Intoafrica October 2019

OCTOBER 2019
CHARTING AFRICA’S
BUSINESS TERRAIN
THE OUTLOOK FOR INVESTMENT THE RULE OF LAW’S ROLE IN

IN AFRICA: RISKS AND REWARDS ATTRACTING FOREIGN INVESTMENT
WHERE TO INVEST IN AFRICA 2020: AFRICA’S CITIES ARE ABOUT TO

EGYPT TOP DESTINATION BOOM OR EXPLODE
AFRICAN INSTITUTIONAL INVESTORS CHARTING AFRICA’S BUSINESS TER

FINANCING GAP IN AFRICA RAIN: GHANA, BOTSWANA, ETHIOPIA, NIGERIA,
SOUTH AFRICA, WAEMU
www.capitalmarketsinafrica.com
Editorial
Welcome to the October 2019 edition of INTO AFRICA, a publication written by the profession-
EDITORIAL TEAM als, for professionals, investors, policymakers … Advancing and providing fresh insight into
Africa’s emerging markets through renowned thought leadership and peer-to-peer
Editor
knowledge-sharing. The edition is titled: Charting Africa’s Business Terrain.
Tunde Akodu
Associate Editor Africa’s business potential is tremendous and in various sectors, including energy, infrastruc-
Michael Osu ture, agriculture, natural resources, and information and communications, offering opportuni-
ties for investors. However, these business opportunities come with many challenges to doing
Feranmi Akodu
business – which are not differ from other continents. The question is how to balance risk,
Advertising & Sales reward, and regret, as there are massive opportunities for growth across the continent. Also, the
Tola Ketiku perceived risk is often exceeded real risk and doing business environment is improving rapidly
in several countries such as Mauritius, Rwanda, Botswana, Nigeria, South Africa, and Kenya all
offering ease in doing business through conducive environments and incentives. In the World
Bank Group’s 2019 Doing Business Report, Mauritius remains the leader in the ease of doing
CONTENTS business rankings in Africa as its ranking progressed from 25th to 20th, for the first time an
FEATURED ARTICLES African country to join other economies in the top twenty rankings worldwide
The Outlook for Investment in Africa
Risks and Rewards
Opening the discourse, BARNABY FLETCHER (Associate Director, Control Risks) examines the
Where To Invest In Africa 2020: Egypt Top risk and reward of investment in Africa. He pointed out that change is occurring, and this is
Destination
creating new investment opportunities, as the economic role of the state is shrinking as
African Institutional Investors Financing countries. In parallel, CELESTE FAUCONNIER (Sub-Saharan Africa Economist, Rand Merchant
Gap in Africa
Bank South Africa) looks at where to invest in Africa in 2020 and she identified these six key
Charting Africa’s Business Terrain sectors: resources, retail, finance, ICT, manufacturing, and construction. Besides, GUILLAUME
Uncovering Botswana Opportunities ARDITTI (Founding Partner, Belvedere Africa Partners Paris) postulates that African institutional
Doing Business in Ethiopia Legal and investors (such as pension funds and sovereign wealth funds) are key to close the continent's
Regulatory Viewpoints financing gaps
Doing Business in Ghana Perspective on
Ghana as an Investment Location Exploring further, TEMO NTAPU (Director of Business Intelligence, The Botswana Investment
Doing Business in Nigeria Some Tax and Trade Centre) discusses doing business in Botswana and providing some key facts on the
Perspectives country. In addition, MEKDES MEZGEBU (Senior Associate, Mesfin Tafesse & Associates
Doing Business in South Africa Charting Ethiopia) and DEBORAH HADDIS (Associate, Mesfin Tafesse & Associates Ethiopia) explore
the Tax Landscape doing business in Ethiopia from a legal and regulatory viewpoint. Besides, GEORGE KWATIA
Doing Business in West African Economic (Head, Tax Line of Service, PwC Ghana and Sierra Leone), CHINEDU EZOMIKE (Partner & Head,
and Monetary Union: Issues Related to Commercial Practice, Andersen Tax, Nigeria) and VELI NTOMBELLA (Head of Tax Advisory
Financial Services and Banking Services, SNG Grant Thornton South Africa) provide a tax element to doing business in Ghana,
The Rise of Mauritius as a Family Office Nigeria and South Africa respectively. JONATHAN MAZUMDAR (Strategic Advisor, Rwanda
Destination Development Board) and GUY BARON (Chief Investment Officer, Rwanda Development Board)
The Rule of Law’s Role in Attracting write on investing in Rwanda.
Foreign Investment
Funding Model for the Development of Proving more insight, MAME NGONE SOW (Senior Associate, GENI & KEBE, Senegal) addresses
Mineral Resources in Africa the key issues relating to repatriating proceeds from the sale of mining and oil and gas products
Investing in Rwanda: Finding in the West African Economic and Monetary Union (WAEMU) member states. As well, she exam-
Opportunity in the Land of a Thousand ines the funding options for the development of mineral resources in Africa. While JIMMY HOW
Hills SAW KENG (Client Director, Ocorian Mauritius) and KENNY CURPEN (Private Client Director,
Ocorian Mauritius) showcase Mauritius as a family office destination. Also, NDUBUISI EKEKWE
SPECIAL FEATURE (Founder African Institution of Technology and Chairman of Fasmicro Group) discusses the
Why Africa’s Industrialization Won’t Look
Like China’s reason why Africa’s industrialisation would not look like the China’s industrialisation. Likewise,
ANDREW SKIPPER (Partner and Head of Africa, Hogan Lovells South Africa) write on the rule of
Africa’s Cities Are About to Boom or law’s role in attracting foreign investment.
Explode
The Carbon Tax Act Makes South Africa’s And still more, ATHI JARA (Director, Gwina Attorneys South Africa) looks at South Africa’s
Position Clear
carbon tax law and BONGANI MEMANI (LNP Attorneys Inc. South Africa) provide a hawk’s view
A Hawk’s View on Commencement and on commencement and termination of business rescue resolution. In parallel, JUDD DEVERON
Termination of Business Rescue
Proceedings Will Companies Be Rescued (Director, Center for Strategic and International Studies) and TODD MOSS (Executive Director,
Under the Companies Act of 2008, Act No Energy for Growth Hub) argue that Africa is increasingly urbanized, and its future will be shaped
71?
not in sleepy remote spaces but in the dense vibrant clusters of Lagos, Addis Ababa, and
Kinshasa.
Cover Image: By Laurent
Baheux
african-wildlife-photography-20 Editor
Connect with The Editor on Linkedin. Follow us on twitter @capitaMKTafrica. Subscribe to INTO AFRICA at
http://eepurl.com/buHhNv or please send an email to intoafrica@capitalmarketsinafrica.com.
DISCLAIMER:
The contents of this publication are general discussions
reflecting the authors’ opinions of the typical issues involved Please visit our website at www.capitalmarketsinafrica.com for the latest news, bespoke analysis, investment
in the respective subject areas and should not be relied upon events and outlooks.
as detailed or specific advice, or as professional advice of any
kind. Whilst every care has been taken in preparing this
document, no representation, warranty or undertaking ENJOY!
(expressed or implied) is given and no responsibility or
liability is accepted by CAPITAL MARKETS IN AFRICA or the
authors or authors’ organisations as to the accuracy of the
information contained and opinions expressed therein. Charting Africa’s Business Terrain | 3
FEATURED ARTICLE
THE OUTLOOK FOR INVESTMENT IN AFRICA
RISKS AND REWARDS

