‘Saudi Arabia is trying to put itself on the map and establish itself as a place where international businesses want to make significant inward investments,’ says Clyde & Co’s Susie Abdel-Nabi, of the busiest Middle Eastern legal market today.

Abdel-Nabi, who is based in Dubai, leads the international firm’s dispute resolution group across the Middle East, where she has been based since 2002.

Clydes was an early mover in Saudi – gaining a presence in the market in 2009 through an association with local firm Abdulaziz Al-Bosaily Law Office, the only option at that time for international firms operating in the Kingdom.

New rules, introduced in 2023, mean affiliations are no longer enough to win work in the Kingdom. Instead, international firms must obtain foreign law licences to practise, either by setting up their own stand-alone offices in Saudi or by forming a joint venture with a local firm, in which the local firm must make up at least 25% of the partnership.

On top of this, the Regional Headquarters (RHQ) Programme means that since the start of 2024, eligible multinational corporates, including a handful of law firms, have been able to shift their Middle Eastern HQ to Saudi in order to secure an RHQ licence that enables them to bid for the most lucrative work from key government agencies, as well as to secure various other perks.

‘Saudi Arabia is trying to put itself on the map and establish itself as a place where international businesses want to make significant inward investments.’
Susie Abdel-Nabi, Clyde & Co

Both new regulations have triggered a wave of expansion in the Kingdom by international firms as they seek to win lucrative mandates from the sweeping social and economic reforms and investment set out in Saudi’s Vision 2030 strategy, which sets out ambitious plans to diversify the economy away from hydrocarbons.

So far, at least 15 firms have already secured foreign law licences, with a similar number thought to have applied but not yet completed the process. Some have ended long-term partnerships with local firms to set up alone, while others are establishing a presence in Saudi Arabia for the first time.

Several have also taken advantage of the RHQ, which is intended to support organisations’ growth plans in the country, as long as they meet various criteria, including hiring at least 15 employees, three of which are at C-Suite level and all of whom reside in Saudi Arabia, and performing certain mandatory operations such as formulating and monitoring regional strategy and having operations in at least two other Middle East countries.

While the biggest advantage to the RHQ licence is that, as of January this year the Saudi government has refused to contract directly with any foreign company without a licence, other benefits include tax relief, unrestricted visas and a ten-year exemption from Saudisation requirements, which obligate companies operating in Saudi Arabia to meet a specified quota of Saudi national employees.

With Saudi home to some of the wealthiest public bodies, institutions and sovereign wealth funds in the world, this would prohibit non-complying multinationals from accessing premium work and business streams directly from government agencies – although they could still work for other parties involved.

Firms securing RHQ licences so far include Clyde & Co, Latham & Watkins, Kirkland & Ellis, White & Case, and most recently Greenberg Traurig, which obtained its licence in February 2024.

In Abdel-Nabi’s view, the decision to take advantage of the RHQ licence was essential to the firm’s growth strategy in the Kingdom: ‘In order to work with the PIF (Public Investment Fund) and government-backed entities, it is mandated that you have your regional headquarters in Saudi Arabia. Securing our Regional Headquarters licence further cemented our dedication to our clients, specifically public bodies and government agencies that we have worked with for a very long time in the Kingdom.’

While the new regulations bring with them definite benefits, there are strict rules of compliance for international firms that may be harder for some firms to meet.

For Clifford Chance (CC), which does not have an RHQ licence but says it can still bid for projects work via its local association, these restrictions have not been an issue: ‘For a firm like ours, our offering in Saudi has scale and maturity and it is simpler for us to comply with the latest regulations,’ says CC regional managing partner Mohammed Al-Shukairy. ‘The bulk of our Saudi work is done in Saudi with the support of our global network to bring the best of both worlds to our clients.’

This sentiment is shared by Abdel-Nabi, who argues that Clydes’ long-term presence in the Kingdom makes it well-positioned to meet the conditions: ‘One of our strong points is going into challenging, emerging markets and establishing ourselves before others, and that’s given us a headstart. We have a full-service offering, and I think a lot of firms will try and play catch up.’

However, both Al-Shukairy and Abdel-Nabi think the restrictions may pose issues for firms without a longstanding history and presence in the jurisdiction. ‘I think problems may arise for law firms with a far smaller presence in Riyadh if they need to export a lot of the work outside the Kingdom, as that is an area of focus for the regulators,’ says Al-Shukairy. He further adds that many clients value firms engaging with and handling work on the ground in the Kingdom. ‘Saudi clients also want to see skin in the game with a strong presence on the ground and be true partners to our clients. This enhances one’s ability to organically build and strengthen these client relationships. That’s really our mantra at Clifford Chance in Saudi.’

Abdel-Nabi adds: ‘It will be interesting to see how new entrants into the Saudi market – who have traditionally had a fly-in, fly-out approach – are able to balance their work and comply with the regulations.’

With numerous new market entrants to Saudi, some question how they will all navigate an increasingly competitive legal landscape. The Saudi Ministry of Justice announced in October 2023 that it had granted 15 licences to foreign law firms, and this number increased further when Gibson, Dunn & Crutcher and Norton Rose Fulbright both received licences at the end of last year, while Quinn Emanuel Urquhart & Sullivan and Simmons & Simmons secured their presence in 2024.

‘The reality is, there are not enough people to meet the in-country native lawyer requirements in Saudi, so there has been a push for training to catch up.’
Sara Khoja, Clyde & Co

Lateral recruitment

This competition is creating a battle for talent as firms endeavour to comply not only with the quota for Saudi nationals set out in the foreign law licence stipulations but also with client demand for local expertise.

As Abdel-Nabi stresses: ‘Based on our experience, having been in the Kingdom for over 15 years, Abdulaziz Al-Bosaily, our managing partner, has been instrumental in our growth. He’s a Saudi national plugged into what’s happening in the market and has the experience and credibility clients want to see. If a client has a Saudi dispute, they want a Saudi partner and want to know their counsel know what they’re doing. If you’ve got a credible, established name, it opens doors and delivers positive results.’

As a result lateral partner recruitment is booming, with frequent changes between firms.

For example in 2023, Addleshaw Goddard bolstered its Riyadh presence with a flurry of hires, including Ibrahim Siddiki (formerly at Bracewell) and Homam Khoshaim and Amar N Meher from Latham & Watkins. The firm also hired Christian Both, formerly of AS&H Clifford Chance, who subsequently left in June this year to join local independent leader Khoshaim & Associates.

Kirkland’s newly established Saudi offering features seasoned Saudi lawyers Noor Al-Fawzan, previously of Latham & Watkins, and Manal Al-Musharaf, a former White & Case local partner, who offer M&A and capital markets expertise respectively.

Gibson Dunn, meanwhile, hired a team of seven local partners from White & Case and its former associated firm in 2023, including Megren Al-Shaalan, the managing partner of White & Case’s former associated Saudi law firm. This came as part of a wider regional play by the US powerhouse which has added 14 new partners and 19 new associates to its Gulf offices over the past 18 months.

Highlighting the extent of the war for local talent in the market, when Herbert Smith Freehills (HSF) became one of the first international firms to receive a foreign law licence, having previously practised in the Kingdom under an association with The Law Office of Mohammed Altammami (LOMAT), Norton Rose Fulbright formed its own association with LOMAT, acquiring all but one of its lawyers for the new partnership. This left HSF’s Riyadh office with just Saudi partner Joza Al-Rasheed, who continues to lead the office today.

In December 2023, Norton Rose Fulbright received its foreign law licence and dissolved its association with LOMAT but retained the lawyers, who are now part of Norton Rose Fulbright, with Altammami currently serving as head of Saudi Arabia.

Sara Khoja, head of the MEA employment group at Clydes, comments: ‘The reality is, there are not enough people to meet the in-country native lawyer requirements, so there has been a push for training to catch up. We’re seeing a lot of entrants into the market starting from day one with this policy and agenda. Some firms even have scholarship programmes, where they send candidates to the US or Europe to get qualified and gain experience before bringing them back to the Kingdom. There’s a lot of investment.’

Local firms are also having to navigate an ever-changing legal landscape. Addressing the increased presence of international firms in the Kingdom, Rima Mrad, a corporate and M&A partner at BSA Ahmad Bin Hezeem & Associates (BSA), a firm with offices in Saudi Arabia, the UAE, Iraq, Lebanon and Oman, says: ‘There’s a lot of competition in the legal field. The presence of Magic Circle and international law firms is pushing the expertise in the Saudi legal market to another level and is elevating the quality of legal services provided.’

BSA’s head of banking and finance Arsalan Tariq also notes that while new regulations attract new players, they also generate substantial work. ‘When laws are issued, there is a need to interpret them for companies and multinationals practising or intending to practise in the Kingdom. This means as of now there is a huge demand for lawyers in the jurisdiction. So, while more firms make it more competitive, the piece of the pie is also increasing because of the activity taking place.’

Some local firms have capitalised on the increased movement and investment in Saudi Arabia and the opportunities this brings. Khoshaim & Associates, which has offices in Riyadh and Jeddah, was associated with legacy Allen & Overy (A&O) from 2012 until they mutually parted ways in 2020. Khoshaim managing partner Zeyad Khoshaim emphasised that Vision 2030 and the need for independence to effectively and comprehensively advise multinationals investing in the Kingdom were key reasons for the decision to split from A&O in 2020 in press articles at the time.

‘When laws are issued, there is a need to interpret them for companies and multinationals practising or intending to practise in the Kingdom.’
Arsalan Tariq, BSA Ahmad Bin Hezeem & Associates

Boom times for tech and construction

As regulations increase and more multinationals enter the Kingdom, firms are taking on more diverse mandates. Mrad notes that BSA’s work has significantly broadened over the past four years, moving beyond litigation and corporate work for Saudi and international clients. Now, the firm caters to a wider range of clients, including many new investors and multinationals active in emergent sectors. ‘We are working a lot with companies who were historically active in the region but did not have a direct presence because of the previous restrictions. The newcomers include businesses active in various sectors, but mainly e-commerce and technology,’ says Mrad.

The Saudi state is targeting markets such as China and Silicon Valley for potential investment, with a particular focus on big technology companies and start-ups, with press reports suggesting they are being encouraged to set up in Saudi in return for investment. Alongside Silicon Valley, Shenzhen is considered crucial for the Kingdom to develop its emerging AI industry.

Mrad describes how technology start-ups have become a feature of the Saudi market and BSA’s work: ‘There are various new technology start-ups considering the region as a base. They are coming from the US and Europe and mainly looking to start developing their products in countries like KSA or UAE, benefiting from the various sandboxes and initiatives from the government. Such initiatives include facilities and different types of support for legal, practical and operational needs.’

The technology piece is especially important to Saudi due to the scale and complexity of the giga-projects currently under development. The need for skill and technology is essential for Saudi Arabia to achieve its Vision 2030. Clyde & Co’s Khoja comments: ‘A lot of these projects are government-led, and there is a need to have more private sector involvement for there to be a transition away from a state economy. This is why there’s such a focus on start-ups and trying to get people to set up companies.’

The infrastructure focus of Vision 2030 and desert city Neom means construction work is also keeping firms busy in the Kingdom. As Abdel-Nabi comments: ‘We have been active on mega projects from their inception, and clients continually return to us throughout the project lifecycle.’

‘Although equity capital markets have slightly softened compared to debt capital markets, there are still some very interesting opportunities, and we continue to act on a number of IPOs in the UAE.’
Mohammed Al-Shukairy, Clifford Chance

Where next?

With so many firms already active in Riyadh, many are already moving to expand elsewhere in the Kingdom. Clydes, for example, joined the likes of Dentons and Ashurst when it established a Jeddah office in May 2024.

BSA also considers Jeddah as an area with real opportunity. ‘We actively work outside of Riyadh for two major work streams: M&A involving companies present across Saudi, particularly in the energy sector, TMT, and litigation,’ says Mrad. ‘We have our internal arrangements to manage this from our Riyadh office, but in our long-term plans we have an interest to set up an office in Jeddah because of the active commercial scene and the fact we have various clients, particularly those involved in the pharmaceutical and education space, based in Jeddah.’

UAE

Saudi Arabia’s ambitious Vision 2030 strategy, combined with the ramifications of the RHQ programme, effectively pits the Kingdom against Dubai and the UAE. Partners stress though that while the Kingdom is winning many of the headlines right now, the UAE remains active.

‘Dubai has something of a halo effect on a global scale and has boomed over recent years,’ says Addleshaw Goddard’s Middle East head Robin Hickman. ‘Riyadh has its RHQ programme to ensure businesses are moving their operations to the Kingdom and this has helped the Kingdom achieve its ambitious plans, but Dubai still thrives. It’s in the best position it’s ever been in and is a real hub for the region.’

The region moved earlier than Saudi to introduce sweeping regulatory reform to facilitate the growth and appetite of multinationals operating in the jurisdiction, and in the past year the government has made significant amendments to a number of federal laws.

As Mrad comments: ‘The government is constantly hearing the challenges facing investors and addressing these. The legal amendments are issued to enhance and create more appetite for international investors and to provide more clarity on the stability for foreign investments in the jurisdiction.’

Law firms report growth across all practice areas in the UAE, with M&A and private equity particularly thriving. Al-Shukairy comments: ‘Our M&A and private equity focus not only reflects the presence of some very active financial investors in the UAE, particularly in Abu Dhabi, but also strategic players in the UAE who are looking to expand their business operations and get exposure to markets outside the Middle East.’

With asset managers and hedge funds setting up headquarters in the jurisdiction, the fund space remains a core area of activity for firms. In 2023, Addleshaws and White & Case were among the many firms making a play to further enhance their fund formation and management offering in the UAE, with the former hiring Philip Dowsett from Dechert and the latter Phillip Sacks, also from Dechert. Both individuals now head their respective practices.

Banking and finance has also been a strong performer, across both acquisition finance and capital markets. ‘We’re seeing a lot of strong issuers taking advantage of capital markets,’ says Al-Shukairy. ‘Although equity capital markets have slightly softened compared to debt capital markets, there are still some very interesting opportunities, and we continue to act on a number of IPOs in the UAE.’

Meanwhile, real estate and hospitality disputes remain prominent in firms’ work in the UAE. Abdel-Nabi explains that hospitality disputes are cyclical, typically emerging when hotel owners seek new operators every few years, often leading to conflicts. ‘At the moment we have some really interesting cases brewing for some significant hotel sites,’ explains Abdel-Nabi.

Mrad adds that BSA is seeing a similar trend, with a growing focus on real estate and bankruptcy issues. Its bankruptcy practice is expanding due to the UAE’s updated laws, which are expected to drive more restructuring work. Insurance disputes have also increased, partly due to severe weather events causing supply chain, landlord-tenant, and various industrial issues.

Employment practices are also busy, reflecting the jurisdiction’s increasing sophistication and regulatory changes. Khoja notes that for many employers, there is a careful balance between the global integration of best practice and complying with the ever-changing local landscape: ‘You have multinationals who want best practices and consistency across all their global offices, whether that be contracts, policies or benefits. Very often, the advice they seek is how to achieve this whilst still complying with the rules and protecting the company from a legal perspective.’

There is also rising demand for lawyers with tech and digital expertise, with Abdel-Nabi pointing out ‘we’re seeing a lot of exciting and interesting activity around crypto and fintech’.

Addleshaws’ Hickman adds: ‘Dubai is a very smart and entrepreneurial city, and the opportunity to move into the digital space is not being missed either here or in the wider region. We’ve made big investments in fintech, finreg and data and are building out our partnership in this space.’

Qatar

If things are positive in the UAE and Saudi, Qatar has proven to be a difficult market for some law firms. In 2023, Simmons & Simmons became the latest international to withdraw from Doha, following in the footsteps of firms such as Squire Patton Boggs, HSF, CC, Latham, Hogan Lovells and Baker Botts in previous years.

Those remaining include White & Case, Dentons, Clydes, Eversheds, DLA Piper, Pinsent Masons and Addleshaw Goddard. Addleshaws’ Hickman expands: ‘There aren’t many international firms still on the ground in Qatar, as a lot of firms that opened in the jurisdiction subsequently left. It’s a small country with only a few million people, and whilst it’s an extremely wealthy state on a per capita basis, it’s not a big legal market by any means. It’s challenging for many firms to have strong offerings there.’

