by Simon Lewis


A guide to a better business


With Africa set to become the target of the world’s smart investment money, we polled a group of experienced legal minds about the ins and outs of doing business in Africa

“The term ‘Africa’ is often used rather glibly as if Africa is one unit when, in fact, it comprises 54 countries and a huge diversity of cultures, languages, religions and ethnic groups, as well as business opportunities and states of socio-economic development,” says Pieter Steyn, Director of Werksmans and Chairman of LEX Africa.

Africa undeniably also represents an incredible range of business opportunities, from natural resources through to dynamic technological innovation. Foreign direct investment is increasingly targeting opportunities across the continent as major international investors recognise Africa as the next great emerging market, driven in part by its burgeoning youth populations.

The continent holds many fears for the uninitiated and the uninformed while, at the same time, demanding respect and caution for anyone seeking to expand their business or invest in what the continent has to offer.

“Doing business away from your home market always has challenges,” adds Steyn. “In order to take full advantage of opportunities, it is essential to do one's homework and to fully understand the local legal, business and political climate. Prevention is better than cure.”

He highlights key important legal issues such as tax structuring, labour laws (including work permits for foreign workers), exchange controls, investment incentives, regulatory requirements and approvals, including local content and local shareholder requirements such as South Africa's black economic empowerment policies. Other challenges in many African countries include an infrastructure deficit, unskilled locals, regulatory and/or political uncertainty, unnecessary red tape, corruption and low intra-African trade and investment.

It goes without saying that a thorough due diligence is top of the priority list for any company in any country, and not just due diligence of the business, company or assets being bought.

“It is vital to ensure you have a thorough understanding of the local legal, business and political climate and culture,” says Steyn. “Getting credible information is often a challenge - especially financial information.”

He advises against adopting a ‘one-business-model-fits-all’ approach, stressing that flexibility is key - as is having reputable local business associates and advisors and avoiding a purely short-term approach.

“Identify the risks and then take steps to mitigate them,” he adds.

Nicky Garnett (partner head for Adams & Adams Attorneys' Africa Patent Section), knows first-hand the benefit of hands-on experience in Africa (as well as the challenges), having worked in this field in Zimbabwe for 10 years "at a time when nothing was easy to achieve. I believe that anything is possible and I believe that the people who work with us across the continent are as dedicated as we are to our work and our clients. In South Africa, we are so privileged to work in nice surroundings, and with full stomachs, running water and electricity - mostly! We sometimes cannot imagine how difficult it must be trying to deliver the kind of service we demand of our partners in other countries. They often do not have internet access, running water, electricity and, in some cases, they operate in areas of political and social instability," says Garnett, whose decade of experience on the continent enables her to assist clients to obtain patent and industrial design protection in all 54 countries in Africa.

"As a firm, we travel often across the continent and are familiar with the challenges faced by our partner offices. As far as possible, we try to assist by providing clear and timeous instructions and limit the input required by them," she adds. Crucial to opening up the continent is the sharing of knowledge and, to this end, Adams & Adams have achieved a first by publishing a guide to IP in Africa, with an updated version set for release mid-2018.

"The complexity of managing a patent prosecution practice in so many jurisdictions with varying laws, procedures and requirements was overwhelming when we started out. It is not easy to find information on the laws and requirements and, even when you do find information, you then have to verify it with multiple sources to check if it is correct and then see how it is applied in practise," says Garnett.

Major infrastructure development is required across the continent, but for decades Africa’s development has been hampered by an energy deficit, with an estimated 70 percent of people in sub-Saharan Africa existing without reliable access to electricity, says Ashen Jugoo is a partner in the Johannesburg office of Fasken Martineau. The firm is in a unique position to assist with energy and infrastructure related projects, as they have intimate and extensive experience working with the renewable energy industry.

“Policy reform is increasingly important as off-grid energy solutions begin to be included in national electrification strategies,” says Jugoo, whose firm has extensive experience with the financing of energy projects. “Our team can complete all the necessary due diligence with respect to the project’s existing financing, and also assist with any modifications or consents required as part of the acquisition transaction.”

Jugoo has noticed a shift in focus as clients transition from developing micro-finance solutions (which seek to finance each household or energy user) to developing financing solutions for energy service companies.

“This shift may resolve certain financing challenges, as some energy service providers may elect to pre-finance the development of the project and use bank loans to refinance their initial development costs. One of the most viable financing solutions is portfolio finance. This allows developers to seek funding for a combination of projects while prospective lenders are able to assess risk in relation to cluster of projects, rather than a single project,” says Jugoo. 

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