By Barnaby Fletcher, Associate Director, Control Risks
fter a difficult few years, Africa is on the path to transient events that typically dominate headlines.
recovery. In 2016 sub-Saharan Africa experienced The results in the fourth edition reflect the
its lowest GDP growth in almost 25 years, as it improvement in Africa’s overall attractiveness as an
struggled with low commodity prices and stagnant investment destination and highlight the trends
politics. But growth rates are starting to recover behind this.
and so is investor interest. In 2018 foreign direct
investment (FDI) into Africa rose by 11%, even as The trend that has garnered the most headlines has
global FDI flows fell. The underlying attractiveness been the reformist vanguard. From Prime Minister
of Africa as an investment destination – its Abiy Ahmed of Ethiopia to President João
demographics, natural resource wealth and ability Lourenço of Angola, a new generation of leaders
to leapfrog technological paradigms in areas such have put forward ambitious reform agendas that
as telecommunications or finance – have long been have fuelled significant investor excitement. But the
known. But its current recovery is based on more real political lesson from the past few years has
recent trends. been not to underestimate the strength of other
political structures. Africa is not the “Big Man”
To track these trends and how they manifest continent of stereotypes and leaders cannot simply
across the continent, Control Risks and our transform a country’s structure on a whim. Reform
economics partners Oxford Economics have agendas are already slowing as leaders are forced
developed the Africa Risk-Reward Index1. This aims to navigate through a web of influential
to provide an independent assessment of Africa’s stakeholders with competing objectives.
challenges and opportunities based on the
underlying political and economic structures in Change is occurring and this is creating new
each country, rather than on the high-profile but investment opportunities. The economic role of the
Figure 1: Africa Risk-Reward Index

The position of each country is defined by its risk and reward score; the size of its bubble represents the size of the country’s GDP. The individual scores for each country for risk and reward
are shown in the table opposite. Further details on the methodology for calculating each country’s scores are provided in detail in the annex.
1. To read more from the African Risk Reward Index 2019, please visit the Control Risks website: https://direc.to/cVWF
4 | www.capitalmarketsinafrica.com
FEATURED ARTICLE
state is shrinking as countries such as Mozambique European Union (EU) is acting as an ever-more
and Zambia engage in privatisation programmes, unified and hugely influential force, while the past
which is opening up space for the private sector. decade has seen a surge of interest in Africa from
But different sectors in different countries will open smaller geopolitical players such as Russia, India,
up at different rates and in different ways the Gulf states and Turkey.
depending on vested interests and political
considerations. Investors who have so far profited This competition is driving flows of development
from the reforms initiated in Angola and Ethiopia finance towards the continent and prompting a
have taken the time to understand the overlay of change in how that finance is allocated. Both new
political and commercial interests and used this and old geopolitical players are actively seeking
understanding to identify which reforms will political influence and aggressively promoting
proceed and which will stagnate. In contrast, those commercial interests. There is certainly a risk that
who take announced reforms at face value and this crowds out private-sector investment, or that
assume they will proceed as planned risk losing private-sector investors find themselves unable to
out. compete unless they tie themselves to wider
geopolitical objectives; a strategy that carries its
Another trend that has received attention is the own risks. But it also drives growth and
progress being made towards unlocking the huge opportunities for those investors able to
potential long promised by increased intra-Africa understand and navigate the new geopolitical
cooperation. Media attention has been attracted to landscape.
the ratification of the African Continental Free Trade
Area, which is undoubtedly an important milestone These three trends are by far from the only ones
but the implementation of which will undoubtedly driving change in Africa. Much could be written
be long and torturous. More substantial – albeit about the impact of technology, transnational
often unheralded – unheralded progress has regulations, growing financial inclusion or any
already been made among Africa’s various regional number of other trends. These trends are also far
bloc such as the Southern African Development from being applicable across the entire continent
Community (SADC) and the Economic Community and manifest themselves differently in every
of West African States (ECOWAS). country. Similarly, the African Risk-Reward Index –
just as any ranking or index – will never capture all
One of the most successful of these blocs is the the nuance and complexity of an individual country
East African Community (EAC). The EAC may not that must be understood to ensure investment
contain any of the continent’s giants, but the region success. Nonetheless, they are important, and they
as a whole continues to register the highest levels do contribute to Africa’s ongoing economic
of economic growth on the continent. In recent recovery.
years, the EAC’s Common Market has led to a
modest increase in intra-regional trade by slowly Contributor’s Profile
easing restrictions on the movement of goods and Barnaby Fletcher is Control Risks’ Senior Analyst
people across borders, especially benefitting its for Southern Africa. He is a regular contributor to
landlocked member Uganda, Rwanda and Burundi. Control Risks’ subscription services, as well as
The international community has bought into the responding to regular ad-hoc sector-specific
idea of the EAC, with multilateral institutions such queries from Control Risks’ clients operating in
as the World Bank and African Development Bank wider region. Barnaby also works on bespoke
extensively and enthusiastically funding capacity consulting projects for clients.
building initiatives for EAC institutions as well as
transport, energy and communication infrastructure Prior to joining Control Risks, Barnaby was a
to better link the EAC member states. contributing analyst to the Economist Intelligence
Unit, focusing on political and economic
Alongside growing intra-Africa cooperation there is developments within sub-Saharan Africa. He also
also growing geopolitical competition, the third worked as executive editor of Global Business
major trend highlighted in the fourth edition of the Reports, a business media company focused on
Africa Risk-Reward Index1. The standard narrative the energy and mining industries and has
of geopolitics in Africa may still be around the contributed work to publications including
US-China rivalry, but in reality, this focus on bipolar Engineering & Mining Journal, Hart’s E&P, and Oil &
competition was always simplistic and distracts Gas Investor. He has previously worked with AKE
from an increasingly multipolar landscape. The Group and Africa Confidential.
Charting Africa’s Business Terrain | 5
FEATURED ARTICLE
WHERE TO INVEST IN AFRICA 2020:

EGYPT TOP DESTINATION
By Celeste Fauconnier, Sub-Saharan Africa Economist, Rand Merchant Bank
gypt is the top investment destination in Africa Construction activity is surging as countries
If you were to invest in Africa right now, where attempt to bridge the funding chasm between
would you take your money? According to the what’s needed and what’s actually being spent,
latest 2020 RMB Where to Invest in Africa Report1, while mining, energy and agriculture all offer vast
it’s Egypt. Egypt’s sophisticated business sector, opportunities for the savvy investor. Turning to
market size and increase in investment from the retail, it’s all about playing the long game. While
private sector has made it the most attractive the middle class is not growing as fast as
investment in Africa right now. South Africa has expected, the potential is still evident in the num-
fallen to the third place, overtaken by Morocco. bers.
These are some of the many useful insights
contained in the latest Where to Invest in Africa Taking a tumble
Report, compiled by authors Celeste Fauconnier, South Africa, Ethiopia and Tanzania are among the
Neville Mandimika and Nema Ramkhelawan-Bhana more prominent countries to have taken a tumble.
from the RMB Global Markets Research team. A deterioration in the ease of doing business has
contributed to their relative underperformance and,
The much-coveted Report showcases the top ten in addition, South Africa is enduring a cyclical
investment destinations in Africa. The Report is downturn.
based on RMB’s Investment Attractiveness Index
which provides a means with which to discern the Tanzania’s fall from grace has reshuffled the top
most appealing of these destinations by overlaying ten investment destinations, with Tunisia returning
macroeconomic fundamentals with the practicali- to the fold at number ten, while Côte d’Ivoire and
ties of doing business on the continent. Ghana edge ever-closer to the top five. North
Africa remains dominant with Morocco displacing
The top ten most attractive countries to invest in South Africa in the rankings, rising to second
according to the 2020 Report are: (#1) Egypt, (#2) place.
Morocco, (#3) South Africa, (#4) Kenya, (#5)
Rwanda, (#6) Ghana, (#7) Côte d’Ivoire, (#8) Nige- There is an even split of countries from the north,
ria, (#9) Ethiopia and (#10) Tunisia. east and west within the top ten rankings, with only
South Africa representing the southern tip of the
Key growth sectors continent, as a result of its dominance in terms of
This year, the Research team focused on six market size.
sectors: resources, retail, finance, ICT, manufactur-
ing and construction which they believe are key to The Top 10 most attractive investment destina-
inclusive growth in Africa. tions
The authors said that after nine years of publishing
According to the Report, manufacturing is set to they never fail to be both pleased and surprised by
take centre stage as Africa (with its abundance of the extent of improvement in countries that are not
natural resources) is focusing on turning its raw necessarily perceived as strong investment desti-
materials into manufactured goods to boost nations. This year, Guinea, Mozambique and
exports and reduce reliance on imports. Financial Djibouti recorded the strongest gains in the rank-
services continue to play a critical role in support- ings, with notable advancements in their operating
ing project development in key areas such as environments.
infrastructure, healthcare and energy projects,
while the ICT sector and Internet access, long- #1 Egypt: The enormity of the market paired with a
viewed as a luxury in Africa, are fast becoming sophisticated business sector relative to other
crucial to inclusive economies. countries makes Egypt the most attractive invest-
1. For the first time ever, the Report has been set in a special digital e-Book format to make it easier for readers to cross-reference and search.
FEATURED ARTICLE
ment destination in Africa. The improvement in environment rankings, Ghana remains one of the
Egypt’s business environment, facilitated through easier business environments in Africa.
government programmes, combined with the
progressive increase in investment from the private #7 Côte d'Ivoire: Côte d'Ivoire is one of the more
sector has enhanced economic growth and diversified economies in francophone Africa. Its
assisted in repositioning Egypt on the global strong growth rates are supported by the govern-
investment map. ment's pro-business reforms and a relatively stable
political context. Large infrastructure projects,
#2 Morocco: While only Africa's fifth-largest particularly in transport and energy (financed by
market, Morocco’s expected growth rate of 4% foreign investment, aid inflows and the govern-
over the medium term and its greatly-enhanced ment) also support the country's strong position in
operating environment has served the country well the rankings.
since the Arab Spring. Its reintegration into the
African Union and accession to the Economic #8 Nigeria: Nigeria retains its top ten ranking due
Community of West African States (ECOWAS) have to improved macroeconomics, supported by
enhanced its investment appeal. recovering oil prices and production. As the largest
economy in Africa in nominal terms, the possibility
#3 South Africa: South Africa has slipped another for investment cannot be overlooked; and with the
place in this year’s rankings, stymied by depressed largest population on the continent, domestic
levels of growth and a lack of structural reform. Yet demand continues to rise. Resources and favour-
it remains Africa's hotspot for portfolio investment. able demographics are attracting strong flow of
With many countries facing severe liquidity FDI. The liquidity crunch has subsided since 2017
constraints, South Africa’s financial markets and as commodity prices have recovered and changes
level of financial inclusion are still a cut above the in FX regulations have been implemented.
rest.
#9 Ethiopia: Ethiopia is the fastest-growing
#4 Kenya: The above 5% expected growth rates, economy on the continent. With a population of
helped by favourable weather and political recon- almost 100 million people, demand for goods and
ciliation after 2017’s disputed elections, has services is rising significantly. The prohibition of
propelled Kenya one spot higher than 2019. The foreign ownership in key sectors is still a constraint
economy benefits from diversity as well as a for investment, but this is slowly changing. The
sustained expansion in consumer demand, urbani- government has announced shake-ups across
sation, East African Community (EAC) integration, industries, including plans to open up the once
structural reforms and investment in infrastructure, closely-guarded telecommunications and power
including an oil pipeline, railways, ports and power monopolies.
generation.
#10 Tunisia: Tunisia re-enters within the top ten
#5 Rwanda: Rwanda has the second-best busi- supported by a reasonable market size and favour-
ness environment in Africa. According to the World able operating environment. The government's
Bank’s operating environment scoring, the country encouragement of foreign investment, through its
has more than doubled the efficiency of its busi- new simplified investment code, has made the
ness environment in less than a decade. The country increasingly attractive to multinational
government has also invested heavily into its manufacturers.
domestic industries, while FDI has increased over
the same period, pushing Rwanda to being one of Contributor’s Profile
the five fastest-growing economies on the conti- Celeste Fauconnier is a Sub-Saharan Africa
nent. Economist for the Global Markets Research team
at Rand Merchant Bank for the past thirteen years.
#6 Ghana: The growth outlook is strong, concen- She finished her under-graduate degree in Interna-
trated around the oil and gas sector. Non-oil tional Relations at the University of Stellenbosch
growth will pick up again, supported by pro- and completed her honours at Wits University.
business reforms and a steady improvement in Celeste formulates macroeconomic and financial
power supply. Political stability will remain under- market views for various sub-Saharan African
pinned by Ghana's strong democratic credentials. countries. Her team has won multiple awards in the
Regardless of a recent deterioration in its operating past decade for the best Africa Research House.