‘There’s a real opportunity for us to be the go-to firm in Qatar for complex work particularly given the lack of competition.’
Robin Hickman, Addleshaw Goddard

Squire Patton Boggs said that its Doha office closure was part of a strategy to ‘invest in growth elsewhere on the Arabian Peninsula’, while HSF stated it could ‘continue to provide the quality and breadth of service to clients in Qatar’ from other offices.

Khoja observes that while exits have been a trend in Qatar over the past decade and work streams fluctuate, the jurisdiction remains active. ‘We have seen a few international law firms exit the market, but at the same time, there’s a fair bit going on. Admittedly, after the World Cup in 2022, many were wondering what was coming next, but there’s still a big stimulus in the gas industry, and many energy companies are upping production and bringing new people in.’

Hickman adds that Addleshaws has a specific strategy for Qatar and is looking to capitalise on favourable opportunities in the country. ‘We’re not looking to be completely full service, and instead are looking to double down on corporate, finance and construction work. Those are the core areas we intend to build out, and we see that there’s a real opportunity for us to be the go-to firm in Qatar for complex work particularly given the lack of competition.’

Oman

In Oman, there is a big government push to increase tourism, as Tariq comments: ‘Oman is growing towards achieving its Vision 2040 and looking at pivoting away from the oil business, much like Saudi Arabia. The sectors they are looking for investment [in] are logistics, marine and tourism.’

Tariq describes substantial real estate activity, with the government aiming to develop a new Muscat Downtown that will feature a number of luxury properties and hotels, as well as high-rise buildings. ‘The laws in Oman have changed as they look to allow foreign investors to come and deliver in the jurisdiction. As a result, many Dubai developers are expected to turn their attention to Oman. Omani companies in the construction space may not have the experience delivering high-rise buildings; the largest structure in Oman today is only 13 floors and was constructed a long time ago.’

Elsewhere, BSA also has offices in Lebanon and Iraq which, according to Mrad, are specifically tailored to service the firm’s longstanding clients still active in the respective jurisdictions. ‘In Lebanon, most of our clients are international energy clients who started operations in the country, and some are quite active, especially after the new government assignments in this field. Other than that, it’s litigation, M&A involving entities with presence in Lebanon, and retainer services to some international airlines that act in the jurisdiction.’

Mrad continues: ‘In Erbil, our operations before the political turmoil were much more active than today. At that point in time, we handled a lot of real estate, energy, and infrastructure projects for various US and European oil companies. However, since then, our practice in Erbil has changed drastically. Private sector operations dropped tremendously, and at the same time our oil and gas clients limited their presence to a streamlined team essential to their work and largely moved to other places in the region. We service these teams, as well as regional clients if they happen to have work in the jurisdiction.’

Türkiye

Türkiye retains close connections and synergies with the Gulf and deal and capital flow has steadily increased over recent years. Turkish industrial players are active in the region, especially in the context of infrastructure and projects in Saudi Arabia and the UAE, and Turkish banks are very interested in funding and financing operations, both inland and in the marine space.

2023 was of course a disrupted year for Turkish businesses as the country grappled with the impact of the country’s devastating earthquakes last February, as well as uncertainty around the presidential and parliamentary elections in May. However, the new government has implemented a robust economic strategy to address past macroeconomic imbalances, particularly high inflation.

Despite the unstable market conditions, Türkiye’s pro-foreign investment regime has enabled M&A and PE activity to remain fairly steady. Chinese and Russian companies continue to have an appetite to invest in the country, and start-ups have done particularly well. Emerging sectors such as software development and gaming have witnessed a steady increase in M&A activity, requiring corporate and IP teams to work closely together, with digital banking and fintech also areas of promise. LB

The post MENA focus: Middle Eastern dreams appeared first on Legal Business.

With the Covid pandemic now firmly in the past, the Middle East has been enjoying a return to form, with activity levels up across the region and many law firms – both local and international – in expansion mode.

On top of all of the investment driven by last year’s World Cup in Qatar, the wider Middle East region has benefited in the wake of Russia’s invasion of Ukraine, with global oil prices soaring, boosting revenues in oil-rich nations such as the UAE, where oil exports account for around 30% of GDP.

The ongoing war has also had an additional knock-on impact on the UAE, with its position of neutrality generating an influx of Russian money, alongside increased migration from Russia and Ukraine. This investment, combined with a general increase in foreign direct investment across the Middle East, has resulted in an increase in corporate structuring and set-up work.

Following the meteoric rise of the neighbouring Kingdom of Saudi Arabia, which overtook India as the world’s fastest growing major economy with a growth rate of 8.7% in 2022, the UAE is aiming to encourage further overseas investment and non-oil expansion of its own.

Meanwhile, improved relations with Qatar and Iran and the opening of economic opportunities with Israel are expected to result in an increased flow of work into the UAE.

UAE market reform

As Middle East nations try to diversify their oil dependent economies through large-scale renewable energy, construction and real estate projects, they are courting international financial investment.

As part of this drive, the UAE has been modernising and liberalising its laws. Afridi & Angell corporate and commercial partner Danielle Lobo explains: ‘It is clear that these legal reforms are not just to encourage inward investment into the UAE, but also to ensure that it has a suitably developed and robust legal and regulatory environment going forward.’

From a corporate and commercial perspective, the most comprehensive regulatory evolution has been the new Federal Commercial Companies Law, which came into force in February 2022. One of its more remarkable elements was the abolition of the Emirati majority shareholder requirement, a move which raises opportunities for overseas investors and which is expected to help further drive a bounce-back in M&A activity in the region, particularly in key sectors such as tech and cyber.

For Sadiq Jafar, managing partner of Hadef & Partners, ‘the key legislative change of 2023 is corporate tax’. A new decree has introduced a 9% corporate tax rate from June 2023, with exemptions in many of the free zones. Following the introduction of VAT in 2018, this is another step for the UAE in attempting to increase non-oil revenue. Jafar predicts a ‘substantial demand from clients who need to assess the effect on their business’, with ‘extensive corporate and commercial structuring required’, as well as ‘UAE related transactions now needing to be designed and documented to optimise for tax’.

‘These legal reforms are not just to encourage inward investment into the UAE, but also to ensure that it has a suitably developed and robust legal and regulatory environment going forward.’
Danielle Lobo, Afridi & Angell

Lobo adds: ‘This will not only generate work in its own right throughout 2023, but also impacts the practice of other areas such as M&A, where there will be a move towards more robust tax covenants and warranties.’

At the same time, firms are also benefiting from an overhaul of labour and residence laws, which have boosted employment and immigration work over the last year.

When the new Labour Code came into force in February 2022, it replaced a system that had been in place for more than four decades. With changes to laws surrounding fixed-term contracts, terminations and an abundance of other employment matters, firms’ employment practices have been advising clients on how to ensure their businesses comply; from redrawing contracts and handbooks, to shifting policies.

Luke Tapp, head of Pinsent Masons’ Middle Eastern employment offering comments: ‘The implementation of the new Labour law has been extremely positive for international and regional clients operating within the UAE. This is a major milestone development and will only increase and improve working arrangements, as well as help businesses within the region to attract and retain world class talent.’

Another consideration for large employers is the government’s push for Emiratisation. This initiative aims to increase the contribution of UAE nationals to the economy by upping their proportion in the workforce.

From January this year, private sector employers registered with the Ministry of Human Resources and Emiratization (MoHRE) with more than 50 employees have been required to ensure that at least 2% of their workforce are nationals. Residence laws have also been overhauled, with a new range of visas, introduced in September 2022, loosening the link between rights to reside and employment. These amendments were intended to attract skilled workers and their families to the UAE.

‘The UAE’s new Labour Law is a major milestone development and will only increase and improve working arrangements, as well as help businesses within the region to attract and retain world class talent.’
Luke Tapp, Pinsent Masons

Separately, efforts have also been made to update laws around data protection, cyber crime and digital assets, signalling to large international businesses that the region is at the forefront of such innovations, as Gulf states look to diversify their economies by embracing technology and cyber-related sectors.

‘The digital future is playing a pivotal role in the landscape of the Middle East,’ says Tapp, observing the growing influence of technology in the UAE and adding that ‘Dubai is emerging as a critical hub for designing the future of the globalised digital economy.’

Afridi & Angell’s Lobo predicts that ‘the digital asset space is likely to be an important sector moving forward, as the UAE positions itself as a hub for blockchain and virtual assets’, with IP work also likely to surge in response to updated trade mark laws. Tapp, meanwhile, adds that: ‘cyber security is at the forefront of people’s minds and there is an increase in demand for such services’, with new laws seeking to crack down on false advertising and criminalise the unlicensed trade of cryptocurrencies.

Law firm expansion in the Middle East

But it is not just the UAE that is busy. Recent months have seen significant expansion by international firms into Saudi Arabia. The kingdom dramatically altered rules governing how law firms operate in the country last year by amending the Saudi Code of Law Practice. The changes, which are due to come into effect in the coming months, mean firms have to end any existing affiliations with Saudi law offices if they want to continue to work there. Instead, they will be able to set up their own firms offering non-Saudi law advice, or practice local law via joint ventures with Saudi firms, as long as they abide by the strict new licensing rules.

The move has already led to a wave of expansion news from international firms. In March this year Squire Patton Boggs announced that it would be ending its affiliation with its existing partner and opening its own office through an alternative cooperation with The Law Office of Looaye M. Al-Akkas. Greenberg announced that it would be entering the region, while Latham & Watkins, Linklaters, Herbert Smith Freehills (HSF) and Clifford Chance are among the international firms to have been granted licences to practise, although several of HSF’s Saudi lawyers have since been recruited by rival Norton Rose Fulbright.

Addleshaw Goddard, meanwhile, has confirmed it is applying for approval to open in Riyadh – a launch that will mark its fourth office in the MENA region.

The new code means that foreign firms wishing to practice Saudi law have to be structured as joint ventures, with registered Saudi partners holding at least 25%. At least two partners representing the foreign firm must live in Saudi, at least half of the lawyers must be Saudi and at least 70% of fee income must remain in Saudi. Licences will have to be renewed every five years.

The expansion is not confined to Saudi. Gibson Dunn has added a second UAE office in Abu Dhabi, while Baker McKenzie opened UAE offices in Dubai and Abu Dhabi last year after splitting from its former Gulf partner firm Habib Al Mulla in the wake of a social media scandal involving the local firm.

Overall, the legal landscape for both domestic and international firms is incredibly promising. As Jafar comments, the UAE ‘has witnessed significant growth and development in recent years’, with the thriving business environment leading to ‘international firms establishing or expanding their presence, particularly in Dubai or Abu Dhabi’.

Clyde & Co is another firm that has been expanding significantly in the UAE as well as the Middle East more broadly. The firm secured a 13-strong team from PwC in Dubai in June, expanded its Riyadh offering and has also launched in Cairo. The new offering in Egypt, Barakat, Maher & Partners Advocates & Legal Consultants, will operate in association with Clyde & Co.

This expansion into Egypt comes against a backdrop of instability in the country, where the flotation of the Egyptian pound in October 2022 initially took the currency down to a record low against the US dollar. However, the country continues to be viewed as a gateway to North Africa and M&A and private equity activity has picked up in response to investor demand in the region.

Elsewhere in the Middle East DLA Piper strengthened its long-established Oman presence by entering into a collaboration with Mehdi Al Lawati Law Office (Al Lawati Law), an Omani law firm led by managing partner Mehdi Al Lawati.

‘The UAE has witnessed significant growth and development in recent years, with the thriving business environment leading to international firms establishing or expanding their presence.’
Sadiq Jafar, Hadef & Partners

Oman, which like many Middle East nations is attempting to diversify its economy away from oil and gas, is on track to become the sixth largest exporter of hydrogen in the world and the largest in the Middle East. Other firms in the country include Kennedys, which opened in 2021, Dentons and Addleshaws.

While firms are expanding across the Middle East generally, Tapp argues that the UAE remains the strongest legal market, followed by Saudi Arabia and Qatar.

Whether looking at the legal or economic markets of the UAE and wider Middle East, the impetus is very much geared to the future. Whether it is the modernisation of laws on the UAE’s 50th anniversary, Saudi’s ambitious Vision 2030 projects, or Qatar’s continued growth following the 2022 FIFA World Cup, new policies are aimed at placing these states at the forefront of the global economy in the coming decades. As these plans continue to materialise, the need for legal services is only going to increase, with both domestic and international firms set to play an instrumental part in their success. LB

MENA 2023: Top-tier firms by country and sector

MENA 2023: top 20 firms by Total rankings and by top-tier rankings

North Africa 2023: top 20 firms by Total rankings and by top-tier rankings

The post MENA focus: From the World Cup to the world stage appeared first on Legal Business.

As the world moves on from the pandemic and growth is firmly back on the agenda at law firms, the impact of the global geopolitical uncertainty triggered by Russia’s invasion of Ukraine and soaring energy prices is shifting firms’ focus when it comes to international expansion.

The Middle East, where rapid vaccine rollouts mean economies bounced back earlier than Europe and where construction is booming under ambitious state-backed investment plans, is inevitably a focus for many.

But where in the past attention focused largely on the UAE, Saudi Arabia’s Vision 2030 means that it too is receiving increased attention from international firms, raising the prospect of increasing competition between the two markets.

Saudi Arabia

In October 2021 listed UK law firm DWF became one of 44 multinational companies, including the likes of PwC and Siemens, confirmed by the Ministry of Investment of Saudi Arabia to have received licences to open in Riyadh as part of the Future Investment Initiative.

The firm joined a growing roster of international players entering the Saudi market in response to the Kingdom’s efforts to make itself a more attractive destination for global corporates, their employees and their families, who in the past may have been reticent about relocating to the country, despite the fact its vast petroleum resources make it one of the largest economies in the Middle East.

Vision 2030 also sets out ambitious plans to diversify the Saudi economy, weaning it off its reliance on the oil sector through a vision built around three pillars: an ambitious nation, a thriving economy and a vibrant society. This plan, which is expected to generate significant investment in the Kingdom and construction work, is also intended to improve perceptions of the country, making it more competitive in the Middle East.

DWF joined a growing roster of international players entering the Saudi market in response to the Kingdom’s efforts to make itself a more attractive destination for global corporates.

Firms with regional headquarters in Saudi are hoping to pick up some of this work. DWF’s licence, announced at the same time as it confirmed an association with local law firm Al-Ohaly & Partners, will also allow it to offer services provided by its alternative legal services provider Mindcrest and Connected Services under DWF Arabia to clients in Saudi and across the Gulf.

Sir Nigel Knowles, group chief executive at DWF Group, said at the time: ‘The ambitions set out by Vision 2030, will transform both the Kingdom and the wider region and are consistent with our goal of creating job opportunities and contributing to the diversification of the Saudi Arabian economy. DWF Arabia and Al-Ohaly & Partners will work closely with our existing teams in Doha, Dubai and globally.’

Other firms also hoping to benefit from Vision 2030 via launches and expansion include US firm Curtis, Mallet-Prevost, Colt & Mosle, which launched in Saudi through an association with newly-formed local outfit Trafua Legal Consultants last summer, and HFW, which launched a transactional practice in Riyadh through the hire of ex-Baker Botts partner Euan Pinkerton in October last year.

Meanwhile, Latham & Watkins added Vinson & Elkins’ former Dubai managing partner Ahmed el-Gaili to work within its associated Riyadh operation – the Law Office of Salman M. Al-Sudairi – last summer. El-Gaili added significant expertise in big-ticket M&A, as well as large-scale energy projects in Saudi Arabia and across the region.

More recently, Herbert Smith Freehills (HSF) announced the hire of Joza Al-Rasheed as a corporate partner in the Riyadh base of its associated firm, the Law Office of Mohammed Altammami (LOMAT).

Other key firms operating in Saudi include Baker McKenzie, Dentons and Clifford Chance (CC), as well as significant local players Khoshaim & Associates, Derayah LLPC – Saudilegal and regional powerhouse Al Tamimi & Company.

Firms operating in the country have already benefited from an uptick in transactional mandates across the board, including banking and PPPs linked with the Public Investment Fund and real estate giga projects such as the NEOM smart city.

