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Phebe Hoover
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1 This Webcast Will Begin Shortly If you have any technical problems with the Webcast or the streaming audio, please contact us via at: Thank You! 1

2 Doing Business in Africa: Lessons Learned for Mitigating Risks December 5, 2013 Presenters: Lizelle Marwick, AngloGold Ashanti Ashleigh Hale, Bowman Gilfillan Tamara Dini, Bowman Gilfillan Susan-Barbara Kumapley, Bentsi-Enchill, Letsa & Ankomah 2

3 Investment into African Markets Opportunity and Risks 3

4 Africa is not a Country True Size of Africa: 4

5 Assessing Market Attractiveness Perception: Africa is a high risk, difficult and often dangerous place to do business Country Risk Analysis: The strength of the financial and capital markets systems Strength of institutional environment Governance quality Democracy levels The ease of doing business Sector specific risks need to be considered in detail 5

6 Assessing Market Opportunity Risk profiles of different markets need to be balanced against the potential rewards on offer in these markets Drivers and indicators of opportunity are different across sectors Growth potential and opportunity analysis: Size of the economy GDP growth trends Population size Population size in largest cities 6

7 Local Partners and Stakeholders Prior to establishing business presence in country identify local partners and local stakeholders Local partners: legal services, financial services, communication specialists, independent directors, suppliers, contractors Local Stakeholders: Governments, regulatory authorities, trade unions, religious institutions, village leaders/elders, NGO s, nationals 7

8 On-going Sustainability It takes more than luck and resourcefulness to sustain success Sustainability Agreements entered into with Governments Engagement with stakeholders Community investment 8

9 Mergers and Acquisitions in Africa Challenges and Considerations in Managing Cross-border Private M&A Transactions in Africa 9

10 Due Diligence and Regulatory Landscape Briefing local counsel clarity of instruction and managing cost Understanding the regulatory environment pre- and post closing Preparation of regulatory approval / notification matrix (including timing and documentation requirements) Exchange control requirements pre- and post closing; investment requirements 10

11 Compliance Issues Affecting Multinationals Compliance due diligence requirements (FCPA; UK Anti-Bribery Act, sanctions lists, etc.) Managing risks: Restructuring aspects of the deal Condition to closing (ie: the purchaser not having learned of any facts suggesting significant violation of anti-bribery laws or having identified any significant legal or compliance issue prior to closing) Special undertakings; warranties and indemnities 11

12 Warranty and Indemnity Insurance An option to consider to increase coverage above agreed caps; to provide additional protection to buyer if claims against seller might be difficult Coverage across Africa is generally possible (we have seen coverage in Uganda, Namibia, South Africa, Nigeria, Zambia) Single premium for the duration of the policy; pricing is coming down (would be in the range of 1% - 3% of limit of cover) Parallel due diligence by insurer up to closing; policy in place from closing date 12

13 Closing and Post Closing Issues Local counsel review and approval of closing mechanics and deliverables to effect ownership transfer Administrative and bureaucratic requirements Step plan for closing payments (flow of funds, currency and timing) Local ownership and relationship with minority shareholders (Botswana, Zambia, Zimbabwe, Namibia, South Africa, etc.) 13

14 Antitrust Clearances Challenges and Considerations in Managing the Competition Approval Process in Africa 14

15 Importance of Identifying Where to File Growing number of African jurisdictions with mandatory notification regimes (including COMESA) Many jurisdictions have low filing thresholds and enforcement is increasing Regulators more aware of international transactions, particularly if target has a local presence and/or transaction is high-profile Criminal sanctions apply in a number of jurisdictions Also important to notify if business strategy is expansion in the region 15

16 Planning, Planning, Planning! Merger notification is suspensory in most regimes (except COMESA) so filing expediently is important Often long or indefinite review periods (authorities may extend without competition concerns) COMESA filing obligation triggered within 30 days of decision to merge Do not underestimate documents and information required Apply a consistent approach in all filings: regulator interaction 16

17 Obtaining Approvals in Time Review periods can be long and/or extended Best approach is to file a comprehensive but not overlytechnical notification Consider public interest issues, including employment (high priority in e.g. Botswana, South Africa) Although not expressly provided for, hold separate and/or ring-fencing is possible in many African jurisdictions 17

18 Other Challenges and Recommendations Generally not the practice to hold pre-notification meetings BUT: contact with the authority post filing can help: Expedite the review Avoid misconceptions about the market/effect on competition Avoid concerns being raised Managing potential conditions or prohibition is a challenge Local contacts and relationships are very important 18