FEATURED ARTICLE
AFRICAN INSTITUTIONAL INVESTORS

FINANCING GAP IN AFRICA
By Guillaume Arditti, Founding Partner, Belvedere Africa Partners Paris
he financing gap in Africa remains a recurring retreated. One of the main reasons was that, to
theme on the continent’s investment landscape. meet the prudential ratios defined by the regulation
Within the infrastructure sector alone, estimates post 2008 Global Financial Crisis, their capital
increase year on year: currently, they range from consumption increased exponentially for
$100bn1 to $140 bn p.a. whereas available transactions in non-investment grade countries: for
resources cover only half of the continent’s two transactions with identical counterparty risk,
infrastructure needs. In 2017, the IFC estimated the one in a lower-rated country needs to pay a
that Sub-Saharan micro-enterprises and SMEs premium not only the same return on capital but a
were in a dire need of an estimated $330bn2, higher one in order to compensate for intangible
widening the already existing financing gap. costs: remote monitoring, reputation risk,
knowledge acquisition, etc. The premium needed
The difficulties are well-known and to overcompensate the risk differential has become
multi-dimensional: it is difficult for domestic so high that it either jeopardises the viability of the
banking systems to lend on a long term basis, project or undermines profitability to a point where
resources tend to be allocated in favour of investors retreat.
government paper to the detriment of the SMEs,
and financing conditions remain generally Protecting financial institutions from country-risk
expensive, as Central Banks seek to counter volatility is laudable, but one of the few advantages
inflation through high interest rates. Additionally, of being rated lower is a lower downside (mirroring
the lack of market depth and liquidity in capital greater growth potential). Take Greece and Egypt:
markets limits the available equity and fluidity for Greece went down from A-rated at the end of 2008
IPOs or M&A transactions while on the international to C-rated by mid-2011, losing 15 notches in less
side most of the large banks have tended to retreat than three years; Egypt was rated BB+ in January
from the continent in the last years. Development 2011 and it took a revolution to take it 6 notches
Finance Institutions (DFIs) have been trying to down to CCC+ in May 2013, before recovering to
extend their footprint through multiple initiatives B- by year-end, where it has stabilised so far4.
but official development aid globally remains stable There is simply far less volatility in non-investment
or tends to slightly decline on the back of grade countries, which should be acknowledged in
budgetary restrictions3. one way or another.
There is no silver bullet to solve the financing gap Unfortunately, regulation is not close to evolving
issue and it is only through the improvement of but the situation nevertheless says something: that
each of the financial sub-sectors that it will be for international players who used to work in Africa,
possible to finance the needs of the different the main deterrent has not been a credit risk. There
economic segments and create robust, diversified is, therefore, a unique opportunity to bring in a new
and resilient financial sectors. breed of investors, not submitted to the same type
of regulations, such as large Asset Managers,
Now if one focuses on one of the segments, the Funds or HNWIs.
availability of international resources, African
institutional investors might have the opportunity to For the last years, liquidity has been amassing on a
play a decisive role in bringing new sources of large scale in Europe and the US, only to provide
liquidities to the continent. unsatisfying low yields. Consequently, investors
are now increasingly eyeing the African markets.
Let’s step back on why major international banks They are nevertheless still shying from making their
1. http://www.africaneconomicoutlook.org/
2. https://www.avca-africa.org/research-publications/data-reports/avca-private-credit-strategies-in-africa/
3. http://www.africaneconomicoutlook.org/en
4. https://ieconomics.com/credit-rating
FEATURED ARTICLE
first steps essentially for fear of political and image private counterpart. Pension funds could catalyse
risk. international investment the same way, if not to a
larger scale: reputational damage for a project
The situation was the same over twenty years ago holder in Africa defaulting on African pensioners
with equity investors: DFIs successfully promoted could prove worse than the one caused by
the development of the Private Equity industry on defaulting on the international institution.
the continent, as their presence at the round tables
reassured and attracted the private sector LPs. Furthermore, the presence of African institutional
investors would also present a unique operational
African institutional investors, particularly pension advantage: who better than African investors have
funds, could replicate this strategy using a new an intimate knowledge of the domestic ecosystem,
asset class, Private Debt, with a long-term focus. It that could be leveraged to fine-tune due diligences,
would be the perfect tool to complement the benefit from market intelligence, or provide support
existing offer and compensate for the lack of through their networks in negotiations during crisis
international financing. This asset class remains times?
largely untapped on the continent – out of $107bn
raised in 20175 close to nothing went to Africa, To reiterate, there is no silver bullet to tackle the
while it is widely used in Europe and the US. financing gap in Africa. However, there is a
fantastic opportunity to address a portion of it
Pension Funds undoubtedly have the credibility through the partnerships of African and
and legitimacy to play this role as DFIs did with PE. international investors where both will fulfil their
Amounts under management are now significant: objectives bringing new sources of cash to the
South Africa obviously stands out with over continent for the former, finding new markets with
$320bn, but other countries have increasingly decent yields for the latter, in an as secured
significant amounts under management, out of environment as it could be for both.
which a small portion - around 15% of a Debt Fund
- can be potentially used to leverage much larger
ones: Nigeria, Botswana and Kenya for example,
“African institutional
have over $25bn, $6bn and $7bn respectively investors might have the
under management6. opportunity to play a decisive
One of the main limitations pensions funds used to role in bringing new sources
face was the obligation to invest domestically. of liquidities to the
While it made political sense from a resource
allocation perspective viewpoint, perspectives continent.”
have been progressively shifting towards an
investors’ one: benefiting from geographic Contributor’s Profile
diversification improves the risk profiles, while it Guillaume Arditti is the founder of Belvedere
also promotes the development of intra-African Africa Partners, a financial and strategy advisory
relation at a time where the AFTCA is making the firm focused on Africa. He started his career in
headlines. South Africa7 has been paving the way, RSA, with the French Development Agency (AFD),
followed by Kenya, Botswana or Namibia – and then joined major financial institutions such as
many others are also considering this kind of NATIXIS and BNP PARIBAS. His focus was always
evolution. on Africa, working on landmark transactions,
leading strategy and business development
The DFI’s success in the PE industry rested on an initiatives.
essential pillar: the wide recognition that their
presence at a round table provides implied Guillaume also sits at the Ghana-France Business
protection. Indeed, the likelihood or probability of Club (thegfbc.fr) Advisory Board, is a lecturer in
an investee or a borrower (whether public or International Relations and African Studies at the
private) defaulting on financing provided by an Political Sciences Institute of Paris (Sciences Po)
institution for political reasons or mismanagement and frequently shares his analyses in international
is significantly much lower than with a completely media.
5. https://docs.preqin.com/samples/2018-Preqin-Global-Private-Debt-Report-Sample-Pages.pdf
6. https://www.avca-africa.org/media/1329/pension_funds_and_private_equity_2014.pdf
7. idem
FEATURED ARTICLE
CHARTING AFRICA’S BUSINESS TERRAIN

