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
Into the Lusophone: the Euro Elite in Africa
While Francophone and Anglophone Africa remain more open markets for global elite firms, in Lusophone Africa it is tougher for non-Portuguese players to make progress as the larger market leaders in Lisbon make bigger commitments to former colonial territories.
‘The international firms in our jurisdictions don’t seem to be looking to expand,’ says Vieira de Almeida (VdA) senior oil and gas consultant Rui Amendoeira. ‘In fact, they often use Vda as local counsel.’
Of the Portuguese firms active on the continent, VdA has the deepest roots. The firm’s structure sees its partners cover Angola, Cape Verde, Cameroon, Chad, Congo, DRC, Gabon, Guinea Bissau, Equatorial Guinea, Mozambique and São Tomé and Príncipe. Besides an office in East Timor, all of VdA’s international presence is on the African continent.
Because of this, a vast majority – approximately 95% – of the firm’s international revenue comes from Africa, while overall its non-Portuguese work makes up one third of total revenue. ‘The firm has two main goals,’ Amendoeira says. ‘To consolidate in Lusophone Africa, especially Angola. And to expand our presence in Francophone Africa.’
Over the last 18 months VdA has made no Africa-related lateral hires. That said, the firm has acted on significant matters, including assisting a joint ministry of finance and oil industry working group in successfully settling a longstanding – over ten years – dispute over petroleum taxes in Angola. VdA also has a goal of exporting its Portuguese banking practice to Africa, while 2017 was a record year for the firm’s revenues from the continent. Growth in 2018, however, is expected to be less eye-catching.
Portuguese rival Miranda, meanwhile, has a presence in all the countries VdA does, after announcing a new alliance with CDI Counsel in Côte d’Ivoire, while the firm is expected to announce a new partnership in 2019. Miranda also secured a role advising the Permanent Joint Technical Commission as international counsel in the structuring of a $1.5bn, 600MW bi-national hydro power plant to be built in the Cunene river basin.
Raposo Bernardo similarly has a presence in Angola, Cape Verde, Guinea-Bissau, Mozambique, São Tomé and Príncipe. Though unlike its Lisbon-based competitors, the firm adopts a strict policy of only opening under its own name and not forming exclusive alliances. It managed to resist political and economic turbulence within the countries it operates as revenue from Africa continues to grow, currently contributing around 30% of the firm’s revenue. ‘Our way of operating is to have our own offices on the continent,’ says Raposo Bernardo’s Joana Andrade Correia. ‘To have a business in Africa, you have to be there with local lawyers because they understand their own country.’
The Portuguese players are looking to consolidate their hold on jurisdictions such as Angola and Mozambique but unpredictable commodity cycles remain a concern. Angola is Africa’s second-largest oil producer, making foreign investment in energy a steady stream of work for firms active in the jurisdiction, but the country will need to diversify its economy if it is to avoid being beholden to the whims of fluctuating commodity prices. ‘The economy in most countries is dependent on oil, and the last four or five years prices have gone down and countries have suffered,’ Amendoeira points out. ‘Now it is recovering. So the question is: is that recovery sustainable, or will it crash again? We cannot control that, we can only prepare.’
Meanwhile, France’s Gide Loyrette Nouel has 28 lawyers operating from its offices in Casablanca, Algiers, Tunis and Cairo, of which four are partners. However, most of the firm’s work on the continent takes place in sub-Saharan Africa, operating through its Paris hub, and there is no inclination to expand further on the continent after its 2018 Cairo opening. Aggregating all of its Africa work, Gide produced €20m worth of deals over the last three years, despite a slowdown in matters coming from Tunisia. Meanwhile, as a member of Lex Mundi, the firm enjoys a close working relationship with South African firm Bowmans.
The Cairo offering came as Gide looked to develop its ties in the Mediterranean basin and the Middle East. ‘We study very closely possible other openings for the firm,’ says projects partner John Crothers. ‘But for now, we have not found a market deep enough to justify opening in it.’
European independents are as married to their strategies as the global elite firms. However, Portuguese players enjoy a more ingrained presence on the continent than any other nationality. There is perhaps a sense that firms like VdA take Africa more seriously (unsurprising, given the breakdown of its international distribution) than firms operating in the Anglophone territories. However things stand, the opportunities and challenges remain the same.