Guest post by Stefano Simontacchi, chairman of BonelliErede
Africa is consistently proving itself to be an attractive market and rapidly becoming one of the biggest players in the global economy. Indeed, more and more European multinationals are pursuing investment opportunities within its borders – and naturally, law firms are following suit.
But what is the driving force behind this trend? And most importantly, how can law firms successfully expand to the market?
Africa – the appeal for European companies
First things first, we need to understand the main driving force behind this ‘rush’ to the continent.
European companies’ appetite for Africa is fuelled by several factors – the main one being the continent’s growth prospects and its privileged relationship with Europe.
Africa’s growth is clear: International Monetary Fund statistics confirm that the continent has the most prominent growth rate in the world and boasts the highest number of countries growing at over 5% a year.
This growth is certainly propelled by its young, ever-increasing population and its attractive business environment – which includes the ongoing introduction of reforms by governments in order to attract and protect international investment, including tax incentives, free zones with accelerated licensing and permitting regimes, and favourable commercial agreements.
The privileged relationship with Europe derives from the geographical proximity and the linguistic and cultural affinities between the two continents.
On top of that, Europe and Africa have deeply rooted governmental ties, which is a crucial factor: the EU is responsible for over half of all official development assistance to Africa, making it the continent’s top partner in that field.
Given this favourable business environment, numerous European investors across multiple sectors have opened plants, set up joint ventures, acquired companies, and started distributing their products and services in Africa over the last couple of decades.
European law firms are committed to their clients
The growth in business ties with Africa has led to sophisticated legal needs for European investors. Naturally, European firms have always been enticed by the opportunity to secure work – be it transactional or general assistance – to support existing clients with their growth plans in Africa.
And with the EU continuing to pour copious funding into African countries – particularly into those committed to introducing reforms and institutional capacity to spur international relations and investments – European investors’ legal needs are constantly changing.
At the same time, African governments have started to seek out top-flight legal advisors to support their growth, which has only further encouraged European law firms to invest in and commit to the continent.
Law firms have two choices when it comes to meeting their clients’ needs: attempt to go it alone or team up with a local firm. Historically, French law firms have opted to follow their clients to French-speaking Africa (the north-western part of the continent), and Portuguese firms have focused on Lusophone Africa (e.g. Angola and Mozambique in Sub-Saharan Africa).
Some have opened offices in these regions by leveraging on shared cultural affinity; others have preferred to simply form an alliance with a local firm. The latter tactic is most common with Dutch and Italian firms.
A bespoke strategy is essential for successful market entry
There is no doubt that a variety of reasons make Africa attractive to European law firms looking to expand. But to successfully seize these opportunities, it is crucial to understand how to best shape your strategy.
The primary task when approaching a new country in Africa should be to get to grips with the local regulatory framework to ensure that any steps into the new market fully comply with local laws.
Beyond that, as a general principle, the approach of any firm looking to expand into Africa should be centred around a desire to bring added value to local communities by becoming a strategic hub able to help businesses seize, support and safeguard investments there and maximise value for international investors, local businesses and governments.
The goal should be to play a key role in Africa’s future legal landscape, including by advising African governments on legal reform in the energy, banking and corporate sectors to further stimulate foreign investment.
To do that, it is important to ensure that the operational set-up in a new country is based on true co-operation – which can well lead to a formal joining of forces – with a local partner law firm that shares similar values and vision and is truly committed to creating a long-lasting partnership.
Having lawyers with in-depth knowledge of the European firm on the ground is fundamental to ensure that international capabilities fully merge with the local expertise of top professionals in the region. That is the only way to meet both international and local clients’ needs.