UNCOVERING BOTSWANA OPPORTUNITIES
By Temo Ntapu, Director Business Intelligence, The Botswana Investment and Trade Centre
widespread internal and international

communication by telephone, facsimile and
electronic mail. In addition, three cellular
companies operate in the country.
• Botswana is a cosmopolitan and peaceful
country where people of all races live
together in peace and harmony. In short, it is
a good place to live and work in.
• Excellent education facilities, public and
private.
• Very good medical facilities. The healthcare
bout Botswana – A Synopsis delivery system is made up of government
Botswana is an upper income middle country, with a and private health institutions, missionary,
GDP per capita of USD 7,570 (Global mine and private medical practitioners. There
Competitiveness Report 2019). The country boasts a is a modern private hospital in Gaborone.
mature and peaceful democracy with an excellent
track record for good governance as well as a stable i. Transparent and Attractive Tax Code
political and macro-economic environment.
Botswana is the most transparent country in Africa o General corporate tax: 22%
according to Transparency International. It is centrally o Financial services
located in the heart of Southern Africa and shares corporate tax: 15%
o Low personal income
borders with Zambia in the north, Namibia in the west tax: Up to 25%
and north, Zimbabwe in the north-east and South o Value added tax (VAT): 12%
Africa in the south and south-east. The country’s o Possible tax holidays: 5-10 years
geographical positioning makes it a perfect gateway o Foreign exchange
to access the Southern African Development controls: None
o Repatriation of profits: Free to home country
Community (SADC) region. The country is 581,730 o Ease of paying taxes: 6th easiest country in Africa
square kilometers, roughly the size of France with a to pay taxes in
population of just over 2 million people.
ii. High Regard by Global Citizens
Given its sustained high growth rates, the country Table 1: Botswana’s International Rankings
has often been hailed as Africa’s sparkling model
economy.
Why Invest in Botswana

Living conditions in Botswana are comparable to
some of the leading economies in Africa. Gaborone,
Botswana’s capital city is a fast-developing city with
an up-market suburb, internationally comparable golf
centers, word repute hotels and resorts, an
international airport, shopping malls and cinemas.
Below are some of the summary points on

infrastructure and the quality of life in Botswana; iii. Easy Access to SADC and Africa
• Excellent infrastructure - the road, rail and Access to huge SADC (Southern African
air network is well developed, making it easy Development Community) market of 300 million
to access export markets. A sophisticated people, Europe and the USA.
microwave and fibre optic • SADC headquarters is in Botswana. Southern
telecommunications network enable African Customs Union (SACU) allows
FEATURED ARTICLE
movement of goods amongst South Africa, gold, uranium, copper, nickel, coal, manganese and
Swaziland, Lesotho, Namibia and Botswana Mining services. Also includes prospecting,
free of customs duty expansion of existing mining projects, new mining
• Botswana has duty free and quota free projects, beneficiation of minerals and business
access Europe opportunities relating from links with other sectors.
• Cargo, freight and logistics: Consolidation,
• African Growth Opportunities Act enables deconsolidation, distribution, transport services,
Botswana to export to the USA on a liberal handling, warehouse management and integrated
basis. systems.
• COMESA-EAC-SADC Agreement facilitates • Leather and leather goods: high premium leather
access to Southern and East African markets production, high premium leather goods
production, preferential market access through
iv. Vibrant Financial Markets trade agreements to key growth markets for
As at March 31, 2018, the non-bank financial leather and leather products and exporting leather
institutions sector recorded a total of 775 active and leather goods to high growth markets.
entities, reflecting a growth of 11% from 698 entities • Automotive sector: Supply of parts and
recorded in the previous year. The net increase in components to South Africa’s automotive sector,
regulated entities is mainly due to the positive supply of replacement parts for vehicles of large
movement in all industries, with the Micro Lending scale projects, expansion of existing component
industry dominating the sector with 324 players in manufacturing industries, R&D services,
2018 from 311 players in 2017, followed by the diversification of after-sales services for private
Insurance industry recording 298 players in 2018 and commercial vehicles and the establishment of
from 246 players in 2017, then Capital Markets skills development / training facilities for auto
industry with 64 players in 2018 from 53 in 2017 and, mechanics and technicians.
lastly, the Retirement Funds industry with 89 players • Information Communication Technology (ICT)
in 2018 from 88 in 2017 (see figure 1). sector: Innovative money operations, e-Waste, TV
White Space, TV Broadcasting, e-Health, BPO and
Table 2: Structure of the Botswana Financial System Call Centres and e-Commerce, software and app
Assets, as at December 31, 2018 development and ICT in agriculture.
• Health sector: Diagnostic facilities (imaging and
laboratory), pharmaceutical manufacturing,
manufacturing of biomedical equipment, medical
tourism
• Education Sector: photographic safari tourism
training, mining and energy technical schools,
medical and health sciences school, business
school, lifelong training institutions and education
services for special needs students.
Source: NBFIRA • Energy Sector: Power generation, extraction of
Figure 1: Structure of the Non-Bank Financial coal bed methane and renewable energy projects
Institutions (2018) such as solar PV plants and solar power
generators as well as bio-fuel projects.
• Agriculture: Grain, fruit and vegetables, irrigation,
dairy farming, leather (raw hides and skins), pork
and beef products.
• Diamonds Beneficiation: Diamond trading, cutting
and polishing, jewellery manufacturing and
diamond related services such as security,
banking, insurance, and certification and
brokerage services.
• Infrastructure: Transportation and logistics
• Financial and Business Services sector: Banking,
Investment Opportunities in Botswana insurance and investment funds.
Key Priority Sectors- Some of the investment
opportunities that are actively promoted by BITC
include but are not limited to:
• Mining Sector: Mining and base metals, such as