UAE

But while Saudi Arabia may be on a mission to raise its profile with the global business community and is already attracting more investment from international firms, the UAE’s position within the Middle East does not look to be under threat just yet.

Its economy bounced back in 2021 largely due to a successful vaccination programme and a reduction in OPEC+ oil production cuts.

Many legal reforms were introduced in the ‘Year of the 50th’, showcasing further signs of a shift from a Shari’ah-based legal system to a more secular system. Over 40 laws were introduced, including the decriminalisation of suicide, cohabitation of unmarried couples and reforms to intellectual property rights and laws. These legal reforms will further bolster the economy as the authorities continue efforts to create a more favourable business environment and improvements to social equality.

Both Dubai and Abu Dhabi remain key legal hubs in the Middle East and both international and domestic law firms have been very active. Practice areas that remain the busiest for law firms include construction arbitration, front-end construction, debt capital markets, TMT and project finance. With the World Expo and the region’s diversification goals to reduce its reliance on hydrocarbons, there continues to be a strong demand for legal services in the UAE.

Examples of firms expanding in the region in recent months include Reed Smith and Norton Rose Fulbright, which late last year added well-known corporate partner Zubair Mir from HSF in Dubai, where he headed the Middle East practice. Taylor Wessing confirmed earlier this year that it would be adding Al Tamimi head of corporate commercial Abdullah Mutawi to head its MENA corporate team, when his notice period finishes.

Qatar

Elsewhere in the Middle East, Qatar remains one of the most prosperous nations, mostly off the back of its colossal export of oil and gas (particularly liquid natural gas), and it has the third-largest reserves in the world. Its natural resources accounted for 60% of its GDP last year.

The country has invested a sizeable amount into developing key construction projects, developments and entertainment facilities in the run-up to the 2022 FIFA World Cup, which is due to take place at the end of this year. Key areas of growth include social infrastructure, healthcare and manufacturing. On the contentious side, lawyers have been kept busy with an increase in construction-related disputes, particularly in relation to supply chain and contractual disputes.

The ending of the Qatar blockade has seen a promising start to regional reconciliations among the GCC countries. Market leaders in the Qatar space include Doha-based international firms Simmons & Simmons, White & Case and Dentons. Regional firm Al Tamimi & Company In Association with Adv. Mohammed Al Marri is also of note, alongside other well-established local outfits, including Al-Ansari & Associates.

North Africa

Firms’ growth hasn’t just been limited to the Middle East though. Activity has also increased in Northern Africa, where many economies have remained resilient.

In Egypt, firms report their businesses are operating at full capacity again after a slowdown in activity at the start of the pandemic, with many working on the building boom prompted by the country’s new cities, which are intended to push eco-friendliness into everyday living.

Energy remains a driving sector in the market, with renewable energy projects, particularly in the field of solar energy constituting a major field of investment. Green hydrogen is also an emerging area of interest in this sector.

Egypt’s legal market remains stable, having stayed away from major partner moves and mergers amid the pandemic. Founded in early 2020, Khodeir & Partners continues to make a name for itself, while ADSERO-Ragy Soliman & Partners demonstrates rapid growth in several practice areas including commercial, corporate and M&A as well as banking and finance. Constituting another promising young firm in the market, Mazghouny & Co has particular strengths in projects and infrastructure and energy, being led by former Shahid Law Firm partner Donia El-Mazghouny. Al Tamimi & Company has expanded its expertise into the maritime sector by opening a new office in Port Said in early 2021. Meanwhile, longstanding firms such as Zulficar & Partners Law Firm, Zaki Hashem & Partners, Attorneys at Law, Shalakany Law Office, Matouk Bassiouny & Hennawy, and Shahid Law Firm remain strong players in the market.

Egypt’s legal market remains stable, having stayed away from major partner moves and mergers amid the pandemic.

Further west, Morocco’s long period of unprecedented economic and political stability means it remains a key gateway for investment into Francophone Africa. The automotive and aviation sectors have been a focus for investment from the US, Europe, China, Korea and Japan, though other fast-growing industries such as healthcare and renewable energy have also attracted substantial capital inflows.

Going forward, the prospects for a post-pandemic recovery are good. The new government installed in October 2021 has a pro-capitalist stance and features more women than ever before. The focus of its agenda is investment and energy projects, roads and ports are key targets for investment.

Furthermore, Morocco has signed a new deal to create power connections that will bring renewable energy to the UK. The country has also signed a partnership agreement with Israel, which is bringing more Israeli investors into the market and boosting sectors such as agriculture and technology.

International firms in Morocco include Gide Cuatrecasas Casablanca – a local collaboration between Spanish and French firms Cuatrecasas and Gide Loyrette Nouel – DLA Piper; CC; Baker McKenzie Maroc; and Norton Rose Fulbright.

In March this year Middle East heavyweight Al Tamimi announced that it would be following their lead and opening in Casablanca, with the move following its 2021 launch in Port Said, Egypt. The launch takes its Africa presence to three offices, adding to its existing base in Cairo.

Elsewhere in North Africa, Dentons announced a combination with Tunisian law firm Zaanouni Law Firm & Associates as part of its ongoing bid to become a pan-African firm.

Despite divergent approaches and contrasting geopolitical and economic climates, there is good reason to be hopeful for countries across the Middle East and North Africa. As oil prices continue to rise Saudi Arabia, again, appears to have the competitive edge in the year to come. LB

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While the same old story of political volatility continues to pervade in Africa, a bullish M&A market and renewed optimism driven by a pan-Africa trade agreement makes the continent hard to ignore for law firms.

For Herbert Smith Freehills (HSF), an ongoing commitment to Africa has played an important role in galvanising its place among global firms. London and Paris offices have targeted the continent for decades, while the launch of a Johannesburg office in 2015 took its ambitions a step further. Nina Bowyer, the Paris-based co-head of HSF’s Africa group is very much alive to the challenges: ‘Obviously, Covid has crippled a number of economies across the world and Africa is no exception. Finding the necessary resources to tackle some of the challenges will continue to be difficult.

‘We have seen a disturbing number of coups and attempted coups across Africa, so when international investors are weighing up where to invest, concerns regarding political instability can play out in certain jurisdictions,’ asserts Bowyer.

Chris Taylor, Addleshaw Goddard’s London-based head of UK M&A and Africa, notes the opportunities and pitfalls of the Ethiopia market. ‘The government in Ethiopia has been pursuing a program of privatization of state-owned assets, which in and of itself has driven a lot of corporate activity. Big Blue-Chip companies from Europe and the United States are looking at getting a foothold in that territory. The reasons for this are obvious to a certain extent: a huge population, a real drive for middle class trappings of wealth, and those sorts of indicative behaviour in those countries. ‘But of course, Ethiopia unfortunately, recently has had some civil unrest which has slowed down investments in that particular territory.’

Joana Andrade Correia, partner and co-head of Raposo Bernardo’s corporate and M&A department, notes: ‘The most important challenge is always the economic challenge. At the beginning and at the end it will always be about economy.’

M&A opportunities

Whatever the clear misgivings of lawyers specialising in Africa, there are pockets of opportunity across the region that are hard to ignore, and firms like HSF have been reaping benefits too, particularly in an uptick in M&A activity.

Says Bowyer: ‘Last year we advised on 990 matters across Africa, and that’s a Covid year, so that gives you an idea of the scale of the practice. And corporate over the last year accounted for about 40% of that revenue.’

Indeed, HSF is not alone as an international firm seeing potential reward in the region. Hogan Lovells hired M&A partner Chris Green in Johannesburg from Pinsent Masons in November 2021, while other international practices continue to focus on incoming investment from afar. Says Addleshaws’ Taylor: ‘We are really committed to the region, whilst we don’t actually have any offices in Africa, that’s a purposeful decision because what we want to do is to assist and work with the very best local firms.’

Despite being particularly severely hit by the effects of the coronavirus pandemic, healthy levels of M&A activity in South Africa are a reason to be cheerful. As HSF’s Johannesburg-based corporate partner Huneiza Goolam is upbeat: ‘South Africa had a booming M&A year last year, we had about 430 M&A transactions that took place. I think that the companies here are quite undervalued, so they are very attractive for foreign buyers. Of those 430 about 70 of those deals were in fact by foreign buyers.’

But now for a reality check: this is not a sweeping trend. As Bowyer notes: ‘Although we are having a bumper year in our practice, it is very much tailored around specific sectors, where people see potential.’

‘Covid has crippled a number of economies across the world and Africa is no exception. Finding the necessary resources to tackle some of the challenges will continue to be difficult.’ Nina Bowyer, Herbert Smith Freehills

Meanwhile, Taylor has seen a resurgence in popularity of an old favourite. ‘For a long time, oil and gas was very much king, and interestingly, that has come back a little bit because a sudden ramp-up of energy prices has made those sorts of investments incredibly attractive.’

Indeed, one of the factors attributed to a retrenchment of the ‘Africa rising’ narrative is the volatility of commodity prices and their inseparability from certain jurisdictions’ economic success. ‘Nigeria’s economy is so tied to its extractive industries that as soon as the price of crude fell, you almost saw overnight the impact that had on the economy, its corporate activity particularly,’ says Taylor.

Not only are oil prices rising, but there is growing demand for commodities driven – somewhat counterintuitively – by investors’ desire for cleaner energy assets. Africa is no exception to this market trend as climate change and awareness around social responsibility bring to the fore environmental social and governance (ESG) imperatives.

Bowyer explains: ‘We have seen a marked uptick in interest and competitive tension for certain key minerals to which Africa is home. Effectively to fuel this energy transition, we need certain types of minerals to support the new technologies such as cobalt, lithium and copper. So we see, as part of this global energy transition, this scramble for the future minerals that are needed to support that sector and that is creating a very buoyant environment which we suspect will continue to provide further M&A opportunities this year and in years to come.’

Meanwhile Taylor notes that the realities of doing business in Africa have caused investors to change tack. ‘A few years ago, large US private equity houses created huge Africa focused funds. Substantial amounts of money were put aside to make investments in Africa and the problem they ran into was, whereas in the rest of the world they can deploy hundreds of millions of dollars on a single investment, it’s much harder in Africa because the businesses aren’t at the same scale. What we have then seen is that the profile of private equity investments in Africa has changed from those mega funds into smaller and more nimble mid-market funds,’ says Taylor.

A different kind of energy

It is fair to say that the energy transition is driving transactions in its own right. ‘A number of clients, oil and gas companies, are looking at their portfolios and looking at how they can reduce their footprint. So, there are a number of divestments occurring across the continent. We have seen some large transactions in Nigeria, but we are seeing transactions spread across Africa, Sub-Saharan Africa and North Africa. Africa has amongst the lowest electrification rates in the world, so there is this very keen drive to solve both energy access and creating cleaner energy,’ says Bowyer.

And with both fossil fuel and renewable markets proving a draw to investors, there is a potential playoff between the critical and immediate need for power and infrastructure across the region and the push for clean energy. But Raposo Bernardo’s Andrade Correia insists the interests are compatible: ‘The truth is that these goals can be achieved simultaneously. We saw that happening and were strongly and positively impressed by it,’ she says.

Morais Leitão managing partner, Tiago Arouca Mendes, says: ‘Mozambique already has one of the largest renewable energy generation projects in Africa (Cahora Bassa Hydro Power), and in recent years we have seen the development of multiple photovoltaic plants such as Metoro, Mocuba and Cuamba, which are under construction. There are many other projects already announced in the pipeline, such as the construction of the Mphanda Nkuwa dam. Other projects will follow.’

Addleshaws’ Taylor echoes this sentiment: ‘It will be fascinating to see how the deployment of money works as you’ve got attractive returns from oil and gas and renewables coming to the fore again, but my suspicion is that the journey towards a much, much more carbon neutral, carbon zero environment is going to be inevitable, so I just think we’re going to see more and more of that.’

TMT has also endured as a destination for investors, in line with inevitable global demand, with telecoms a source of prominent deals in the region. Says Goolam: ‘I worked on the IHS transaction where they bought towers by way of an auction process from MTN, a large telecoms operator here. The transaction value was about ZAR6.4bn. It was hotly contested as there were about 22 bidders that showed interest. TMT remains an active sector in South Africa, and on the rest of the continent as well. A number of the other mobile network operators are gearing themselves up for further activity, with Vodacom, for example, in the process of splitting their towers into a separate vehicle.

‘It will be fascinating to see how the deployment of money works as you’ve got attractive returns from oil and gas and renewables coming to the fore again.’
Chris Taylor, Addleshaw Goddard

‘Telecoms is such a dynamic sector whether it is relating to towers or fibre. For example, Vodacom has made a big investment in CIVH (Community Investment Ventures Holdings), which is very heavy into fibre as well,’ adds Goolam.

Andrade Correia notes: ‘I foresee a whole lot of opportunities in another level of development – the massive digitalization and development of technologies. At this level many efforts have been made, but there is still a long road ahead. I believe this will be the source of many legal work opportunities.’

The fintech sector has also continued to develop apace, according to many market commentators, with a host of investment opportunities in start-ups and joint ventures to play for.

Says Taylor: ‘Africa is to a certain extent much further developed in terms of its mobile wallet capabilities. There was a product called M-Pesa, which was the mobile wallet in Kenya and has been replicated across a whole host of jurisdictions. Micro finance lending, so very small elements of borrowings for businesses and individuals, is an increasing focus.’

Despite the inevitable economic and supply chain-driven delays and suspensions of development projects wrought by Covid, firms remain undeterred from this focus. ‘There is still a lot to accomplish regarding infrastructures, public facilities, such as roads, bridges, airports, railways, dams, renewable energy facilities, hospitals, universities and an immense array of public infrastructures that shall contribute to the development and wellbeing of the people. All these projects generate major mandates of legal work particularly in sectors such as transportation, infrastructure, health and energy,’ insists Andrade Correia.

Indeed, firms continue to tool up, with Pinsent Masons earlier this year hiring partner Edward James from South Africa-headquartered ENSafrica to its corporate crime and investigations bench to work predominantly in global energy and infrastructure sectors. Also in January, Bowmans hired Allen Leuta as a project finance partner from the International Finance Corporation, the multinational that promotes investment into developing regions.

Taylor asserts: ‘We continue to be incredibly active this year and for us it will be a record year for work in Africa, by some distance as well. Not all of that is just a reflection of the strength of the continent – it’s as much about investments that we’ve made in our teams – so that’s no surprise that turnover has shot up. We have brought in a number of partners (particularly in the oil, gas and energy sectors) who will focus the majority of their time on Africa. Over the last year we have assisted clients with investments across numerous African countries. We have seen increasing investments back into Nigeria and have also handled investments into Angola, Egypt, Mozambique and Kenya, and have seen a lot of work related to Uganda.’

While many commentators speak in earnest on the ever-popular subject of ESG, the extent to which these concerns genuinely feature on the Africa agenda should probably be viewed with healthy scepticism. Nevertheless, it is a consideration cited by every partner interviewed for this piece.

‘ESG is definitely a big trend. If it has not already, it will be driving transactions in the future, not only just from a risk perspective but also in terms of value creation,’ says Safiyya Patel, transactional partner at Webber Wentzel in Johannesburg.

‘ESG is definitely a big trend. If it has not already, it will be driving transactions in the future, not only just from a risk perspective but also in terms of value creation.’ Safiyya Patel, Webber Wentzel

Andrade Correia agrees: ‘Companies have become even more aware that environment, social and governance subject matters are essential for their development and for the success of their operations. Therefore, despite the difficulties created by Covid, they have launched intense compliance programmes and have implemented good practices regarding ESG requirements and criteria. ESG requirements will have a strong penetration in the African countries with higher sustainability indexes, being already a strong concern of many companies operating in those markets. This past year this has been one of the main growth vectors of legal work.’

Arouca Mendes observes: ‘ESG policies are increasingly present in the daily life of Mozambican law firms and are becoming a priority in their management, as well as in the services provided to the client. However, the tendency has been to work the three areas separately and not structured as the acronym indicates. But this does not represent an absence of ESG policies, because they exist and are very well implemented, for example, in the mining and oil and gas energy transition, net zero emissions, recycled water, distribution of rights, child labour and slave work. Clearly, the area that needs the most development is the social area, and that is a priority to us.’

