Realities of Doing Business in Africa – Part 2

PPreamble art 1 of this article considers the general outlook of doing business in Africa both economically and considering common political influences. We reviewed ‘Why Africa?’, its current projections and those for the year 2020. We also considered the challenges associated with doing business in the continent. Our discussion will now continue with the challenges and some recommendations for eradicating these challenges. Local Content Laws A fast emerging trend in most lucrative markets of the African continent is the introduction of local laws which mandate the engagement of a certain level of nationals for various types of jobs including allocations within local companies, roles for the supply of goods and services, and roles for local attorneys. In Nigeria, for example it does seem like the Nigerian Oil and Gas Industry Content Development Act 2010, now established, conveys certain benefits in the Oil and Gas sector which only accrue to companies that qualify as Nigerian companies by virtue of the ownership of shares of such companies by Nigerian citizens. Indeed the local content laws have gone a long way in ensuring that the services of indigenous companies are largely utilised in the sector. It is important to mention that the Nigerian Content Development Act provides a minimum local content level for Engineering and Construction services, a standard to which all contracts in the industry are required to adhere. Practically though, despite the clear provisions of the law and the efforts being put up by the Nigerian Content Monitoring Board, companies still find a way to circumvent the provisions of the Act. A typical example is the recent dispute between Lagos Deep Offshore Logistics (LADOL) and Samsung Heavy Industries (SHI), wherein upon obtaining a contract for the building of a Floating Production Storage Offshore (FPSO) in conjunction with LADOL, SHI purported to proceed to manufacture the FPSO outside Nigeria without the input of LADOL. Unfortunately, the Court did not have the opportunity to give a ruling on the implementation of the law as this dispute was resolved out of court. It is clear that the strict adherence to the law is pertinent to the execution of Engineering contracts. However, suffice it to say that the impression that other local laws such as the long awaited Petroleum Industry Bill (PIB), create a complex local content compliance regime in the Oil and Gas sector and give foreign investors many hurdles to scale, is not correct in my opinion. The main objective of the PIB is indeed to maximize Nigeria’s benefit from its Oil and Gas assets, through the provision of an improved regulatory framework, as opposed to protecting the interest of indigenous Oil and Gas companies or international Oil companies. Local Counsel As underscored in Part 1 of this article, the legal market in most African countries is foreclosed to foreign lawyer participation, this includes Nigeria by the provisions of the Legal Practitioners Act. Despite increasing calls by a small percentage of the generality of lawyers in Nigeria, the position does not seem likely to change in any near future. Not even the ‘fly-in fly-out’ rules in India are applicable in Nigeria or other African countries. The Section on Business law of the Nigerian Bar Association in the spirit of the globalisation of legal practice have consistently advocated for the opening of the market to allow foreign practitioners have a piece of the action in Nigeria. However foreign law firms carrying out transactional works in Africa are forced to engage the services or affiliate in some way with local attorneys in the respective area they intend to deal.

The choice of local counsel, with the requisite expertise and exposure in a range of complex international legal transactions is essential towards the successful execution of transactions that correctly identify, and sufficiently comply with all applicable laws. With respect to local counsel in Africa, it is important to maintain a proactive and an interactive approach, anticipate issues and discuss them with local counsel and communicate frequently, otherwise there is a risk that the deliverables might not be ready when they are expected and could have a negative impact on the timing for the closing. Lately, there is an increasing rate of specialisation amongst African lawyers, with the emergence of big law firms with highly skilled and competitive attorneys that are at par with their counterparts in other more advanced jurisdictions. This is influenced by the simple fact that many African lawyers are now receiving all or part of the same educational qualifications from the same western universities as their counterparts enrolled at either the English Bar or the New York Bar. Many have undergone internships or have real practice experience in the big global Magic Circle law firms like Linklaters, Clifford Chance, Herbert Smith, White & Case, Allen & Overy, freshfield and a host of others. More so, in the last five years Nigerian lawyers have consistently constituted the largest number of delegates at global conferences like the International Bar Association’s Annual Conference and the Commonwealth Lawyer Conference. These platforms have created room for exchange of ideas in new global trends for handling legal transactions and creating alliances with practitioners from other jurisdictions advising clients in cross-border transactions involving Nigerian law.

Chief Richard Akinjide (SAN) once posited in his paper titled ‘Advocacy, Ethics and the Bar’, that there are three classes of legal practitioners gradually but surely emerging in the Nigerian scene, the City Practitioner, The High Street Practitioner and the Country Practitioner. The City Practitioners who are the Super elite of the profession (most of them 2nd and 3rd generation lawyers, children of Judges, Professors of law and Senior Advocates). To this class, nothing but the best is acceptable. They are unfortunately, few, but the number is growing. This class want to be at par with their counterparts in England, France, Germany and in the USA. They update their knowledge on a regular basis by attending International law conferences and operate with an up-to-date well-stocked law library. They recruit the best set of associates and paralegal with subtle marketing/PR strategy nuanced in every action they take as individuals and a firm. They are very ambitious, innovative and are determined to succeed. This Class of lawyers can mostly be found in big cities like Lagos, Abuja and Port-Harcourt (not discounting a few of them in other smaller cities). The High street practitioner is Midway between the city and the country practitioner. He is competent but not overtly ambitious. His law library is average. He is pleased with himself. The country practitioner is happy in his chosen world. He is satisfied with his bread and butter law practice because he does not know any other world, he misses nothing. He is happy with his modest achievements.

General Counsel of big multinationals when shopping for local attorneys takes these factors into consideration in line with the relevant areas of the specific transaction. As transactional lawyers, an awareness of the challenges and risks highlighted above and the development of a methodical approach to identifying them in each transaction and developing appropriate mitigation strategies thereto is essential to successfully structuring and implementing transactions in Africa.

Other challenges such as disjointed governing laws and financing still exist and so to the perception of unsophistication of the legal framework and courts in most African countries. Still, the standards are improving, with the growing demographics of young intelligent attorneys getting on board in a bid to re-shape our policy direction in the continent, we will certainly overcome these challenges. CONCLUSION. On a general note, in virtually all striving sectors in Africa, the appeal to a broad variety of investors and in-house counsel of these global players is that structuring investment will continue to assist corresponding growth, as perception of Africa as an investment destination is gradually transformed from the hunger-stricken, impoverished and conflictridden continent into one with significant investment opportunities for these global players. This includes the growing number of African corporations thriving in pan-African regions of trade such as the Dangote Group, Protea, MTN, Shoprite, Seplats. This appeal was reiterated at the just concluded Mining Indaba Conference in Cape-town, South – Africa. With high expectations from Nigeria in the General Buhari led administration come May 29, 2015, the anticipated turnaround in the Nigerian economy will attract a boom in business activity giving the relative stability in the political equation after all the tension resulting from the hate speeches and campaign. The demographic trend and the emerging middle class, the development of modern commercial laws and private dispute resolution institutions such as Settlement House, International Centre for Arbitration and Mediation Abuja (ICAMA) will result in a long term optimism that Africa will become a permanent member of advancing economic communities contributing to the global economy. Like Former President William Jefferson Clinton stated “if you ignore Africa, you do so at your own risk”.