Thursday, 4th Sep 2014
Lawyers in sub-Saharan Africa are using innovative techniques to facilitate business deals in countries where the legal framework may lack the levels of robustness that international investors are comfortable with.
Francisco Khoza, Director and the Head of Banking and Finance at pan-African corporate law firm, Bowman Gilfillan, commented, “To give comfort to the parties involved, many deals are based on English law because people are familiar with that system in so far as contractual arrangements are concerned.
“Contracting parties also need to consider where they would go to resolve disputes should problems arise down the line. London is frequently chosen as the venue for resolving commercial arbitration disputes.
“While investing in Africa may present issues around the enforceability of contracts and obtaining different approvals related to deals, the real issue is reassurance from people on the ground about what could, in reality, upset the deal beyond the documents that the parties have agreed upon”.
He added that one test of whether a deal will hold water in terms of a binding and enforceable contract is whether a change of government or minister would upset the transaction.
In addition to the capabilities necessary to undertake complex cross-border transactions, companies seeking advice in Africa should work with legal counsel with a local presence and local knowledge that enable navigating the complexities in a particular jurisdiction, while providing insight into what could result in a deal unravelling.
In countries where the legal framework is not that well developed, innovative legal solutions can involve lobbying government and developing a framework through contractual means.
Mr Khoza noted that the sometimes difficult environment has not deterred investors from making Africa one of the world’s preferred destinations for their capital. Indicative of this are high levels of private equity flows and merger and acquisition (M&A) activity.
In looking for the most compelling M&A environments, he said it was instructive to consider where South African business is investing, including in Nigeria, Ghana, Kenya, Zambia and Botswana. In some regions M&A activity is being driven by the resources sector, for example oil and gas in Tanzania and Mozambique.
Infrastructural development will remain a driver, with cross-border deals between African countries likely to continue increasing.
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