To trade or not to trade?

While efforts to create free trade regions have notoriously proved largely unsuccessful, the African Continental Free Trade Area (AfCFTA) came into force on 1 January 2021 and is touted as having huge potential for Africa’s place in global trade.

There is certainly a sense of renewed optimism. Bowyer comments: ‘There is a long-recognised anomaly that is the lack of intra-African trade, when you compare it, for example, to how much trade there is within the EU. Although a lot of the regulations still need to be implemented, the aim is to remove barriers to cross border trade across Africa such as tariffs and customs.

‘It’s not just about having the right regulations in place to support pan-African trade, it is also about addressing some of the practical issues on the ground. There is a huge infrastructure gap which will need to be addressed if we are really going to be able to achieve pan-Africa trade, which is really on the critical agenda,’ Bowyer adds.

Meanwhile Taylor is alive to the benefits and downsides. ‘Without addressing exchange control restrictions you’re only dealing with one side of the coin. I can understand for some of these more junior economies in Africa, the need to stabilize their economies by using some form of exchange control, so that, for example, dollars don’t flood into the market. But at the same time, I can’t help but feel that actually the strictures of some of these exchange control rules are really quite damaging for business.’

Bowyer concludes on a more bullish note: ‘There is a hope that it will help drive further interest from international investors into Africa because they can look further down the path at a more pan-African play.’ LB

megan.mayers@legalease.co.uk

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Far from immune to the global crisis – but making concerted strides towards immunity in some instances – the Middle East and North Africa region (MENA) has fared similarly to the rest of the world over the last year. That is to say that the universal impact of the pandemic has been felt across MENA, although the paths that the various countries have taken have been disparate.

Middle East

Early lockdowns in several countries helped to contain the number of coronavirus cases, and a number of success stories emerged from the region with Israel and the United Arab Emirates (UAE) – numbers one and two, respectively – frontrunners in rolling out their vaccine programmes. While distinct, both countries have adopted an agile approach to sourcing and distributing the vaccine.

Reportedly paying more than twice the amount for the Pfizer/BioNTech vaccine than certain EU countries, Israel has been ahead of the chasing pack in inoculating its population (though the government, which has a national digital public health record, ceded the data of its citizens to Pfizer in exchange for ten million vaccines). In another first, Israel will be offering booster shots to adults with pre-existing health conditions in an effort to combat the Delta variant, which is responsible for the recent surge in the number of cases. Israel, which had dispensed with all non-pharmaceutical interventions in early summer, has now reinstated the mandatory wearing of masks on public transport and for indoor gatherings.

Early lockdowns in several countries helped to contain the number of coronavirus cases, and Israel and the UAE – numbers one and two, respectively – were frontrunners in rolling out their vaccine programmes.

The UAE was the first country to approve the Sinopharm vaccine back in early December, also forming an agreement with China to manufacture the vaccines in the Emirates; Gulf Pharmaceutical Industries started producing the vaccines in April. Despite this, the UAE remains on the UK government’s list of red countries where it was placed back in January 2021 and, in early July, Saudi Arabia also suspended flights to and from the country in response to a surge in the Delta variant.

Dubai remains the legal centre in the Middle East, home to many international firms as well as key regional players. While there have been few new international entrants to the Dubai market, several firms have bolstered their on-the-ground offerings in recent months. However, there has been a general trend towards exiting the market, with the departures of Winston & Strawn and offshore law firm Conyers from the UAE in recent years examples of this. The legal market in the UAE continues to be well known for its hard-hat approach, with construction and infrastructure expertise in demand across the Middle East region.

Away from the coronavirus, Saudi Arabia’s Vision 2030 continues apace. The programme, which was launched in 2016, has the intended objective of diversifying the petrostate’s economy away from an overreliance on oil and stimulating growth in other sectors. So far, it has been the high-profile entertainment and sporting events – ranging from boxing matches to F1 races – that the country has hosted that have generated international headlines. However, it is the Kingdom’s ambitious infrastructure projects that will arguably prove the most fertile ground for lawyers in the region. Vision 2030, pioneered by Crown Prince Mohammed bin Salman, has three giga-projects at its core: Neom, a model metropolis intended to rival Dubai, which will be powered on green energy; entertainment megacomplex Qiddiya; and the Red Sea Project, a luxury tourism destination that is expected to be a special economic zone. All are already under construction and have created a considerable work stream for law firms and construction companies alike.

In addition to its planned mega projects, Saudi Arabia is also bulking up its ports market share. In early 2021, the Red Sea Gateway Terminal, the largest terminal operator in Saudi Arabia, sold separate 20% interests to China’s Cosco Shipping Ports and Saudi Arabia’s Public Investment Fund. The company intends to use this investment to shore up its expansion plans on both an international and domestic scale, with a plan to invest in three international ports in the next five years.

The company has also stated that it will be focusing on ports of strategic importance, targeting those that are essential to imports including food.

Despite the excitement around its various mega projects, Saudi Arabia remains best known for the strength of its oil reserves and its flagship brand, Saudi Aramco, the state-owned petroleum and natural gas company. Saudi Aramco continues to occupy the number one spot in Forbes’ Top 100 list of companies in the Middle East, a list that includes over a third of Saudi Arabian companies. Its stock, like that of many oil companies, fell sharply in 2020 as the need for oil dropped internationally and global supply chains were disrupted. As a result of falling oil prices Saudi Arabia, along with other members of the Organization of the Petroleum Exporting Countries (OPEC), agreed to cut oil production, with global production reduced by between 9.7 million barrels per day and 5.8 million barrels per day at various points between May 2020 and April 2021.

In Saudi Arabia, Vision 2030 has three giga-projects at its core: Neom, Qiddiya, and the Red Sea Project. All are already under construction and have created a considerable work stream for law firms.

However, tensions between fellow OPEC members and traditionally close allies Saudi Arabia and the UAE emerged in late 2020 and continued to rumble on, coming to a head in summer 2021 with the UAE refusing to back Saudi Arabia and Russia’s plan to maintain cuts to oil production levels to the end of 2022. The UAE has fared particularly badly as a result of the cuts, with Saudi Arabia emerging as a winner and further cementing its position at the top of the tree in the oil stakes. The impasse turned out to be short-lived, though, with reports emerging in July that a compromise had been agreed, raising the UAE’s oil production to a level that it found palatable. Several observers have speculated that this will lead to a further fracturing in the relationship between states that are both allies and rivals in the Middle East – something that is already evident in the UAE’s burgeoning friendship with Israel, with the UAE recently becoming the first Gulf country to open an embassy in Tel Aviv following the Abraham Accords peace agreement in summer 2020. By contrast, Saudi Arabia and Israel do not have an established diplomatic relationship in place.

In a positive move for the region, Saudi Arabia and the UAE ended their embargo against Qatar in early 2021. Qatar, which will host the 2022 FIFA World Cup, has its own roadmap for growth, the Qatar National Vision 2030. Less ambitious in scope than Saudi Arabia’s seismic Vision 2030, the National Vision also aims to move the country away from a reliance on its oil reserves to instead focus on economic, social and environmental growth. International law firms operating in the country tend to have a strong projects bent and expertise acting for state-owned enterprises. In a one-in, one-out move, Crowell & Moring opened in Doha in the fourth quarter of 2020, taking on Squire Patton Boggs’ office, inheriting a team that has substantial infrastructure experience.

Restrictions remain in place in Saudi Arabia barring international law firms from fully operating in the country. Instead, they function in association models with local law firms. A key deal in the offing relating to Saudi Arabia is the intended sale of its gas pipeline, a much-hyped transaction that should attract a posse of high-end lawyers.

Unsurprisingly, the UAE and Saudi Arabia remain the key markets for M&A deals across the region. The headline deal in 2020, although more than a year ago now, was Abu Dhabi National Energy Company’s merger with Abu Dhabi Power Corporation, which saw the transfer of power and water generation, transmission and distribution assets to the former company. The combined utility has assets worth $54bn.

North Africa

In contrast to rapid vaccine rollout programmes in some countries in the Middle East, the situation is markedly different in North Africa. According to information provided by Reuters as of mid-July, Morocco is out in front with 28% of its population estimated to have had the vaccine, Tunisia at 9%, Algeria at 3% and Egypt at just 1%.

In a positive move for the region, Saudi Arabia and the UAE ended their embargo against Qatar in early 2021. Qatar, which will host the 2022 FIFA World Cup, has its own roadmap for growth, the Qatar National Vision 2030.

Morocco’s automotive industry is also showing encouraging signs, with Peugeot joining Renault and Dacia in starting production in the country in 2019, setting up a plant in Kenitra. The country has the continent’s largest passenger car industry, with automotive Morocco’s largest export sector; reports place the industry’s share of GDP between 16% and 20%. A number of major automotive suppliers are also present in Morocco, while China’s BYD also recently opened a factory in the country. The EU, however, remains Morocco’s largest trade partner, in large part due to its proximity to Spain and connections to France, and frequently serves as a gateway into the wider European economic region, with the automotive industry contributing significantly to goods imported by the EU. Morocco’s location has enabled it to function as a base for international law firms looking to do business in the country and the wider North African region, with the country serving as a bridge between Europe and North Africa.

Firms in Morocco are predominantly based in Casablanca and international firms include Gide Cuatrecasas Casablanca – a unique Moroccan collaboration between elite Spanish and French firms Cuatrecasas and Gide Loyrette Nouel; DLA Piper; Clifford Chance; Baker McKenzie Maroc; and Norton Rose Fulbright. Baker McKenzie Maroc’s team recently acted for Suez in its attempts to avoid a hostile takeover by Veolia, although a merger agreement between the two companies was agreed in spring 2021.

In a situation far from unique in 2020, tourism to Egypt dried up almost overnight. Despite this, according to data provided by the IMF, Egypt was one of the few emerging markets to record positive growth in 2020.

Restrictions imposed by governments globally in response to the pandemic significantly impacted Egypt’s tourism trade, a key economic driver in a county which is the second-most popular tourist destination in Africa. In a situation far from unique in 2020, tourism to the country dried up almost overnight. Despite this, according to data provided by the International Monetary Fund (IMF), Egypt was one of the few emerging markets to record positive growth in 2020. Government measures, including the suspension of tax payments, monetary support to those businesses most impacted by the pandemic and a reduction in policy interest rates, together with IMF support, helped to bolster the country’s economy. Further growth is forecast for 2021.

Despite divergent approaches and vastly different geopolitical and economic climates, there is some reason to be hopeful for countries across the Middle East and North Africa. Fuelled by rising oil prices, Saudi Arabia, in particular, has strong reason to look forward to the year ahead. While Qatar eagerly awaits the kick off of next year’s World Cup to showcase what is set to be the largest global sporting event the region has ever held. LB

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In times of stress and unpredictability, it pays to be conservative. Most sensible investors will plump for safe havens during troubled times. So is Africa a senseless gamble?

Some 20 years after the term ‘Africa rising’ began to enter the world’s consciousness, the continent still delivers a plentiful supply of extreme volatility and complexity, intimidating factors that seep into deals, projects and other legal engagements. It is not a benign environment for law firms.

While undoubtedly, Africa has been hit by the Covid-19 pandemic, particularly South Africa, it does offer growth fundamentals that are hugely attractive to bullish investors and acquisitive businesses. ‘Businesses continue to want opportunities in markets that have sustained 5% to 10% growth every year and many African jurisdictions are in that bracket,’ comments Chris Taylor, head of Addleshaw Goddard’s Africa group.

Herbert Smith Freehills (HSF) is another firm that believes its commitment to Africa has significantly augmented its international standing. Its London and Paris offices have targeted the continent for decades, while the launch of a Johannesburg office in 2015 took its ambitions a step further. Nina Bowyer, the Paris-based co-head of HSF’s Africa group says: ‘We have a lot of clients where our first touch point was through Africa. This is a huge part of our revenues and a really important practice for us. But for me, it’s not really about the money, it’s about the profile raising, it’s about being relevant to our clients.’ In January this year, HSF advised the senior lenders, including Absa Bank, African Export-Import Bank and Standard Chartered Bank, on the $450m senior financing for TNOG Oil & Gas’s acquisition of an interest in OML 17, a Nigerian onshore asset.

A safe commodity

Being relevant to clients comes in many forms, but as the world’s demand for commodities increases, particularly those that are set to fuel the green-tinged transformation of the global economy, this focus on Africa looks particularly astute. The Democratic Republic of Congo (DRC) produces 70% of the world’s cobalt, an essential mineral in lithium-ion batteries for electric vehicles. The DRC is also Africa’s largest copper producer and the fourth largest globally; copper prices rose by more than 22% in 2020 according to CNBC in December.

‘Businesses continue to want opportunities in markets that have sustained 5% to 10% growth every year and many African jurisdictions are in that bracket.’
Chris Taylor, Addleshaw Goddard

‘The huge increase in commodity prices could be game-changing for Africa,’ says Peter Leon, the Johannesburg-based co-chair of HSF’s Africa group. ‘Just look at copper prices. While mining projects have been fairly quiet, you will see a lot more activity there. And you’ll see a lot more M&A activity, because there’s a significant demand for commodities that will fuel the clean energy transition, such as copper and cobalt, not to mention graphite and lithium. Africa produces almost all the minerals required for the global green economy.’

Although Africa is seeing a much slower rollout of vaccines than in other parts of the developed world, it does have the opportunity to rebound in a world that has been universally affected. ‘In a way, Covid was a bit of an equaliser in that many countries around the world, including some of the strongest economic forces, have really struggled and have experienced some of the difficulties that are normally experienced by developing countries,’ comments Christo Els, senior partner of South African firm Webber Wentzel, which is in an alliance with Linklaters.

Joe Biden’s inauguration as US president is also thought to be positive for the African continent. Promising to re-engage with the world, Biden’s stance contrasts with his predecessor Donald Trump, who did not visit Africa at all while in office. ‘We’re expecting to be able to help our clients take advantage of this development,’ comments Robert Legh, chair and senior partner of Bowmans, the South Africa firm with multiple offices around Africa. ‘Looking forward, we’re expecting growth in our M&A, restructuring and insolvency, and project finance practices in particular.’

‘Covid was a bit of an equaliser in that many countries around the world have really struggled and have experienced some of the difficulties that are normally experienced by developing countries.’
Christo Els, Webber Wentzel

Having a more evenly balanced opportunity to come out of the crisis may be a positive for Africa, but many believe that its nations need to work together for an ‘African solution’. Africa has for years been associated with economic nationalism and populism, a tendency to focus inwardly on sovereign interests at the expense of international investment. Efforts to create free trade regions have been largely unsuccessful, but the African Continental Free Trade Area (AfCFTA) came into force on 1 January 2021, in theory creating an economic region of some 1.3 billion people. The World Bank has predicted that it will lift over 30 million Africans out of extreme poverty and ‘boost the incomes of nearly 68 million others who live on less than $5.50 a day’. Last year, Caroline Freund, the World Bank’s global director of trade, investment and competitiveness said: ‘The implementation of AfCFTA would be a huge step forward for Africa, demonstrating to the world that it is emerging as a leader on the global trade agenda.’

The free trade area is expected to bolster intraregional trade and lessen the reliance on foreign investment from outside the continent. ‘When AfCFTA was first announced, a lot of people may have been sceptical, but ultimately it is the largest consumer market in the world, it’s an incredible initiative,’ comments Els. ‘There’s a real commitment from African governments to make this free trade agreement work. And if that kind of intracontinental trade really grows and takes off, that’s good for firms such as ours that can really support our clients wherever they do business.’

‘Angola is open to foreign investors. Many of the companies that are interested in buying those businesses are foreigners.’
Joana Andrade Correia, Raposo Bernardo

The prospect of African nations operating in union rather than according to their own singular interests, is a compelling one to firms looking to capitalise on an uptick in cross-border transactions. ‘We see that there is a will in most of the important economies in Africa, but it is a long-term process,’ says Tiago Marreiros Moreira, a partner and head of international operations at Portuguese firm Vieira de Almeida (VdA). Leon believes that intra-African trade accounts for only around 14% of total trade involving the continent: ‘At this figure, it is one of the lowest levels of intracontinental trade in the world, so AfCFTA is certainly very much a step in the right direction. Multinationals will in future be able to set up manufacturing hubs in one country, in order to export to other members of the AfCFTA, which makes a lot of sense economically and which they simply cannot do currently. So it is potentially transformative for Africa not least because the next step will be an agreement on trade in services.’

