rules modelled on the London Court of International Arbitration and the UN Commission on International Trade Law, the LCA has the potential to enhance Nigeria’s status, but this will also require other measures in Nigeria such as improved security, a robust judicial support system and more hospitality and tourist attractions,” says Oghogho Akpata, managing partner of Templars.

However, Nigeria is not yet at a level to compete with centres such as London and Singapore, Akpata says.

“Most of the arbitrations centred in Nigeria are either domestic ones or international arbitrations arising out of Nigerian transactions or commercial arrangements,” comments Akpata. “It’s rare to find arbitrations that have no direct connection to Nigeria
being held in Nigeria.

“However, as Nigeria strives to become the commercial hub of Africa it can be reasonably projected that it will become a desired centre for arbitrations out of a number of African countries.”