FEATURED ARTICLE
DOING BUSINESS IN ETHIOPIA

LEGAL AND REGULATORY VIEWPOINTS
By Mekdes Mezgebu, Senior Associate, Mesfin Tafesse & Associates Ethiopia
Deborah Haddis, Associate, Mesfin Tafesse & Associates Ethiopia
ntroduction commericial Register. Commercial registration is a

Since the appointment of Prime Minister Abiy pre-requirement to acquiring a business license in
Ahmed as the new Prime Minister of Ethiopia in Ethiopia. The registration of a company in the
April 2018, several economic and political reforms Commercial Register results in the issuance of a
have been introduced. Most of the legislations and Commercial Registration Certificate by the
policies surrounding business in Ethiopia are registering authority that certifies the legal
undergoing amendments as a result of these incorporation of an entity. After the legal
reforms. As part the Prime Minister’s vision of registration of the entity, in order to commence its
expanding the role of the private sector in the business and start earning income the entity is
Ethiopian economy, the office of the Prime Minister required to obtain a business license. No person
launched a “Doing Business Initiative” laying out shall engage in a business activity without having a
priority policy, regulatory and administrative valid business license. Moreover, some business
reforms that will be adopted by various offices of sectors are required to acquire a competence
the Ethiopian government. In this piece, we certification from the sector regulating authority
present a general background of the main laws that prior to applying for a business license.
regulate doing business in Ethiopia followed by a
summary of the legislative reforms that are b. Forms of business entities
currently underway. The Commercial Code recognizes 6 forms of
business organizations. These business
Legal Framework organizations can be broadly classified into
The Commercial Code and the Civil Code of partnerships and companies limited by shares.
Ethiopia generally govern key aspects of trade Partnership may take the form of an ordinary,
such as forms of business organization, contracts, general, limited partnership or a joint venture.
property, bankruptcy and agency1. Moreover, the These forms are different in the extent of the
Investment Laws2 regulate foreign investment with liability of the partners to the partnership.
particular emphasis on sectors allowed for foreign
investors and minimum requirements for Companies limited by shares are the most
investment licensing in Ethiopia. Additional relevant common form of business structure in Ethiopia.
legislations are, the Income Tax Proclamation & Limited liability companies may take the form of a
Federal Tax Administration Proclamation that share company or a private limited company (PLC).
govern the tax and the tax administration Share Companies are formed by a minimum of five
procedures and the National Bank of Ethiopia members and unlimited number of maximum
(NBE) directives regulating foreign exchange members. Share companies are required to have a
regime in Ethiopia. The authorities responsible for formal management structure and are more
business registration and operations are the regulated by the Commericial Code. Whereas
Ministry of Trade and Industry (MoTI) and the PLCs may be formed by a minimum of two and
Ethiopian Investment Commission (EIC) for local maximum of fifty members with capital that is fully
entities and foreign investors respectively. paid at the point of formation. Unlike a share
company, a PLCs may be operated by a manager
Starting a Business responsible to the shareholders, rather than having
a. Registration and licensing to adopt a formal management structure, such as a
Registration and licensing are the dual obligations board.
of any business person planning to operate in
Ethiopia. A business organization acquires a legal c. Foreign direct investment
personality when its registration is entered in the The Investment Law categorizes investment
1. These codes are further supplemented by legislations such as the Commericial Registration and Business Licensing Proclamation, Regulation and directives.
2. Investment Proclamation No.769/2012 and the Investment Incentives and Investment Areas Reserved for Domestic Investors Council of Ministers Regulation (as amended) No. 270/2012.
FEATURED ARTICLE
sectors into four broad categories of (i) sectors Exiting a Business