Of course, the shadow of nationalism and protectionism still hangs over the continent. States such as Tanzania have pushed forward resource nationalism and local content laws to try to bolster the economy, although this naturally deters inbound investment and creates international tensions. It has faced a number of investment treaty claims, following the decision to revoke mining licences and impose local content regulations that demand significant levels of Tanzanian ownership and Tanzanians in senior management positions. Roles below management and other senior positions are to be held entirely by Tanzanians. Tax regulations have also imposed further pressure on foreigners. Barrick Gold settled a tax dispute with Tanzania in 2020 after acquiring the Acacia mining group, and has pledged to share future economic benefits from mines on a 50-50 basis with the Tanzanian government, according to Reuters.

These policies are not rare in Africa. Zambia, one of the world’s largest copper producers, has driven a hard line against overseas influence in the mining industry, burdening foreign mining businesses with heavier taxes and licensing arrangements. Vedanta, the Indian resources business, has faced a long-running dispute in Zambia over a jointly-owned copper mine that had been put into liquidation. In November 2020, the Zambian Court of Appeal ordered that liquidation proceedings for Konkola Copper Mines be halted, to enable arbitration proceedings to occur between Vedanta and ZCCM-IH, according to Reuters. The dispute concerns an alleged breach of Vedanta’s mining licence.

Despite many instances of economic nationalism and populism, there are numerous examples of liberalisation and a welcoming of foreign capital. Some 80% of Angola’s government revenues currently come from oil and gas and in its latest privatisation programme it seeks to take more than 190 businesses into private ownership.

Joana Andrade Correia, a partner at Portuguese firm Raposo Bernardo, which has offices in Angola and a number of other Lusophone Africa countries, says that the privatisation programme has slowed due to Covid, but is still a hugely bold initiative: ‘Privatisations in the financial sectors, insurance, telecoms, oil, natural resources, and transport are planned for 2021.’ These include Sonangol, the state-owned petroleum and natural gas business, and Endiama, the diamond mining company. Caixa Angola and Angola Telecom are also on the roster of businesses to be privatised. ‘Angola is open to foreign investors,’ she adds. ‘Many of the companies that are interested in buying those businesses are foreigners.’

André de Sousa Vieira, a partner at Portugal’s Morais Leitão, Galvão Teles, Soares da Silva & Associados, agrees: ‘For Angola’s privatisation programme, my feeling is that it is being taken in a serious way and international investors are really looking into it. It might be a bit slower than initially expected, but we have no reason to believe that it won’t move forward. Evidence of this is the Presidential Decree no. 44/21 approved last month, which updates the programme.’

Understandably, Portuguese firms with strong links to or physical presences in Africa, are intensely focused on Angola for the next two or three years. Marreiros Moreira believes that the nation’s ability to recover from huge levels of hardship over the past 50 years makes it well positioned to transition to a free market economy with strong connections to other African nations and the rest of the world: ‘Angola is a country that has been able to overcome a recent civil war and several other challenges, that is why it is so resilient. So even when facing a lot of difficulties, they are able to find a way, because they have very important commodities in a country with a lot of potential. It will be a long and gradual process of recovery from the oil crisis and the Covid pandemic.’

He has been impressed with the way that this has been managed so far: ‘It is important that Angola is able to keep political stability and open the economy gradually, so that you will see a long-term process of gradual diversification from oil into other areas. In order to do that, it will also be important to create an environment where foreign investors feel safe.’

Addressing volatility

Stability cannot be guaranteed in Africa, as in any continent. Another Lusophone jurisdiction, Mozambique, saw significant economic growth until 2016. But then undisclosed national debts came to light resulting in a substantial debt crisis with a debt to GDP ratio of 113% in 2019. In the same year, it was hit by two massive cyclones causing severe societal and infrastructural damage.

An Islamist insurgency in the northern Cabo Delgado district has led to a humanitarian crisis and threatens the landmark Mozambique LNG project, near Palma in the north of the country. Total, which is leading the project, announced in January that it was downsizing its workforce at the site because of jihadists operating in the area. Latham & Watkins is advising the sponsors on the project’s $20bn financing with VdA and Miranda & Associados leading on Mozambican law. White & Case is advising the lenders, which is Mozambique’s first onshore LNG development.

The significant gas discoveries off Mozambique’s east coast provide a basis for long-term optimism. ‘Although Mozambique has suffered as a result of Covid and also in particular ongoing violence in the north of the country, we’ve not seen a decline in investor interest regarding potential opportunities in the country,’ comments Hugo Coetzee, head of the Africa practice at CMS.

‘We had a small increase of activity in 2020. This is probably quite surprising for most people.’
Tiago Marreiros Moreira, VdA

Despite the unsettled situation and Covid-related difficulties in other jurisdictions, firms have not considered retreating from the continent. ‘We had a small increase of activity in 2020. This is probably quite surprising for most people. And this was due to the privatisation process in Angola and several oil and gas projects, together with a massive LNG project in Mozambique,’ says Marreiros Moreira.

Of course, political instability and civil unrest might have devastating societal impacts, but it isn’t always bad news for the legal profession, which often thrives where complexity arises. HSF is targeting difficult situations, particularly where international businesses have tense relationships with national governments and where these frictions lead to full-blown disputes. ‘One of the important skills we bring to bear is crisis management, because Africa can be a difficult place in which to operate,’ comments Leon. ‘Our clients appreciate our ability to crisis manage difficult situations. In recent years I’ve seen African governments becoming concerned – if not aggressive – about concession agreements that previous administrations signed up to that they would now like to reverse because many of these agreements were entered into when commodity prices were low or when there was little investment in the country. Governments come under significant political pressure when commodity prices move upwards and concession agreements do not capture a fair share of rents for the country. This often becomes a stick to beat companies with, as well as a key area of dispute.’

These complex relationships have been further heightened by the influence of China across the continent. China has built and financed a swathe of infrastructure projects across Africa, transforming the economic potential of numerous states, but also making them heavily indebted to the superpower.

China has provided loans to almost every country in Africa and eight states have borrowed more than $5bn each. This forms part of China’s gigantic Belt and Road Initiative, which has seen Africa becoming increasingly aligned with Asia, rather than its former colonial masters, Britain, France and Portugal.

‘I remember taking a road trip about six or seven years ago all the way across Tanzania, into Burundi and up into Rwanda,’ recalls Michael Strain, a partner in Clyde & Co’s Dar es Salaam office. ‘It was incredible that almost the whole way there was paved road under construction. And it was all being built by the Chinese.’

While China’s involvement in these infrastructure projects typically means there are fewer opportunities for legal engagements for international law firms and even local law firms, Strain still believes the trend is positive: ‘If you look over the last ten years, the Chinese are responsible for bringing some incredible positive change to the continent that, frankly, wouldn’t have happened otherwise.’ Clyde & Co deepened its commitment to east Africa in 2020 through a new association with Nairobi-based Kangwana & Co.

‘We have our sights very firmly set on being an African as opposed to a South African law firm.’
Robert Legh, Bowmans

Enthusiasm for infrastructure development is being witnessed across the continent. Nada Eldib, a partner at Eldib Advocates in Egypt says: ‘2020 was a year where the government put a lot of money into infrastructure. Everyone thought that, because it was such a hard year, foreign direct investment would be low. On the contrary, we saw that foreign direct investment was quite high when it came to roads, rail and ports, as well as the energy grid.’ She believes that the effects of Covid on a relatively young population in Egypt (the median age is only 24.6 years) has been slight compared to the nation’s recent revolutions in 2011 and 2013. She also expects to see considerable growth in trade with Sudan after the US lifted sanctions on the state; it was previously alleged to be a state sponsor of terrorism.

Further afield, Els believes that China’s presence in Africa has served to highlight the opportunities that the rest of the world could be missing: ‘It’s not just Chinese investment into broader Africa anymore, it is probably reaching a stage where other powers around the world are looking into this and waking up to the possibilities that Africa offers.’

Els’s home country, South Africa, has been devastated by Covid-19 with over 50,000 recorded deaths, by far the largest number in Africa. The pandemic hit at a time when the country was already in the midst of poor economic performance and a power deficit. He sees these Chinese-supported infrastructure programmes playing an anchor role in African nations becoming more interdependent on each other in an effort to drive collective economic growth.

This interdependence has driven a number of African firms to expand their influence across the continent. Johannesburg-based Bowmans opened new offices in Zambia and Malawi in 2020, adding to its broader network of branches or associated firms in Kenya, Ethiopia, Mauritius, Nigeria, Tanzania and Uganda. ‘We have our sights very firmly set on being an African as opposed to a South African law firm,’ comments Legh. Bowmans’ South African rival, ENSafrica, has similar ambitions and currently has a presence in Ghana, Kenya, Mauritius, Namibia, Rwanda and Uganda. It is a geographically expansive model that has not been replicated by international firms to the same extent, though the Africa Legal Network, founded by Kenya’s Anjarwalla & Khanna, exists in 15 jurisdictions.

Of course, Africa poses such a unique challenge to firms, given the diversity of cultures, economies and legal systems. It represents an intricate web of complexity that can easily overwhelm and deter. So remaining close to key contacts and partners at this time can maintain opportunities, as Taylor comments: ‘Africa often goes quiet as western economies face downturns. Now is when you’ll see experienced investors stealing a march, and by the time you start to hear noise about Africa again, you have usually missed the boat.’ LB

The post Africa focus: Africa first appeared first on Legal Business.

Joe Andrew, the architect of Dentons’ global strategy, is not known for pulling his punches. As such, his stance on staffing the African practices of international law firms is typical: ‘Why would you look to Europe or the US? It’s parochial, it’s a residue of colonialism, and it borders on racism.’

The firm’s chair warms to his theme. ‘There are 54 countries on the continent, and to different degrees they’re all experiencing an incredible democratisation of information. There’s talent everywhere. We don’t agree with our competitors who believe that the best way to service clients is to hire people from Europe.’

Andrew is talking about legal services in the world’s second-most populous continent: its 1.3 billion people make up some 16% of the world’s population. However, given Africa’s size and seemingly limitless natural resources, a variety of factors have conspired to ensure it is also the poorest continent. But, just as Ethiopia’s new, 40-something prime minister, Abiy Ahmed, has hit the ground running, bringing multi-party democracy to what is Africa’s fastest-growing economy and pursuing change at a staggering pace, the tide is turning for Andrew and others in the legal marketplace. For them, Africa is on the up, and the race is on to find the best way of meeting increasing client demands for legal expertise.

On the up

‘Dozens of emails come in overnight embracing every practice group,’ says Andrew. ‘Infrastructure is still big, though perhaps less so than four or five years ago. There’s growing excitement about private equity investment, including social impact and targeted investment. The agri sector is big, as clients invest and create export markets. Ethiopia now has political stability, Nigeria has a mature travel and tourism market and now, after the global financial crisis, talent is returning to Africa.’

‘Why would you look to Europe or the US for staff? It’s parochial, it’s a residue of colonialism, and it borders on racism.’
Joe Andrew, Dentons

Hugo Coetzee, head of the Africa practice at CMS, agrees. ‘We’ve been in Africa for a long time. There’s always an ebb and flow to the work; things change and develop. But we’re seeing a real increase in infrastructure and energy work, as well as work in consumer products, hotels and leisure. We can also see growth coming in tech and digitalisation. It’s a growth continent. The African Continental Free Trade Agreement, signed in Rwanda in March 2018, will make a huge difference too. It’s groundbreaking, in seeking to establish a single market for goods and services across all 54 countries.’

Both Dentons and CMS have demonstrated their commitment to the continent in recent months. In September, Dentons unveiled proposed combinations with five leading law firms in Angola, Morocco, Mozambique, Uganda and Zambia, while just a month later CMS revealed its hand with the announcement that RM Partners and Daly & Inamdar Advocates, based in South Africa and Kenya respectively, had joined the firm.

For Dentons, the move is part of its ambition to become the first pan-African law firm, owned and controlled by Africans – which explains Andrew’s insistence on building on local talent. ‘We decided a long time ago that we wouldn’t be a law firm replicating the offensive, outdated and discredited belief that African nations need leadership and guidance.’

Coetzee, who says that CMS’s strategy is ‘not to open up everywhere, but rather to develop hubs as ways into regions’, puts it simply: ‘The days when there was a huge firm with a London Africa desk, which would send lawyers to pop in and do a deal, then fly home again – those days are numbered.’

‘Angola is one of the richest countries in Africa. Political reform is underway, corruption is being addressed and the economy is being modernised.’
Nelson Raposo Bernardo, Raposo Bernardo

A cursory glance at some of CMS’s recent work shows the pace of development. The firm advised on the first pan-African network of spot and derivatives exchanges, clearing houses and depository platforms targeted initially at Côte d’Ivoire, Egypt, Ghana, Kenya, Nigeria, South Africa, Tanzania, Uganda and Zambia, while also helping Schlumberger on its $1bn investment in an offshore oil field development in Nigeria under a pseudo-equity model (where returns are linked to the performance of the fields, once developed).

Dentons counts pan-African advice on the emerging – and booming – cannabis industry, but two countries, Angola and Mozambique, have been the focus of many of the operators in the African legal marketplace. No surprise, given recent deals including French oil and gas company Total’s $3.9bn acquisition of a 26.5% stake of Anadarko’s shareholding in the Mozambique LNG project. Also in Mozambique, the board of directors of the Export-Import Bank of the United States voted unanimously to authorise a direct loan of up to $5bn to support the export of US goods and services from multiple states for the development and construction of an integrated LNG project located on the Afungi Peninsula. In Angola, state-owned oil business Sonangol and Total intend to create a joint venture to operate in the distribution and trade of crude oil by-products, as well as in the production of solar energy.

The Lusophone connection

Portuguese firm Raposo Bernardo has been operating in Lusophone Africa (Angola, Cape Verde, Guinea-Bissau, Mozambique and São Tomé e Príncipe) for 20 years. Managing partner Nelson Raposo Bernardo says the firm has a dual model in Africa, dating back to 2005, which means a local presence combined with a desk in the main office in Lisbon. He sees work relating to ‘consumer goods, agriculture and tourism’ growing in the coming years, and is in no doubt about Angola’s importance: ‘Angola is one of the richest countries in Africa. Political reform is underway, corruption is being addressed and the economy is being modernised.’

‘The days when a huge firm with a London Africa desk would send lawyers to pop in and do a deal, then fly home again – those days are numbered.’
Hugo Coetzee, CMS

The multinationals now setting up in Angola need legal support, as will anyone tempted by the government’s recently announced privatisation programme. ‘The programme includes almost 200 state-owned companies, of which 30 will make for interesting projects for global businesses. There will be a considerable upsurge of interest and work in Angola in the next four to five years,’ comments Raposo Bernardo.

For Tiago Marreiros Moreira, head of international operations at Lisbon-based Vieira de Almeida (VdA), Mozambique is no less attractive. ‘Mozambique is a very interesting example of how one of the poorest countries in Africa has been given the opportunity to change into one of the strongest regional economies. The impact of the discovery of gas in Mozambique and the signing of several gas deals in the coming months can be a turning point for the country, with IMF economists expecting investments in and associated with Mozambique’s gas industry to top $100bn, and generating over the coming 30 years about $500bn in extra tax dollars.’

VdA concentrates on sub-Saharan Africa, where there are abundant reserves in several commodities, water resources and large amounts of arable land. Add a burgeoning population – a recent UN Population Division report says sub-Saharan Africa’s population is set to double over the next 30 years, adding an additional one billion people and accounting for more than half of global population growth between now and 2050 – and it is easy to see Moreira’s point when he says: ‘Some of the most interesting world challenges and opportunities will take place in sub-Saharan Africa. VdA wants to be part of this process as a leading legal service provider, able to assist local governments, international and local companies and help them profit from the existing opportunities.’