19 Investment Protection in Africa Investment Treaties Jurisdictions with Investment Protection Laws Local Content Initiatives Change in Governments and Laws 19

20 Investment Treaties LESSON ONE: INTERNATIONAL PROTECTION An important part of the legal framework to mitigate the risk of investments in African countries Multilateral Bilateral In Africa, most of the investment treaties are bilateral Reported that African countries have entered into over 400 bilateral investment treaties with developed countries. (Source: Investment protection in Africa, Hogan Lovells, Published December 2012) 20

21 Bilateral Investment Treaties Mitigate sovereign risk problems and give substantive protection to investments Fair and equitable treatment of investors Protection from expropriation/nationalization market value compensation Ease of repatriation of profits/dividends/capital Dispute resolution mechanism International Arbitration - International Center for the Settlement of Investment Disputes (ICSID) United Nations Commission on International Trade Law Arbitration Rules 21

22 Bilateral Investment Treaties Country Specifics Ghana: Signed and ratified 8 bilateral investment treaties with China, Demark, Germany, Malaysia, the Netherlands, Switzerland, Serbia and the United Kingdom; 18 bilateral investments treaties are awaiting ratification of the Parliament of Ghana. Kenya: Signed bilateral investment agreements with 12 states of which 4 with Germany, Italy, the Netherlands and Switzerland are in force. Mali: Signed bilateral investment agreements with 17 states of which 6 with Switzerland, the Netherlands, Germany, Egypt, China and Algeria are in force. Source: 22

23 Bilateral Investment Treaties Country Specifics South Africa: Signed 47 bilateral investment treaties with 23 in force. Given notice to terminate those with Belgium, Spain, Germany, Switzerland, the Netherlands. Nigeria: Signed 22 bilateral investment treaties of which 13 have been ratified. Countries include Finland, France, Germany, Italy, the Netherlands, Spain, Sweden, Switzerland and the United Kingdom. Rwanda: Signed 6 bilateral investment treaties with 3 in force with Germany, Switzerland and the United States of America. Source: 23

24 International Center for the Settlement of Investment Disputes (ICSID) ICSID is established by the Convention on the Settlement of Investment Disputes between States and Nationals of Other States Signed and ratified by 150 States including 44 African states (country or dependent territories) as at 1 st November, requesttype=icsiddocrh&actionval=showdocument&language=english The primary purpose of ICSID is to provide facilities for conciliation and arbitration of international investment disputes. 24

25 Bilateral Investment Treaties Source of Information ICSID Database of Bilateral Investment Treaties UNCTAD Search for Bits + country name [e.g. Bits Egypt] 25

26 Jurisdictions with Investment Protection Laws LESSON TWO: NATIONAL PROTECTION At the national level some African countries have laws that protect investments and seek to mitigate sovereign risk: Registration requirement Minimum capital requirements Protection from expropriation/nationalization Ease of repatriation of profits/dividends/capital Dispute resolution mechanism International Arbitration /National Courts 26

27 Jurisdictions with Investment Protection Laws Ghana Investment Code, 1985 (PNDCL 116) (repealed) Ghana Investment Promotion Centre Act, 1994 (Act 478) (repealed) Ghana Investment Promotion Centre Act, 2013 (Act 865) Registration Requirement Minimum capital requirements Prohibition against discrimination Guarantee against expropriation without adequate compensation Guarantee of transferability of capital and profits/dividends Dispute resolution procedures include international arbitration 27

28 Jurisdictions with Investment Protection Laws Kenya Investment Promotion Act 2004 (CAP 485B) Sierra Leone Minimum investment requirement Guarantee against expropriation without adequate compensation Guarantee of transferability of capital and profits/dividends Investment Promotion Act 2004 Guarantee against expropriation without adequate compensation Guarantee of transferability of capital, profits, arms length loan and interest repayments Dispute resolution procedures include international arbitration 28

29 Jurisdictions with Investment Protection Laws Nigeria Investment Promotion Commission Act No.16 of 1995 Registration requirement Guarantee of transferability of capital. profits/dividends, and payments for loan servicing Guarantee against expropriation without adequate compensation Guarantee against compulsory surrender of interest in capital to other persons 29

30 Jurisdictions with Investment Protection Laws South Africa Promotion and Protection of Investment Bill Yet to become law Replace the bilateral investment treaties that South Africa has in place No international protection 30