open to foreign investors (ii) sectors open only for The liquidation of a business entity requires a
joint investment with the government of Ethiopia verification from the Ministry of Revenue that the
(iii) sectors that are exclusively reserved for the entity does not have any outstanding tax and can
government and (iv) sectors that are exclusively proceed to return its licenses to the relevant
reserved for domestic investors. Prior to acquiring issuing authority. After the tax clearance is
a commercial registration certificate, all foreign acquired, the business entity is required to go
investors are required to get an investment permit through a formal liquidation process with the
from the EIC which is an approval and a involvement of the courts. This usually may take
registration of the planned investment project in up-to a period of 2 years.
Ethiopia. Furthermore, investors must fulfill a
minimum investment capital requirement of USD On-going Reforms: Doing Business Initiative
200,000 if it is a wholly foreign owned and USD The Prime Minister’s Doing Business Initiative aims
150,000 if it is a joint investment with local at increasing investment, lowering costs of
investors. The Investment Laws offer investors tax business formation and increasing productivity. As
holidays and customs duties exemptions in certain part to the Doing Business Initiative the following
sectors of the economy that are considered vital reforms are currently underway with the aim of
for future economic growth and investment in putting Ethiopia in the top 100 for ease of doing
specified underdeveloped regions of Ethiopia. business:
I. The Commercial Registration and Licensing
Operating a Business: Some Considerations
law was amended to reduce procedural
a. Foreign Exchange Controls
steps and days required to start a business
In Ethiopia, foreign exchange is centrally regulated
in Ethiopia. The amendment also reduces
by the NBE. The NBE fixes the daily buying price of
the frequency of renewal of business
currencies and communicates it to commercial
license.
banks on daily basis whereas the daily selling price
is determined by commercial banks which should II. The Commercial Code is currently being
not be less than the daily buying price fixed by the amended by a team of local and
NBE. Foreign investors are entitled to remit international experts to recognize additional
profits, dividends, principal and interest on foreign forms of business entities.
loans, and technology transfer-related fees. III. The Federal Supreme Court enacted new
Foreign investors may also freely remit proceeds procedures for commericial disputes with a
from the sale or liquidation of an enterprise, view to expediting adjudication procedures.
compensation paid to an investor, or from the sale
IV. The Investment Laws are being amended
or transfer of shares or partial ownership of a
with a view to attracting more foreign direct
business to a domestic investor. Repatriation of
investment.
company profits are often delayed due to low
reserves of hard currency available in the country. V. Ethiopia became one of the first 22
countries to sign and ratify the African
b. Tax Continental Free Trade Agreement (AcFTA).
The major direct and indirect taxes applicable to
businesses are the following:
No. Type of tax Rate
1 Corporate income tax 30%
2 Custom du es 0% up to 35%
3 Dividend tax 10%
4 Excise tax 10% up to 100%
5 Export tax Nil
6 Income tax from employment 0% up to 35%
7 Royalty tax 5%
8 Turn over tax 2% and 10%
9 Value added tax 15%
10 Withholding tax 2%
11 Capital gains tax 15% for building held for business,
factory, oﬃce
30% for the transfer of shares of
companies
12 Income from receiving of a 10%
technical service from abroad
FEATURED ARTICLE
DOING BUSINESS PERSPECTIVE ON GHANA AS

IN GHANA AN INVESTMENT LOCATION
By George Kwatia, Head, Tax Line of Service, PwC Ghana and Sierra Leone
hana’s Economy at a glance

Ghana recorded a real GDP growth of 5.4% from
January to September 2018 compared to global
economy growth of 3.7% for the same period. The
services sector remains the largest contributor to
GDP with 44.5% and was followed by the industry
and agricultural sectors with 34.2% and 21.3%
respectively as at September 2018.
recorded a 22.3% improvement in profit-after-tax

of GHS 1.95b in October 2018 relative to GHS
1.59b in October 2017. Additionally, the sector saw
a decline in Non-Performing Loans ratio from
22.6% in June 2018 to 18.1% in June 2019. The
improved performance is attributed to the reforms
by the government to improve investor confidence
and shore up the banking sector’s ability to finance
big-ticket transactions.
Following implementation of production-driven The Ghana Stock Exchange (GSE) and Security
programmes such as One District One Factory, and Exchange Commission (SEC) are key
Planting for Food and Jobs and other production- participants of the capital market in Ghana. GSE
driven initiatives by the current government, 2019 provides a platform for the for purchase and sale of
economic growth is projected at 7.1%. With single shares while SEC regulates and promote the
digit inflation, relatively political stability and growth and development of an efficient, fair and
availability of vast agricultural and natural transparent securities market in which both the
resources, Ghana remains an attractive investment interest of investors and the integrity of the market
destination. The government has recently are protected.
introduced tax incentives for its industrialisation
programme to further enhance the country’s Doing business in Ghana and what to look out
attractiveness to foreign investors. for
Setting Up or acquiring an entity
Sectorial performance and outlook for In Ghana, a foreign investor can conduct business
investment by setting up a subsidiary limited liability company,
The 2019 Mid-Year Budget Review estimates registering an external company (branch) or
growth in all the three sectors of the economy and forming a Joint venture (JV) with a local partner.
anticipates that the continuous implementation of The business must be registered at the Registrar
the production-driven programmes mentioned will General Department and a Tax Identification
propel with growth in the Agricultural and Industry Number (TIN) obtained for the entity. The
sectors. registration fee is GHS 330 (approximately US$ 70)
and a stamp duty of 0.5% is payable on the stated
In the financial services sector, the banking industry capital of the company.
FEATURED ARTICLE
Also, all entities with foreign participation are income (under PAYE), every employer is required
required to register with the Ghana Investment to register with the Social Security and National
Promotion Centre (GIPC). A Joint Venture must Insurance Trust (SSNIT) and pay the mandatory
have at least 10% Ghanaian participation and the contributions in respect of its employees. Resident
foreign partner is required to contribute not less individuals are taxed on a graduated scale from 0
than US$ 200,000 either in cash or capital goods to 30% and non-residents at a flat rate of 25%. All
relevant to the investment. A wholly owned foreign taxpayers, including individuals are required to
entity is required to have a minimum capital of US$ obtain a TIN. Employers of foreign nationals are
500,000 and a trading entity, wholly or partly also required to obtain work and resident permits
owned by a non-Ghanaian needs a minimum for their expatriate from Ghana Immigration Service
capital of US$ 1,000,000. These minimum amounts (GIS), renew same and file returns on the status of
may be increased depending on the sector the their expatriate.
foreign investor seeks to participate in. So, for
instance, a foreign investor seeking to set up a Ghana principally follows the credit system of
bank in Ghana would require a minimum capital of Value Added Tax (VAT), as pertains in various
GHS 400m (approximately US$ 75m). countries across Africa. However, there are
significant differences. Chief among these are the
Tax Considerations and Global Mobility straight levies (National Health Insurance Levy and
A general investor seeking to invest in Ghana Ghana Education Fund Levy of standard rates of
should be concerned about income tax (including 2.5% each), which are administered along with the
withholding tax) and Value Added Tax. These taxes VAT but are not subject to the credit system. VAT
if not carefully managed could affect the expect is charged at each stage of production/distribution
rate of return on investments. as goods and services change hands. It is
generally charged by the person making the supply
Ghana operates a tax system, in which income and borne by the final consumer. The three VAT
from residents are aggregated from all sources and rates in Ghana are 0%, 3% and 12.5%. Other
subject to income tax. Companies are taxed on indirect taxes are Communication Service Tax,
their income from business or investment reduced Special Petroleum Tax, Environmental tax and
by allowable deductions. The corporate tax rate is excise duties.
25% for companies in general with some start-up
and/or location incentives. Mining and upstream Foreign Exchange Considerations
companies are taxed at 35%, subject to terms of Residents and non-residents are permitted to
the applicable petroleum agreements. maintain a Foreign Exchange Account (FEA) and
transfer funds from FEA’s to Foreign Currency
Payments by resident companies that are Accounts (FCA’s) or cedi accounts. FEA’s should
considered to have a source in the country are be credited with foreign exchange generated from
subject to withholding tax. The withholding tax rate activities in Ghana such as proceeds from exports.
ranges from 3% to 20% depending on the tax The threshold for transfers to abroad without initial
residency status of the recipient of funds and type documentation is US$ 50,000. Subsequent
of transaction. transfers must be supported with documents.
FCA’s are free from restrictions and transfer to and
A resident company can claim a foreign tax credit from these accounts may be made freely by
for any income tax it pays to a foreign country in authorised dealer banks in convertible currency.
respect of foreign sourced income subject to
certain conditions. Also, there are reliefs from Repatriation of branch profits, repayment of loans,
double taxation. These relief could be obtained dividend and management technical fees can be
unilaterally or under in-force treaties Ghana has made in foreign currency after appropriate
with France, Germany, United Kingdom, South withholding taxes have been paid. Transfers in this
Africa, Italy, Belgium, The Netherlands, case must be backed by requisite supporting
Switzerland, Denmark and Mauritius. The treaties documentation.
with the Czech Republic, Ireland, Morocco, and
Singapore are not yet in force.
In addition to withholding tax on employees’