With Andersen Global, the legal services spin out from the ashes of what was Big Five firm Arthur Andersen, recently entering Cameroon – its 18th African country – via a tie-up with Douala-based firm Muluh & Partners, and Eversheds Sutherland announcing a restructuring of its Africa group in October to pursue growth on the continent (including in third-party litigation funding), it seems that Africa’s star is rising. For Joe Andrew, it is about time: ‘It’s a very positive place to be. Colonial attitudes are still a problem but in ten or 12 years, Africa will have one of the largest legal markets in the world.’ LB

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The post Africa rising – Foreign firms strive to cover the booming continent appeared first on Legal Business.

Encapsulated in the 1982 hit song by US soft rock band Toto, Africa is frequently referred to in hoary metaphors in the West. However, in a business context, tired clichés of a ‘scramble for Africa’ have made way for the less-frenetic tones of international law firms committed to proven, revenue-generating strategies. Nonetheless, the continent still attracts its fair share of figurative language. ‘The elephant is waking up,’ as one partner puts it. But if Africa is an elephant, some firms are eager not to get caught under its feet.

‘We have consciously decided not to plant a flag in one or two jurisdictions in Africa,’ says Shawn der Kinderen, co-head of the Africa group at Freshfields Bruckhaus Deringer. ‘It doesn’t enable us to do the work our clients expect us to do in cross-border transactions.’

For Freshfields, there are signs the tactic is working. The firm’s growth track over the last five years on the continent measures between 5% and 10%, with an overall revenue comparable to that of a smaller European office. Freshfields’ case reflects how those without offices in any of the 54 African countries continue to pursue a narrower band of premium work. Recently the firm advised Vivo Energy as it defied a subdued market to be valued at £2bn in the largest Africa-focused initial public offering (IPO) since 2005. The float also saw Clifford Chance (CC) representing the banks, including JP Morgan, Citigroup and Credit Suisse, while oil and gas specialist Vinson & Elkins also advised. Closing the book on an IPO of such scale will settle some nerves in Africa especially after other listings on the continent, such as that of mobile phone tower operator Helios Towers, were pulled.

For CC the matter came in spite of – or perhaps because of – a physical presence in just one African jurisdiction. Its ten-lawyer offering in Casablanca launched in 2012 as a means to carry out sub-Saharan, Francophone African work, and the firm cites a strong commitment to Morocco’s competent local counsel and growing economy as a rationale for the opening. However, this motivation does not extend to South Africa – the continent’s second-largest economy after Nigeria. ‘We’re not interested in opening in South Africa,’ says the firm’s head of Africa Anthony Giustini. ‘Planting a CC flag there and rebranding 25 lawyers who aren’t CC lawyers just to do local work isn’t our strategy. We are unabashedly happy with our choice not to open in South Africa.’ Such confidence may be justified, as the firm tries to ensure its African work is far from sporadic. At its last count, CC was working on 380 active transactions across 40 African countries, bringing in approximately £50m per year in revenue. The figure remains small compared to the material output of other jurisdictions for the firm, but the numbers are growing. However, the only Africa-related partner hire the firm has made recently came with Olamide Oladosu joining in London in 2017 as a director of the firm’s Nigeria practice after a stint as general counsel at Rand Merchant Bank.

The notion of planting flags is seldom spoken of by the more globetrotting firms. Instead, it remains a pejorative term used by less expansive competitors. Linklaters is another firm adopting the received wisdom that less is more in Africa, choosing instead to ally itself with domestic South African firm Webber Wentzel in 2012. ‘We did that rather than having our own office; we wanted a full-service offering there and doing a deal made much more sense for us,’ says the firm’s head of Africa group Andrew Jones.

The Webber Wentzel alliance is considered a shrewd move; but an alliance does not make it Linklaters. London, Lisbon, Paris and the Middle East still remain the firm’s main entry points into Africa, while the hire of investment funds partner Thomas Alabaster in London from Latham & Watkins is the only Africa-related move the firm has made in the last 18 months. However, the lack of a physical presence on the continent does not inhibit its ability to win the big mandates, with Linklaters taking a lead role advising Eni on the project financing for the $8bn Coral South floating liquefied natural gas project in Mozambique. Herbert Smith Freehills (HSF) also secured a role on the deal, advising South Korean natural gas company Kogas, while Allen & Overy (A&O) advised the lenders.

The less conspicuous international firms in Africa frequently cite their desire to avoid competing with domestic players, with positive relations considered strategically more important for gaining top-tier work. ‘On the capital markets front, a number of South African companies are in a dual-listing scenario,’ der Kinderen says. ‘With some of those companies we have contacts, but with others they were the contacts of local firms we are very close with.’

Freshfields has made no African lateral hires over the last 18 months but A&O caught the eye recently with the hire of a 12-strong arbitration team from Baker McKenzie in March in Johannesburg, led by partner Gerhard Rudolph. A&O became the first Magic Circle firm to open on the continent with its Morocco office in 2001. Bakers, by contrast, is much more visible, having made eight more Africa-related partner hires than A&O over the last 18 months, and also counts an Egypt offering among three offices on a continent in which it has had a presence for more than 30 years. However, A&O’s approach sees the firm reliably attract the biggest mandates, helping it triple its revenue growth in the last five years. The firm recently advised on Saham Group’s sale of its entire insurance business to Sanlam for $1.05bn, while French firm Gide Loyrette Nouel acted for Wendel on its simultaneous sale of equity interest in the holding company of the Saham Group for $155m.

A particular cocktail

Crucially, the view remains local work can distract from more prestigious mandates. Firms often have to navigate difficult regulatory terrain to open up under their own brands, an unfortunate reality for those trying to move into Nigeria in particular. However, there’s no doubt the firms that have opened multiple offices speak of Africa in more ambitious language. ‘It’s no secret we want to become a pan-African law firm,’ Dentons’ Africa partner Darren Acres says. ‘I expect that our presence will increase in the future.’

Dentons’ unashamedly enthusiastic attitude to office openings and mergers has seen the firm engage in a flurry of activity in Africa over the last 18 months. Currently the firm has 114 lawyers in its Africa group, which includes 22 partners based in South Africa, Morocco, Kenya, Mauritius and Egypt, while a sixth office is due to open in Uganda.

‘We have consciously decided not to plant a flag in one or two jurisdictions in Africa. It doesn’t enable us to do the work our clients expect us to do in cross-border transactions.’
Shawn der Kinderen, Freshfields Bruckhaus Deringer

The Mauritius tie-up with Mardemootoo Solicitors and Balgobin Chambers came in October, along with the Kenyan combination with Harrison & Mathews. Meanwhile, Dentons’ Uganda office will open as part of a combination with Kampala Associated Advocates, the country’s largest law firm with 26 lawyers, including 12 partners.

The strategy keeps the firm active on local deals. Dentons recently advised the Moamah family and Amethis Maghreb Fund I on the disposal of a majority stake in irrigation system operator CMGP to Development Partners International (DPI). However, the deal lays bare the different position the continent’s more active international firms occupy. The transaction was the largest of its type in Morocco this year, making it a significant mandate for Dentons. However, for A&O, which advised DPI on the deal, the matter would not feature among its top three in Africa over the last 18 months.

‘They’re not making inroads on the premium side,’ says White & Case energy, infrastructure and projects partner Caroline Miller Smith when asked about the wave of international firms expanding in Africa. ‘We’re not going for the mid-market work, we’re going for the premium work and that requires us to only pick the right jurisdictions.’

Nonetheless the CMGP deal does reflect the growing importance of Morocco for international law firms. The country’s economy contributes a disproportionate amount of GDP to Africa relative to its population, while its widely-respected local counsel and platform into Francophone Africa forms part of what Giustini describes as a ‘particular cocktail’ of opportunity.

Dentons remains one of the most widespread international players in Africa but others adopt similar strategies. Baker McKenzie has 100 lawyers on the ground in Africa, including 25 partners spread across three offices, while Norton Rose Fulbright (NRF) has offices in Morocco and Tanzania as well as three offices in South Africa. Throughout 2017 NRF – which includes legacy ‘big five’ South African firm Deneys Reitz within the Verein – made 18 hires in Africa, while its historical association with mining work on the continent ensures the practice remains highly regarded in the market. Marelise Van Der Westhuizen, South Africa chief executive at NRF, is quick to endorse the firm’s strategy: ‘We hear from clients that when a different strategy is adopted those firms cannot provide the expertise, they don’t know the in-country regulators or what the economy is doing.’

You need not go far for similar sentiments. DLA Piper’s international development partner, David Church, argues an ‘on the ground’ offering is the best way to serve clients’ needs. ‘We believe very much in having local national expertise,’ he says. ‘At the end of the day who advises best in Kenya? It’ll be Kenyan lawyers, and we want them as part of DLA.’

And making them part of DLA is precisely what the firm does. DLA has two African offices in Casablanca and Johannesburg, and its Swiss Verein has seen another 18 offices among member firms on the continent join the structure. Two of those firms joined in the last 18 months – Zimbabwe’s Manokore Attorneys and Tunisian firm El Ajeri Lawyers. DLA has also made six hires at partner/director level in the last 18 months, with five in Johannesburg and one in Casablanca. But there is a sense externally that the firm’s approach creates disparities in quality among its practices. One partner at a rival firm in Johannesburg pointed out DLA had the leading M&A offering in South Africa, but its energy and infrastructure practice in the jurisdiction fails to meet the same standards.

HSF adopts a ‘long and narrow’ approach, predominantly focused on projects. The firm has 29 lawyers on the ground in Africa, six of which are partners, and Johannesburg remains its only Africa office. In Cameroon the firm recently advised EDF, the International Finance Corporation and the Government of Cameroon on the development of the Nachtigal hydropower project. ‘The Magic Circle and big US firms seem to be more focused on large individual transactions,’ says Martin Kavanagh, HSF global co-head of Africa. ‘While other firms such as NRF and DLA have a great spread, but aren’t at the premium end of deals.’

‘We’re not interested in opening in South Africa. Rebranding 25 lawyers who aren’t CC lawyers just to do local work isn’t our strategy.’ Anthony Giustini, Clifford Chance

Kavanagh stresses the need to still be physically present on the continent, citing that once the firm lost a job to DLA as the client was unaware of HSF’s presence in Africa. ‘We thought it was a bit silly, but perception is reality with stuff like that. Some firms traditionally have done a better job than us at selling their Africa presence – Bakers does, DLA does and NRF always does a good job of selling its capabilities. In the past we have been a bit rubbish at that.’ However, a 60% increase in revenue from Africa work over the last three years shows the gains made by the firm, while arbitration partner Emmanuelle Cabrol’s departure to Ashurst’s Africa practice in Paris in February 2018 is the only notable exit.

Opening offices in Africa is no mean feat and involves a lot of hoop-jumping for international firms. Eversheds Sutherland struggled to launch its South Africa offering due to regulatory concerns, while Orrick, Herrington & Sutcliffe had difficulties opening in Côte d’Ivoire due to regulatory complications and resistance from the local bar. South African firm Bowmans, however, structured its Kenya opening in such a way as to avoid any regulatory pitfalls by launching under the name Coulson Harney. Having bricks and mortar on the ground takes no small amount of endeavour.

Among the US powerhouses, White & Case is frequently cited as growing on the continent. The firm is among the ranks of those with an office in Johannesburg, while also maintaining an offering in Cairo. ‘We don’t have a strategy to set up offices in various spots. Neither do we have a strategy to make exclusive alliances with regional firms,’ White & Case partner and Africa director Joshua Siaw says unapologetically. ‘Our fundamental approach is having White & Case lawyers on the continent working with our clients first hand.’

Last year the firm acted on the Nacala Corridor Railway and Port Project, advising sponsors Vale and Mitsui. The $2.73bn project also saw Linklaters act for the lenders alongside a team from Webber Wentzel. ‘US firms tend to just be in Africa working for clients rather than having a genuine presence,’ notes one projects partner. ‘But White & Case has made great inroads.’

‘We believe in having local expertise. At the end of the day who advises best in Kenya? It’ll be Kenyan lawyers, and we want them as part of DLA.’ David Church, DLA Piper

Mayer Brown is another American-bred firm that sees little need for an extensive physical presence on the continent. The firm has no offices in Africa, instead opting for an alliance with Afrique Advisors in Casablanca. The firm is also advising the lenders on the Tahrir Petrochemical Project’s new $5.5bn petrochemical plant in Ain Sokhna, Egypt. Mayer Brown maintains the firm’s revenue from Africa is ‘substantially’ into eight figures, while Ian Coles, head of the mining and Africa practices, stresses that the diversity of the continent informs the firm’s strategy and echoes the point about the perils of trying to compete on local terms. ‘Africa is not a particularly homogeneous place,’ he points out. ‘Morocco is not much like Mozambique, so it’s not our strategy to have an office in any particular place. It’s also a caution thing. The better law firms in various jurisdictions have managed to go it alone and you can get into difficulties by being perceived to go head to head with local law firms.’

Hogan Lovells, however, has its own office in Johannesburg with more than 130 lawyers, including 50 partners. Its mining practice is considered favourably in the market, with partner Warren Beech spearheading that department. In March 2018 the firm managed to add to its Africa bench with the hire of Haroon Laher from NRF, where he had led the firm’s restructuring and insolvency practice since 2016. He became Hogan Lovells’ tenth African lateral partner hire in the last two years.

Treading carefully

There is widespread agreement on where further expansion for global law firms will take place, with Nigeria, Ethiopia, Mozambique, Ghana and even Zimbabwe all cited as ripening jurisdictions. However, office openings, and even alliances, are still considered risky moves for firms acutely aware of the precarious nature of African economies.

‘We’re definitely seeing a trend of international law firms looking for an on-the-ground presence more than we saw in the past,’ says Dentons’ Acres. ‘Ethiopia is generating a lot of excitement. It being a sleeping elephant is a fair description, but that’s true of many of the countries on the continent.’

Dentons maintains its commitment to being a pan-African firm, while Eversheds expects one or two office openings on the continent in the next five years while currently enjoying year-on-year revenue growth of roughly 10% from Africa. Meanwhile, British prime minister Theresa May’s whistlestop (and dancing) tour of Africa in August – which saw White & Case’s Siaw come along for the ride as the delegate lawyer – has made firms aware of potential modest gains in work as the UK sets about realigning its global position.

Siaw describes the opportunities as ‘awesome’. However, even the most enthusiastic are aware that finding talent and resources in Africa remains a challenge. After all, many of its countries are still licking their wounds from a wobble in the commodity cycle, with South Africa entering recession for the first time since 2009 in September 2018. An upcoming election in Nigeria has brought about an unwanted stasis in Africa’s largest economy, while pending elections in South Africa make it similarly subject to change.

Political change can bring its own benefits. A more progressive government in Ethiopia has caught the attention of potential investors, while economic integration continues apace, with 40 African countries signing up to a continental trade deal in March 2018, with the aim of cutting tariffs on 90% of goods. Establishing such economic blocs can only be good news for investors, and could provide the bedrock for firms looking to open in new jurisdictions.

As it stands, many firms are staying close to their original strategies, with the less-involved players chasing deals at the higher end as the initial stream of firms flowing into Africa becomes a slower drip. There is a lingering sense that the promise of Africa has given way to economic anxiety but the continent’s economies all remain liable to change, meaning no major player categorically rules out expansion. In the long term, as Africa’s population and economies grow, having roots there may become essential. For now the elephant sleeps with one eye open. LB

thomas.alan@legalease.co.uk

The post Legal leaders in Africa: Waking the elephant appeared first on Legal Business.

As the world’s largest continent, Africa covers 20% of global land area and 16% of the global population – currently 1.27 billion people, according to the latest United Nations estimates. By 2050, the addition of a further 1.3 billion Africans will be greater than the population growth in the rest of the world combined, pushing the continent’s total numbers above 2.6 billion citizens. In what is termed the biggest human transformation of our age, that figure is projected to reach four billion by the end of the century.

Accordingly, the infrastructure challenge is immense and some law firms are more alert than others to the long-term growth opportunities. Those with a short-term perspective see only problems: weak commodity prices, underdeveloped legal systems, corruption, currency issues and unstable or unreliable political regimes. They also focus on Africa’s still-modest aggregate GDP of $2.19trn (2016) – less than France – and compared with $1.6trn (2010), a slight decline in percentage terms over six years from 3% to 2.9% of the global total.