31 Local Content Initiatives LESSON THREE: SUPPORT DEVELOPMENT OF AFRICAN ECONOMIES African economies and people must derive benefits from foreign investment Build human capacity/transfer knowledge Use locally available raw materials Use locally available skills and expertise 31

32 Local Content Initiatives Ghana Oil and Gas Local Content and Local Participation in Petroleum Activities Policy Framework, 2010 Petroleum (Local Content and Local Participation) Regulations, 2013 (L.I. 2204) Petroleum (Exploration and Production Act, 1984 (PNDCL 84) Mining Minerals and Mining (General) Regulations, 2012 (L.I. 2173) Mining firms are required to submit localization plans to the Minerals Commission: use of Ghanaian personal and local procurement 32

33 Local Content Initiatives Angola Oil and Gas Ministry of Petroleum Order No. 127/03 of November 25, 2003 Provision of services and supply of goods that do not require substantial investment or expertise (eg, catering, gardening, cleaning, transportation or water supply) is reserved to Angolan companies (i.e. 51% of the share capital is held by Angolan citizens). services and goods that require a reasonable level of investment and know-how (such as geographical and geodesic surveys, mud logging or construction of drilling and production facilities and equipment) may be performed either by Angolan companies or by JVs between foreign and Angolan companies. Angolan companies must be given preferential treatment in competitive tenders for goods and services: they should be awarded the relevant contract whenever their bid is no more than 10% higher than the bids submitted by foreign competitors. 33

34 Local Content Initiatives Nigeria Oil and Gas Oil and Gas Industry Content Development Act, 2010 Transfer of technology and skills to Nigerian employees in the oil and gas sector Prescribe minimum thresholds for use of local services and materials Nigerian independent operators to be given first consideration in the award of oil blocks, oil field licences and all projects for which contracts are to be awarded in the oil and gas industry Submission of a Nigerian content plan for all projects» First consideration to be given to services provided from within Nigeria and to goods manufactured in Nigeria 34

35 Change in Government and Laws LESSON FOUR: COMPLY WITH EXISTING LAW AND OBTAIN THE NECESSARY APPROVALS Change in law is almost always forward looking Compliance with existing law Accrued rights Very few African governments will take away accrued rights of foreign investors without some form of renegotiation. 35

36 Change in Government and Laws Investment of Vodafone Group Plc in Ghana Government of Ghana divested 70% of its shares in Ghana Telecom to Vodafone in 2008 The Constitution requires Parliamentary approval of the transaction and it was obtained in 2008 The investment by Vodafone was registered under the investment protection law in 2008 Ghana has a bilateral investment treaty with the United Kingdom Opposition promised to reverse the sale Change in Government in 2009 Vodafone still owns and manages the company in

37 Questions? 37

38 Speaker Contact Information Lizelle Marwick Vice President: Legal Continental Africa Region AngloGold Ashanti Limited 76 Jeppe Street Newtown, Johannesburg South Africa Tel: ww.anglogoldashanti.co.za 38

39 Speaker Contact Information Ashleigh Hale Partner Bowman Gilfillan [Lex Mundi member firm for South Africa] 165 West Street Sandton South Africa Tel:

40 Speaker Contact Information Tamara Dini Partner Bowman Gilfillan [Lex Mundi member firm for South Africa] 22 Bree Street Cape Town South Africa Tel:

Speaker Contact Information Susan-Barbara Kumapley Partner Bentsi-Enchill, Letsa & Ankomah [Lex Mundi member firm for Ghana] 1st Floor Teachers' Hall Complex

41 Speaker Contact Information Susan-Barbara Kumapley Partner Bentsi-Enchill, Letsa & Ankomah [Lex Mundi member firm for Ghana] 1st Floor Teachers' Hall Complex Education Loop (Off Barnes Road) Adabraka, Accra Ghana Tel: (0) / / / susan-b.a.kumapley@belonline.org 41

42 Thank You Lex Mundi the law firms that know your markets. 42

43 Thank you for attending another presentation from ACC s Webcasts Please be sure to complete the evaluation form for this program as your comments and ideas are helpful in planning future programs. If you have questions about this or future webcasts, please contact ACC at webcast@acc.com This and other ACC webcasts have been recorded and are available, for one year after the presentation date, as archived webcasts at 43

doing business in Zambia

doing business in Zambia country profile time zone GMT+2 official language English population 17 293 692 currency Kwacha ( ZMW ) government structure economic data Executive: The president is head of state