African allure – the international firms eager to join forces with local outfits in sub-Saharan Africa
"The interest in Africa was driven in the late 2000s when there was a lack of work in London," says Roddy McKean, director at Kenyan firm Anjarwalla & Khanna.
June 04, 2014 at 06:13 AM
11 minute read
International law firms are scrambling to forge local alliances to profit from sub-Saharan Africa's economic growth, but the homegrown practices are playing hard to get. Anna Reynolds reports
"The interest in Africa was driven in the late 2000s when there was a lack of work in London," says Roddy McKean, director at Kenyan firm Anjarwalla & Khanna.
While Europe, Asia and the Middle East suffered from the effects of a prolonged downturn, it was the emerging economies of several African countries that provided law firms with opportunities for work. And while international outfits' existing African hubs in South Africa and the north of the continent have proved valuable in this effort, it is sub-Saharan countries such as Nigeria and Namibia that have drawn many lawyers' attention thanks to impressive growth rates and a spate of high-profile, high-value deals.
While traditional projects and infrastructure work continues to provide much of the day-to-day legal work, recent transactions are a sign that the market is becoming more sophisticated.
Sanjeev Dhuna, a banking partner at Allen & Overy (A&O) and a member of the firm's Africa group, recently advised a syndicate led by Standard Chartered Bank on the $3.3bn (£2bn) financing for Nigeria's Dangote Industries – Africa's largest petroleum refinery project. "Banks are being more innovative and coming up with new structures – it is the type of corporate finance transaction you would expect to see in deeper capital markets, like the US and EU," comments Dhuna.
Jonathan Lang, head of the Africa group at South Africa's Bowman Gilfillan, explains that this has been triggered by a change in sector focus across the continent: "The growth of the middle class in Africa means that the fast-moving consumer goods (FMCG) sector is booming, along with the mobile phone, retail banking, insurance, IT and advertising sectors."
As a result the continent has seen several major corporates setting up on the ground including Coca-Cola, Nestle and Diageo. As these companies expand, the need for corporate lawyers to facilitate bank borrowing, restructuring, joint ventures and initial public offerings is increasing.
Another cause of the growth of many economies is natural resources. Mozambique, Ghana, Kenya and Tanzania have all seen oil and gas discoveries generate work for lawyers. Meanwhile, Nigeria, with its focus on mining, has also proved to be one of the most commercial of the sub-Saharan countries with a large financial services sector.
Capturing outside investment
As Africa throws up more opportunities, particularly for outside investors, lawyers on the ground note a shift in the way people outside Africa view the continent. "People internationally used to see Africa as a country, but the approach now is a lot more sophisticated – you can't apply the same thinking across the board," comments McKean.
Governments across the continent have also started targeting foreign investors by grouping together to create regional hubs and encourage trading. "Kenya, Rwanda, Tanzania and Ethiopia are approaching foreign direct investment as a region rather than stand-alone jurisdictions, which is an attractive proposition for major corporates," says Rob Otty, managing director of Norton Rose Fulbright's Africa practice.
As a result, there has been a surge of investment from Asia in particular, with Malaysia, Indonesia and Japan joining China as major investors into the region. Paul Bugingo, a partner at Dentons and chair of the firm's Africa steering committee, says: "Today there is a wider group of real investors. We are not talking about aid donors anymore; we are seeing genuine investment for profit, particularly from China."
Otty adds that Europe remains the largest collective investor with the US and Canada also upping their financial commitment to the continent. Meanwhile, common languages and historic ties continue to unite investors, with Portuguese firms still dominating lusophone Mozambique and Angola, for example.
Expansion plans
However, the varying quality of lawyers across the continent continues to cause problems for international law firms looking to serve this influx of clients, with firms "all fishing in the same pond for good lawyers", as Bowman Gilfillan's Lang puts it.
Many leading local firms closely guard their independence as a result, capitalising on the shortage of lawyers by retaining their ability to work with several international law firms. The majority of the large international outfits have favoured strategies involving close but non-exclusive relationships with a small number of local firms in each of their key jurisdictions.
"If you are only chasing the massive deals most of the work is going to be in Nigeria and Kenya," says Elikem Kuenyehia, managing partner of Ghanaian firm Oxford & Beaumont. "Given the infrastructural costs it doesn't make sense to set up an office in each jurisdiction – it's better to have a regional base. If you have good partnerships you don't need to be on the ground."
Norton Rose, for example, has ties with several firms including Kenyan outfits Muthaura Mugambi Ayugi & Njonjo, Walker Kontos and Kaplan & Stratton, as well as Nigeria's Aluko & Oyebode.
When Kuenyehia set up Oxford & Beaumont eight years ago he says he struggled to get interest from international firms. He explains that the situation today is very different: "Now they want to position themselves as having a huge African footprint. It's a small market though – there is a race on and global outfits want more and more alliances. But the elite African firms certainly do not want exclusive alliances; they want to work with whoever is best aligned with them and their skillset on the various projects."
The Africa Legal Network (ALN) was set up to capitalise on this desire, pairing local member firms with international outfits that get the pick of the best legal expertise in each jurisdiction. However, one of the main criteria of the ALN is that members must remain independent. Following confirmation of its alliance with Linklaters last year, South Africa's Webber Wentzel downgraded its membership with the ALN to associate status.
Linklaters, which is keen to expand its presence in the continent further, has also been seeking to develop its relationship with Nigeria's Aluko & Oyebode, independently of its alliance with Webbers. Aluko, which works with several UK firms, last year insisted it wanted to remain independent; however, one partner at Linklaters says a formal tie-up is not "off the cards". The pair are currently discussing how Linklaters can help the Nigerian firm with its technology and working practices.
Peter Strivens, a corporate partner at Baker & McKenzie with responsibility for the London office's Africa strategy, agrees that most African firms want to keep their options open: "The firms we want to deal with don't want to be exclusive."
As well as having three offices on the ground in Africa – in Cairo, Casablanca and Johannesburg – Bakers has a number of associations with local firms. "In many jurisdictions, a lot of clients wouldn't feel comfortable using local lawyers alone for complex work such as investments, financing, M&A and disputes," explains Strivens.
What many local firms want is more commitment. "My challenge is not getting work in but having the capacity to do it," says Oxford & Beaumont's Kuenyehia. "I want to know that an international firm is committed to my growth and I to their growth. Are we going to offer each other training opportunities, secondments for associates, a real partnership? I am not interested in referrals for referrals' sake. The market here is not developed and I want to work with firms that will help grow the pie for both of us."
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