The short-termists tend to forget that the continent comprises 54 countries, each with unique characteristics, and what unites all of them is a significant need for infrastructure. ‘Africa is an exciting place to be, and despite the challenges there have been with commodity and oil prices, infrastructure and energy markets are still performing well,’ says Richard Laudy, head of global infrastructure at Pinsent Masons, which opened its first African office in Johannesburg last year. ‘You’re seeing population growth, so infrastructure needs to be improved,’ he adds.

Head of Hogan Lovells’ Africa practice, Andrew Skipper, adds: ‘It has been a challenging year, particularly for those countries which depend to a large extent on commodities, even though the price of some, including oil, has crept upwards. There are grounds for optimism in several countries that things could get better. Africa remains a medium-to-long-term play for most major international companies.’

Across the continent

In South Africa, where Hogan Lovells combined with local Johannesburg firm Routledge Modise four years ago, Skipper identifies significant challenges: ‘The country has been downgraded and the results of the December choice they are making over the leadership of the ANC [African National Congress] will be very significant in how the international markets react. It’s still an important market with good infrastructure compared with others. Most investment still goes into South Africa, so it remains an obviously strong place to be. We are there for the long run.’

Johannesburg has become an increasing draw for international firms. By general consensus, the local South African market is over-lawyered and under extreme competitive pressure, not least because of the weak rand and concerns over political uncertainty. But most of them are not looking to compete in the domestic market, instead focusing on project and infrastructure outside the jurisdiction.

In addition to its longstanding African presence in Cairo, Dentons also added an office there in 2015, supplementing its Cape Town and Morocco offices, which opened the previous year. However, the firm has been present in Africa through a network of associate firms across the continent for nearly 20 years. Says Stephen Shergold, chair of Dentons’ Africa executive committee: ‘That can be quite a challenge because you’ve got 54 countries with a range of legal services sectors from the highly mature through to countries where you don’t even have law firms.’

‘There are grounds for optimism in several countries. Africa remains a medium to long-term play for most major international companies.’
Andrew Skipper, Hogan Lovells

In September, Dentons announced that it will form a combination with Kampala Associated Advocates (KAA) in Uganda, with 26 lawyers, including 12 partners, the largest law firm in the country. ‘We want to be Dentons in different countries but we must be local there,’ says Shergold. ‘What we’ve done in Uganda is our first step of implementing that strategy in Africa: KAA will become Dentons Uganda.’ He points out that Uganda is attractive ‘because of the commitment of global oil companies to produce oil there in 2020’.

By that time, he hopes that Dentons will also be in Kenya, Tanzania and Rwanda. ‘That would be a pretty good job. East Africa is the most vibrant place to be developing business. We have been looking at the transition very much in East Africa to local law firms starting to lead M&A in the region. I’d really like Ethiopia involved in that conversation. That’s a place that lots of clients are interested in – it’s got massive market potential.’

Building blocks

East African countries are increasingly committed to a spread of long-term infrastructure projects, many of them based on the public-private partnership (PPP) model. Following the Rwanda Logistics Programme, the first publicly-procured PPP in East Africa, Kenya National Highways Authority and Uganda National Roads Authority announced flagship road PPP projects this year: Nairobi-Nakuru-Mau and Kampala-Jinja Expressway.

‘PPP legislation has been introduced in a number of jurisdictions over the last couple of years,’ says Eric le Grange, head of ENSafrica’s project development and project finance department. ‘This includes Uganda, Tanzania, Namibia and Kenya. Implementation is, however, slow and the primary issue is around the alignment of historical regulation relating to public infrastructure procurement with PPP regimes. In many instances, such as Namibia, the primary legislation is promulgated but the establishment of the regulations remains outstanding and is sometimes mired in controversy as a consequence of the political protection of vested interests.’

‘There’s a long history of the London office doing PPP projects across the continent but with an emphasis on East Africa,’ says Shergold.

‘Commodity prices have been depressed, so traditional income streams aren’t as strong; therefore governments need to look to different forms of funding and that takes you down the PPP route,’ adds Laudy. ‘I expect to see PPP projects increasing in East Africa and perhaps elsewhere. Governments need to make sure that they create a regulatory regime that investors can trust, because what they hate is uncertainty. That will create the right climate for PPPs.’

‘We’ve got about 300 live transactions in Africa. That surprises clients: even very big corporates say they’d like 300 transactions on the go in Africa.’
Martin Kavanagh, HSF

Among its PPP-related work, Hogan Lovells has been advising on a Senegalese toll motorway project, the Abidjan Metro project in Côte d’Ivoire and solar projects in Kenya, Nigeria, Ghana and Senegal. Meanwhile, Dentons identifies two recent PPP deals: advising on the development of the new $418m Bugesera International Airport in Rwanda and acting for the IFC on the implementation of its Scaling Solar programme in Ethiopia.

Although she has been involved in the PPP expansion of the Gautrain network in South Africa, Brigette Baillie, Herbert Smith Freehills (HSF) project development partner in Johannesburg, is circumspect. ‘We’ve seen a number of failed PPPs in Kenya, Tanzania, Uganda, South Africa and Zambia. Now Kenya seems to be launching their road PPP project and I hope this time that they stick with it. If the PPP takes longer than the current term of government, which was the case in Mauritius, then the new government may decide they don’t want to do this project.’

She points to Zambia coming out of the $6bn Batoka Gorge hydro project as a potential PPP. ‘Zambia’s had a few stabs at PPP. They haven’t got it right, but they’re still flirting with the idea.’

Caroline Miller Smith, infrastructure and project finance partner at White & Case, has been advising on the Nacala Corridor project, involving a railway and coal terminal, which will be one of the largest infrastructure deals in Africa. ‘We have been acting for Vale and Mitsui & Co in respect of a 900km rail project and a coal terminal, which were originally procured under five different PPP concessions in Mozambique and Malawi,’ she says. ‘They are now going to be financed by a combination of commercial banks supported by export credit agencies, direct lending by an export credit agency and lending by a regional multilateral.’

Providing local law advice alongside White & Case is Pimenta & Associados, the Mozambican member firm of the Miranda Alliance, a network of independent firms covering mostly lusophone jurisdictions. Miranda & Associados managing partner, Diogo Xavier da Cunha, says: ‘Because these projects are long term, they cannot really stop and there is always an expectation by the sponsors that the downturn is temporary and that things will resume.’

‘We have gone from Africa representing single-digit turnover to around 30%. In Portugal if you grow 3-4% in a year, that is a stellar result.’
Rui Amendoeira, VdA

Acting for the lenders on Nacala is Andrew Jones, head of Linklaters’ Africa group. ‘PPP means different things in different countries,’ he says. ‘If you look at the Kenyan PPP Act, it includes everything including power, whereas in most of Europe, PPP specifically means just transportation, social infrastructure and a few other things. One way or another, with the exception of oil and gas and mining, in most countries everything we do in Africa is PPP, even if we don’t label it that way.’

Beyond Nacala ‘we are doing power deals everywhere’, he says. ‘So if you go around the continent, it’s non-stop.’ In order, he catalogues Ethiopia, Eritrea, Madagascar, Kenya, Tanzania, South Africa, Mozambique, Namibia, Nigeria, Ghana, Mali, Côte d’Ivoire, Cameroon, Senegal, Zambia, Zimbabwe and Botswana. ‘Recently, we’ve seen an increase in other forms of transportation infrastructure,’ he adds. ‘We’ve been doing airports in West Africa, particularly, as well as ports and roads. We’re looking at a couple more East African roads.’

As for power projects, Linklaters is advising on Lamu in Kenya, ‘which is the very big (1GW) coal-fired power deal, and the Economic Commission for Africa and commercial bank lender group on Morupule B in Botswana, a large coal-power deal with Japanese and Korean sponsors’, he adds. Announced in August, China Power Global is set to construct the Lamu power plant as part of the African Development Bank’s New Deal on Energy, which is providing $10bn for Africa to deliver universal electricity access by 2025.

HSF is also awash with African deals. ‘We’ve got about 300 live transactions in Africa on the go,’ says Martin Kavanagh, co-head of the firm’s global Africa business. ‘That statistic is the one that most surprises clients: even very big corporates say they’d like 300 transactions on the go in Africa.’

‘We decided to invest in Ethiopia and Egypt because they represent the most appealing investment opportunities in Africa.’
Stefano Simontacchi, BonelliErede

He points to oil and gas, mining and energy projects making up a significant part of their work with infrastructure – roads, railways, ports – as well as social infrastructure, making much of the balance. ‘Our Africa revenue last year was double what it was about three years ago, up from £30m to £60m now. This is partly due to the growth in other sectors, such as consumer goods, private equity and financial services.’

An interesting trend, he suggests, has been the involvement of private equity. ‘We have done three very large transactions recently where private equity firms have been the acquirers of assets in West Africa from Shell and ENGIE. They spent a lot of money and they won very competitive processes against dozens of other bidders. They brought with them the private equity way of doing business to the African market, which hadn’t always gone terribly smoothly. It’s a pretty major change in the market.’

In the mix

Working with HSF, among other law firms, on a number of Africa deals has been Harneys BVI partner Greg Boyd. ‘There’s still quite a lot of appetite for investing in Africa,’ he says. ‘In equity financing, investors are taking a stake in the company, using their standard subscription and shareholding agreements. We customise the constitutive documents of the BVI company that they invest through to align with the agreements and make for a fairly robust structure.’

There is, he concedes, ‘a fair amount of competition with Mauritius: they have positioned themselves very well. Mauritius did an excellent marketing campaign across Africa. The African Development Bank, for example, will only invest through an African entity and Mauritius is regarded as being part of Africa. However, on the legal and commercial merits, the BVI is often a better fit.’

In Africa’s lusophone countries, Portugal’s Miranda has a long history: ‘Taking Africa as a whole, about 60% to 70% of our revenues relate to the continent,’ says da Cunha. Referring to Mozambique’s PPP legislation, he says that ‘it tries to place everything in the same basket without really taking due regard to sector-specific needs and legislation’. The firm is currently advising several international investors on Mozambican gas-related projects.

Valued at $8bn, this year Mozambique saw Africa’s largest-ever project finance deal: the floating liquefied natural gas (FLNG) project financing, supporting the Coral South FLNG project. This was led by Italy’s Eni, alongside a range of oil producers aiming to exploit Mozambique’s gas resources in the Rovuma Basin. The producers were advised by Linklaters, while the consortium of lenders was advised by Allen & Overy. Among the local advisers was Portuguese firm Morais Leitão, Galvão Teles, Soares da Silva & Associados.

While Miranda has targeted Africa for many years, the major Portuguese firms have also made big inroads into lusophone jurisdictions. PLMJ Advogados partnered with GLA – Gabinete Legal Angola in 2010 followed by TTA in Mozambique the following year. Combined, the operation in Africa provides roughly 10% of overall revenues, according to PLMJ’s managing partner, Luís Pais Antunes. ‘We’ve enlarged our Africa operation with partnerships in São Tomé, where we’re involved in a major infrastructure project, in Cape Verde and in Guinea-Bissau,’ he says.

‘In Angola, many projects using PPP have been renegotiated, their values reduced and deadlines extended to give relief to projects that now have a lower financial flow.’
Nelson Raposo Bernardo, Raposo Bernardo

In Angola, PLMJ is advising the consortium that has been contracted to build the $4.5bn hydroelectric project, Caculo Cabaça, and Heineken, which is building a new factory in Mozambique.

Says Nelson Raposo Bernardo, managing partner of Raposo Bernardo: ‘In Angola, many infrastructure projects using PPP have been renegotiated, their values reduced and their deadlines extended for several years, in order to give financial relief to projects that now have a lower financial flow.’

Rui Amendoeira, partner at Vieira de Almeida (VdA), spends much of his time in Angola. ‘Five years ago, at the peak, there were almost 20 drilling rigs operating in Angola; by January 2018, there will be only two or three,’ he says. But despite the energy downturn, VdA’s African revenues have surged. ‘We have gone from Africa representing single-digit turnover two-and-a-half years ago, to around 30% now,’ says Amendoeira. ‘Whereas in Portugal if you grow 3-4% in a year, that is a stellar result.’

VdA has been advising many international oil companies and oilfield contractors in Angola, and is also involved in the restructuring of Sonangol, which oversees oil and natural gas production in Angola. It also had a key role in the negotiation and settlement of a large tax dispute, involving the Angolan Ministry of Finance and several oil companies.

Interest in Africa comes from a variety of countries. Prominent among newer arrivals is Italian powerhouse BonelliErede, which has two offices in collaboration with local law firms. ‘We decided to invest in Ethiopia and Egypt because they currently represent the most appealing investment opportunities in Africa for international companies,’ says Stefano Simontacchi, the firm’s co-managing partner.

He points to Egypt’s market size and close historical ties with Italy. Ethiopia, he adds, ‘is one of Africa’s most important countries, due to its increasing openness to international investment, the growing European business community and one of the highest GDP percentage growth rates. Ethiopia is another linchpin for our development in East Africa.’

While there exists natural cultural and language ties between established law firms in Europe and certain African jurisdictions, it is clear there are many opportunities for specialists in infrastructure, particularly in East Africa, as demand continues to increase. An old African proverb says: ‘If you want to know the end, look at the beginning.’ The beginning is happening now for many significant projects in a number of key African countries and those firms there at the start should remain in place at the end. LB

The post Laying the foundations – lawyers scramble as demand for African infra booms appeared first on Legal Business.

‘There is no African law firm that does infrastructure the way we do; it’s front and centre of our strategy. There is a real gap in the market for a sector-based law firm.’

This bold statement comes from Richard Laudy, head of infrastructure at the latest foreign entrant into the increasingly popular South African market, Pinsent Masons. The national UK firm announced in July that it would be opening formally in Johannesburg in early 2017 with an office staffed by 20 lawyers and seven partners, including two partners taken from local heavyweight, Bowman Gilfillan, including head of construction Rob Morson and disputes partner Shane Voigt.

‘The challenge for law firms is: how do you lawyer the continent?’ asks Laudy. ‘The way to do it is through hubs. We will be leading with our infrastructure offering, but we also see great potential in our energy and technology sectors. The demand for power in the region, especially in South Africa, is absolutely colossal and technology increasingly works hand in glove with infrastructure and energy.’

But while the strategic horizon across Africa may look tempting, these are not markets for short-term gain. In many African countries, economic stagnation has taken hold. According to the World Bank’s latest report, the continent achieved aggregate annual GDP growth of 5.4% between 2000 and 2010, equivalent to $78bn a year. However, that slowed to 3.3% a year between 2010 and 2015, while sub-Saharan Africa will decelerate to just 1.4% this year, the slowest for two decades, according to the International Monetary Fund (IMF).

This slowdown reflects the tough economic conditions that prevail in the largest economies and commodity exporters – Angola, Nigeria, and South Africa – as they recalibrate in the wake of lower energy and commodity prices and tighter financing conditions. Angola and Nigeria, in particular, have had painful renegotiation of their debts with China.

‘As a whole, Africa is a critical medium-to-long-term play for global businesses and for law firms. But if you’re not there now showing commitment, you will struggle when things really take off,’ claims Andrew Skipper, head of Hogan Lovells’ Africa practice.

But Africa is much more than just a continent. It comprises 54 different jurisdictions, each with its own dynamics. Although South Africa and Angola have not grown at all in 2016 and Nigeria is in recession, non-resource dependent countries (such as Kenya, Uganda and Tanzania) – aided by falling oil prices and cheaper imports – will grow at 5.6%, suggests the IMF. A clear dividing line therefore exists between two types of jurisdiction: resource and non-resource dependent.

The long haul

Making a success of an Africa practice requires long-term commitment, local understanding and a developed expertise. ‘Over the years, we have worked in every one of the jurisdictions, 54 – or 55 if you count South Sudan – both on contentious work and on the finance and corporate side,’ says Craig Tevendale, head of international arbitration at Herbert Smith Freehills (HSF) in London. ‘Many projects have been mothballed; some have stalled at the financing stage, others have hit the buffers during the early stages. That has a chilling effect on further positive investment, because the case becomes rather more difficult to sell.’

