20 June 2018

Law firms eye up Africa as corporate investment grows

Despite economic concerns, African investment is growing and law firms are capitalising

African companies are continuing to grow, despite challenging economic conditions, and law firms say a more robust legal and regulatory system is helping to attract more corporate investment. The growth trend is highlighted in a new report produced jointly by accountancg firm PwC, the London Stock Exchange Group, investment firm CDC Group and the Africa Development Bank.

Growth in Africa

African companies have seen the sums invested in financing such ventures has grown by almost 50% in two years. In 2017, approximately USD 13.5 billion was raised in the equity capital markets in Africa or by African companies in non-African capital markets, a 49% increase from 2016, while USD 7.5 billion of debt was raised by African companies in international debt capital markets, a 68% increase from 2016. PwC analyzed 75 companies a year after they had been featured in a 2017 report – the inaugural Companies to Inspire Africa 2017 report –supported by the London Stock Exchange (LSE) in partnership with Africa Development Bank Group (AfDB), and CDC Group. Of the 75 businesses analysed, 16 concluded mergers and acquisitions (M&A) deals across a wide range of sectors. The report states that in 2018 to date USD 8.5 billion had been raised on UK debt capital markets by the governments of Kenya, Nigeria and Egypt, while in 2017; there were 61 African initial public offerings (IPOs) and follow-on equity deals on the LSE.

Robust laws

Speaking to the African Law & Business, Melissa Butler, a London managing partner at White & Case, agreed that the survey results are promising, ‘based on the volume of deal flow and new pitches in the first quarter of 2018 alone, we’re definitely seeing an increasing interest in African business and investment.’ She added, ‘Interestingly, we’re also seeing a significant increase in African corporates, whereas for the past ten years or so, capital markets issuances by African entities have largely been dominated by sovereigns and the banks.’ Herbert Smith Freehills energy finance partner Will Breeze also agreed, ‘A steadily more robust legal and regulatory framework in a number of African jurisdictions, driven by external requirements and, more importantly, internal demand has helped support the growth of African business investment.’ He added, “Great certainty and protection for creditors, especially with respect to the creation and enforcement of security, are among the drivers of the level of financing. Although more remains to be done, the trend is (in most jurisdictions) in the right direction for continued improvement.’