‘Clients said: “We just want the work done. It doesn’t matter if you do it out of Johannesburg, London or Lagos.”’
Christo Els, Webber Wentzel

Despite these challenges, Tevendale points to a 30% year-on-year increase in the firm’s Africa revenues. This may be largely due to HSF opening a Johannesburg office in 2015 with 22 lawyers, becoming one of the most recent in a cluster of international firms that have taken a similar approach: plant the flag in South Africa as a regional hub to benefit from long-term sub-Saharan growth.

In 2011, Norton Rose Fulbright (NRF) merged with South African firm Deneys Reitz, while Hogan Lovells used a similar tactic in 2014 to combine with Routledge Modise. Allen & Overy (A&O) opened in Johannesburg initially by taking a six-lawyer team from Bowmans; Dentons opened in Cape Town in 2014 by joining with local energy firm KapdiTwala, and opened in Johannesburg in 2015; while DLA Piper terminated its alliance with indigenous firm Cliffe Dekker Hofmeyr to establish its own Johannesburg presence in 2015.

To supplement their regional offering HSF, Hogan Lovells and DLA have all recently hired prominent partners from leading South African firm Webber Wentzel (which has been in alliance with Linklaters since 2013): energy specialist Brigette Baillie and mining expert Peter Leon joined HSF; competition partners Nkonzo Hlatshwayo and Lesley Morphet joined Hogan Lovells; while heavyweight corporate partner Johannes Gouws was appointed DLA’s South African managing partner, arriving at the same time as fellow corporate partner Peter Bradshaw.

Christo Els, senior partner of Webber Wentzel, says: ‘We test our strategy against the those of some of our South African competitors who have opted for opening local offices in a number of African countries, as well as the international firms that have opened up in Johannesburg. It is not always clear to me whether all of these local offices make sense, and you wonder how sustainable some of them are in the long term. It will be interesting to see in three years’ time who is still there and what they are doing.’

In addition to its Linklaters tie-up, Webber Wentzel has an independent network of African firms, with 12 members across sub-Saharan Africa. According to Els: ‘Before we did it, we asked clients: “Do you want us to have an office there?” Across the board, they said: “We just want the work done efficiently. In the end, it doesn’t matter to us if you do it out of Johannesburg, London or Lagos.”‘

A transactional lull: commodities dip equals a muted African M&A market

Africa’s resource-led downturn has left the M&A market subdued. IPOs are also thin on the ground – although Freshfields Bruckhaus Deringer advised the Cleopatra Hospital Company (Egypt’s largest private hospital group) on its Egyptian Exchange IPO for an initial market cap of $162m. Slaughter and May was also active in healthcare, advising Johannesburg Stock Exchange-listed Mediclinic International on its combination with Al Noor Hospitals Group. This created an international private healthcare group operating in the United Arab Emirates, southern Africa and Switzerland.

Despite the slowdown, there has been continued project-led activity, not least in power and energy. In Egypt, White & Case advised Tahrir Petrochemical on the development and financing of a $5bn petrochemical complex, including proposed financing from US Export-Import Bank, the Export–Import Bank of Korea, the Korea Trade Insurance Corporation and the Italian export credit agency, SACE. In Uganda, Allen & Overy (A&O) advised SN Power, the Norwegian hydropower company, which acquired a stake in the Bujagali 250MW hydropower project from SG Bujagali Holdings, a Mauritian subsidiary of Blackstone, which was advised by Kirkland & Ellis. Meanwhile Clifford Chance (CC) advised 15 lenders on financing Nigeria’s first fully privately financed independent power plant, which will come on-stream in 2017: the first phase of what will become a 1,500MW power plant.

Meanwhile, alliance partners Linklaters and Webber Wentzel advised the sponsors on the Horn of Africa pipeline project – an offshore mooring facility in Djibouti, together with a 550km refined product pipeline from the port in Djibouti across the border into Ethiopia. Again in east Africa, CC advised CDC Group, the UK’s development finance institution, on a primary equity subscription of $140m in ARM Cement in what was the largest announced equity investment transaction in the region this year.

Despite precipitous price drops, oil and especially gas projects are still attracting strategic investment. White & Case represented the lenders on the proposed multibillion-dollar project financing for the development of a LNG facility in Mozambique, one of two major LNG projects under development in the country in what will be the first of its kind on Africa’s east coast. Dentons is advising the Mozambique government in the negotiation and development of the onshore LNG project, scheduled to come on-stream in 2018.

DLA Piper has been particularly active in energy matters and advised Oando, Nigeria’s largest local energy group and dual-listed on the Nigerian and Johannesburg stock exchanges, on a $210m recapitalisation and partial divestment of its downstream operations. DLA also advised HSBC France and Standard Chartered (as lenders) on their $500m letter of credit to Ghana’s state oil company, Ghana National Petroleum Corporation (GNPC). This will support GNPC’s role in the development of Ghana’s Sankofa Gas Project.

A&O advised APM Terminals on a 30-year concession (worth €758m) for a container terminal within the Tangier Med 2 port complex. Also in Morocco, Baker & McKenzie advised SNI as joint venture partner on the $4bn merger of Lafarge Ciments and Holcim Maroc. This created LafargeHolcim Maroc, which has the largest market capitalisation of any local industrial company.

Elsewhere, Herbert Smith Freehills (HSF) has advised on a broad range of deals: CFAO on its agreement with French investment company Wendel, advised by CC, and private equity investors to develop an investment in SGI Africa, a pan-African property company to build and lease retail shopping centres; IHS Holding on its acquisition of Helios Towers Nigeria (more than 1,200 telecoms tower sites) from HTN Towers – claimed to be the first mobile infrastructure consolidation in Africa; and Brazilian energy company Vitol on the financing of its $7bn oil and gas project in Ghana with Eni supplying gas for power generation – the largest single foreign direct investment project since Ghana’s independence.

Alongside Canadian firm Osler, Hoskin & Harcourt as lead adviser, HSF, together with King & Wood Mallesons and Covington & Burling, also advised China Molybdenum on the acquisition of Freeport’s indirect 56% interest in the Tenke Fungurume copper-cobalt mine in the Democratic Republic of the Congo for $2.65bn – one of the year’s largest mining deals.

As one of the largest long-term players in the region, White & Case has run a Johannesburg office since 1995 and in June opened in Cairo through an association with new Egyptian law firm MHR & Partners. The most recent LLP accounts for Europe, Middle East and Africa show that the firm’s Johannesburg office income was £4.2m in 2015, up from £1.9m in 2014: a year-on-year increase of 121%.

Mukund Dhar, a local energy and infrastructure partner at White & Case, says: ‘The most obvious impact [of falling energy prices] has been a slowdown in upstream activity and in the launch of significant new projects. There is certainly pain for many participants.’ However, he adds: ‘We should draw a distinction between the energy or natural resource-dependent economies, where there is much turmoil, and non-resource dependent countries like Kenya, to an extent Tanzania, and some francophone jurisdictions like Senegal, where a lot of other business is happening and significant growth is expected.’

White & Case is representing the Brazilian mining company, Vale, on the development and financing of the Nacala corridor rail and port project in Mozambique and Malawi. Andrew Jones, head of the Africa group at Linklaters, has been advising the African Development Bank, the International Finance Corporation and a syndicate of export credit agencies on the $5bn financing for this project, the biggest infrastructure deal on the continent. ‘It works because coal is a dollarised commodity, so the whole thing is a dollarised infrastructure project,’ says Jones. ‘But overall, there’s an acute shortage of dollars in many African countries – a real structural constraint on infrastructure development. Perhaps the biggest challenge to African development is the currency issue.’

Els adds: ‘There’s a reason the returns you can get in Africa are higher than elsewhere: corporates that are willing to go in for the high returns know these challenges exist, they try and structure around them.’

Meanwhile Christophe von Krause, a Paris-based partner in White & Case’s international arbitration group, identifies a significant increase in disputes work: ‘Arbitration is a common feature to francophone, anglophone and lusophone Africa, so it has impacted every region.’ In representing foreign investors and state entities, he identifies the fall in commodity prices, together with a shortage of US dollars, as catalysts for disputes in oil-and-gas-dependent economies. ‘Infrastructure and oil and gas or construction projects are often financed by the state and their budget is dependent on their oil and gas production. So if there is a fall in prices, it affects their ability to carry on.’

With the development of African courts and arbitral institutions, disputes work has developed to become a cornerstone of many global firms’ Africa practices. ‘The volume of arbitration is increasing dramatically,’ says Robert Gaitskell QC of Keating Chambers, who has been involved in African arbitrations for nearly 30 years. In addition to White & Case, which he sees ‘absolutely everywhere’, he identifies Freshfields Bruckhaus Deringer, Shearman & Sterling, Clifford Chance (CC) and Latham & Watkins as being particularly active.

‘Pressures on traditional sources of finance are opening up opportunities for alternative lenders. We are seeing increasing activity in this space in Africa from debt funds.’
Kem Ihenacho, Latham & Watkins

‘Because China has stopped buying huge volumes of minerals as it did previously, that has had a dramatic effect on commodity prices, which feeds into disputes. Premature termination is a factor: projects that were previously viable suddenly became unviable and got cancelled. Others didn’t get cancelled, but the parties were making considerably less profit or there were delays, so they look for people to blame.’ This, he adds, includes infrastructure and power projects.

Dr Livingstone, I presume?

Johannesburg has not been the only African centre attracting international attention of late. Morocco has seen several firms entering the market with the role of regional hub for north Africa centred on Casablanca. Both A&O, which hired a team from Gide Loyrette Nouel, and NRF opened there in 2011, as did CC in 2012. In 2015, these firms were joined by DLA. All have deployed strong project finance teams as a launch pad into North Africa.

‘The point of entry to the continent used to be just South Africa,’ says Mehdi Bennani, founder of local firm Bennani & Associés. ‘This approach has changed. North Africa is an alternative.’ He points to the Emirates Telecoms (Etisalat) acquisition of Vivendi’s stake in Maroc Telecom in 2014 for €4.5bn. Freshfields advised Etisalat alongside Bennani. ‘This demonstrated Morocco being used as a bridge to Africa. Ventures start out in Morocco and the goal is to reach out to several other countries in Africa.’

But Charles Morrison, trade and project finance partner at DLA, is cautious about overplaying his firm’s recent ventures into Africa, even though DLA’s Africa group already has 15 local member firms: ‘Our Casablanca office has a strong connection to Paris, which helps to oversee its development; in Johannesburg, we are building a good team. We have our first partners in the finance and project group who are already active working for banks and doing deals. But it’s early days and I wouldn’t want to paint it any other way.’

Morrison confirms that some large upstream disposals are still going on – particularly in Mozambique, Tanzania, Ghana and Angola – and he is enthusiastic about gas projects: ‘Whether it is east, west, south or north, there is gas everywhere and there are lawyers involved in developing those gas resources.’

In the east, Kenya has emerged as an attractive destination for international firms, particularly with the 2013 launch and subsequent development of the Nairobi Centre for International Arbitration, potentially making Kenya a credible forum for the settlement of disputes in the region. In July, NRF announced an alliance with nine-partner Kenyan law firm Walker Kontos.

Meanwhile in the west, Nigeria remains the key focus for many firms – even those without an on-the-ground presence in Africa – its 190 million people make up 18% of the continent’s total. At Winston & Strawn, London partner Zoë Ashcroft says: ‘We work on transactions across sub-Saharan Africa, but our concentration is on Nigeria, in large part because it is such an important economy within the continent.’

She highlights Seplat Petroleum’s IPO and dual listing on both the London Stock Exchange (LSE) and the Nigerian Stock Exchange (NSE) in 2014 – the first of its kind – on which she advised. There are now nine Nigerian companies quoted on the LSE: six oil and gas explorers and three Nigerian banks. However, it is notable that there have been no listings on the LSE this year, nor have there been any IPOs on the NSE (see box, ‘A transactional lull’, above).

‘The international banks have been more cautious in closing transactions. They’re still doing them, but it can take a little bit longer,’ she says. The gap created by an absence of conventional financing creates opportunities for alternative sources of funding, most especially private equity. Most active among the PE houses in Nigeria are Helios, Kohlberg Kravis Roberts & Co (KKR), Carlyle, and TPG Capital.

Kem Ihenacho, co-head of Latham’s Africa practice, says that PE work has been extremely busy: ‘Despite the obvious challenges with the economy, there is still significant interest in Nigeria from investors. We have signed a number of Nigerian deals this year across various sectors and remain very active on live transactions in that market in particular, as well as in the other large African economies.’

‘There’s an acute shortage of dollars in many African countries. The biggest challenge to African development is currency.’
Andrew Jones, Linklaters

He continues: ‘As we have seen in other markets, short and long-term pressures on traditional sources of finance are opening up opportunities for alternative lenders. We are seeing increasing activity in this space in Africa from debt funds and the like.’

Caribbean-based Harneys handles an increasing share of Africa-related work with an offshore component, with partner Greg Boyd advising development finance institutions. He says: ‘In Nigeria, because of the oil price drop, in debt finance the ability to service foreign currency debt is extremely difficult. A lot of their infrastructure projects are now being done through equity finance.’

Harneys head of Africa Patrick Colegrave adds: ‘Equity funds are currently having a tough time, partly because of liquidity issues and a cyclical downturn, whereas commodity trade finance funds are doing okay because they plug a financing gap left by the banks. So we have seen some fund formation and investor flows coming into that space.’

Elsewhere in lusophone Africa – Angola, Mozambique, Guinea-Bissau, Equatorial Guinea, Cape Verde, and São Tomé and Príncipe – Portuguese firms continue to be prominent alongside large international players. ‘Africa is the reason this firm exists,’ says Diogo Xavier da Cunha, chair of Miranda & Associados, which is set to announce a new addition to the firm’s alliance, in the Ivory Coast, adding to its spread of west African jurisdictions. ‘2016 saw disinvestment in Africa by several international companies, mainly oil and gas related, especially service providers,’ he says. ‘Mining has also suffered in Mozambique and Angola. The upshot, he adds, has been a big pressure on fees: ‘Oil industry clients have requested rate reductions. Recently, that has stabilised, but we very much regard this as being the new normal.’

Rui Amendoeira, partner at Portuguese rival Vieira de Almeida, adds: ‘For us, the most important jurisdiction by far is Angola. Some of the work has just disappeared – fewer transactions, fewer companies buying assets, fewer farm-ins or farm-outs, virtually no tenders for new licences. That work is significantly reduced or gone completely. But while you lose certain types of work, you gain other types that are needed exactly because the oil price is low. We’ve also seen a significant increase in litigation against the government – tax litigation mostly – because the government is increasing its efforts to collect taxes from corporates.’

At Raposo Bernardo, which operates in Angola, Cape Verde, Mozambique, Guinea-Bissau and São Tomé, managing partner Nelson Raposo Bernardo says: ‘It has been a very active year for the renegotiation of debts, not only in Angola but also in Mozambique. With delays in project payments, both governments are allowing the renegotiation of large contracts. Deadlines have typically been extended by between two to five years, which in some ways means that governments understand that these difficulties are transient.’

Risk and reward

Commodity prices may fluctuate, but three perennial challenges for law firms remain in much of Africa, the three Cs: currency, corruption and certainty. ‘The oil price crash has made it difficult to obtain dollars in key markets like Nigeria and Angola, so doing international business without an international currency remains a short-term challenge in such markets,’ says Skipper. ‘Corruption is difficult to deal with, it remains a persistent challenge in many countries and global business and companies need to be very careful and ensure thorough due diligence is performed when investing on the continent.

‘Consistency and certainty – whether you call it the rule of law, reliability of approach, or simply knowing how much you are going to be fined if you get something wrong, or if the government is going to pull out of contracts – all these things still make it quite difficult to do business with certainty how ruling authorities will react in regulatory and relationship terms, and acts to affect confidence in long-term investment.’

Jones adds: ‘Our job is to structure deals in a way that addresses and mitigates the three Cs, and to help clients mitigate country risk in terms of having the right sorts of funding arrangements and political risk mitigation structures.’

But in a continent with many opportunities for high potential returns, perhaps the biggest risk facing law firms building a practice in Africa is not being there at all. LB

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