FEATURED ARTICLE
DOING
BUSINESS IN NIGERIA
SOME TAX PERSPECTIVES
By Chinedu Ezomike, Partner & Head, Commercial Practice, Andersen Tax, Nigeria
ntroduction aimed at improving the Country’s balance of trade.

Benjamin Franklin once said that nothing can be
said to be certain, except death and taxes. Tax More recently, the Government put in place an
obligations are statutory in Nigeria and there have Executive Order to encourage companies to invest
been renewed efforts to enforce tax payments in in critical road infrastructure projects across
recent times. Nigeria. The Order is known as the Road
Infrastructure Development and Refurbishment
In the past, there was no deliberate focus on Investment Tax Credit Scheme (Scheme). It
adequately subjecting the economically active provides a platform for private companies to
citizens to tax because the Nigerian government undertake the construction and refurbishment of
expenditure was being traditionally funded by eligible road infrastructure projects. The Scheme
income from sale of crude oil. However, when the guarantees full and timely recovery of the project
global oil price dipped, it became very clear that costs through a tax credit mechanism. The
the economy could no longer be sustained by advantage of this scheme is that taxpayers can
revenue from crude oil sales. Thus, the essentially chose to fund road projects that are
Government has been making concerted effort to critical to their businesses, with their future tax
raise the required funds through tax revenue, as payments.
this appears to be the only sustainable source of
Government funding. Another tax incentive is the “Free Trade Zone”
(FTZ) Regime. FTZs were established to boost
The current tax to GDP ratio has been hovering national exports, create jobs and help in
around 6%, but the government intends to diversifying the Nigerian economy. Companies
increase it to 15%, over time. According to a operating in the FTZ are exempt from income tax,
World Bank report on “making taxes work for custom duties and other levies applicable in
Sustaining Development Goals”, maintaining the Nigeria.
15% benchmark is critical for any country that
aims to provide basic services to its citizens. To Nigeria has also signed Double Tax Treaties with
achieve this, the tax authorities are employing a certain countries to improve trade relations. The
mixture of carrot and stick approach to enhance countries include Belgium, Canada, China, France,
and improve the level of tax compliance. The the Netherlands, Pakistan, Philippines, Romania,
Government is also using tax incentives to South Africa, and the United Kingdom. These
encourage more investments in some specific treaties provide relief to businesses from double
aspects of the economy. taxation in respect of international transactions.
In this article, we have highlighted some tax Solving funding challenges through increased
incentives, the challenges of the recent tax drive taxation
and potential ways of addressing them to ensure In recent times, the Nigerian Government has
the objectives are met. made several efforts to generate additional revenue
to fund key institutions in the country through taxes
Using tax incentives to drive investments and levies. For instance, a Police Trust Fund Levy
Over the years, the Nigerian government has was just signed into law. This introduced a levy of
attempted to drive investments into the country by 0.005% of net profits, payable by all companies
granting tax holidays and several other tax-related operating in Nigeria and targeted at raising revenue
incentives. These include the pioneer status to strengthen the operations of the Nigerian Police
incentive, which is targeted at businesses that are Force. This is similar to the establishment of the
considered nascent and of national economic Tertiary Education Trust Fund which imposes 2%
interest. There are also export incentives, which are on the assessable profits of companies to fund
applicable to export oriented businesses and tertiary institutions in Nigeria.
FEATURED ARTICLE
In addition, the Federal Executive Council recently commencement rule has been an unnecessary
approved an increase in Value Added Tax (VAT) burden to new companies as it exposes them to
rate from 5% to 7.5%. This is said to have become the risk of double taxation within their first three
necessary to enable government fund a recent years of business. Companies are also required to
increase in the minimum wage of Government pay minimum tax under the CIT Act even where
workers that was agreed with the labour union in such companies are loss making. These
2018. In a bid to strengthen its tax drive, the tax requirements tend to stifle new businesses and
authorities have been conducting tax audit and increase their risk of failures.
investigation exercises on taxpayers’ records. In
fact, they recently adopted an approach of placing Another challenge faced by businesses is the
lien on the bank accounts of several alleged tax bureaucracy involved in claiming tax refunds.
defaulters, requiring them to regularize their tax Although the FIRS (Establishment) Act requires the
affairs before removal of such liens. tax authorities to settle a taxpayer's refund claim
within 90 days of the application subject to
In Nigeria’s oil and gas sector, companies are appropriate audit, these audits have proven to be
exposed to a host of levies imposed by other laws slow, time consuming and frustrating.
and government bodies, apart from the taxes
imposed on their profits. These include the Notwithstanding the rising compliance obligations
deduction of 1% Nigerian Content Development and several tax issues that businesses in Nigeria
Levy on invoices of companies operating in the may be faced with, the tax officials are undergoing
upstream sector of the oil and gas industry, continuous trainings to ensure seamless service
cabotage levy, contributions to the Niger Delta delivery to taxpayers. Businesses with long-term
Development Commission Fund, Oil terminal dues views are also able to plan their tax affairs and
etc. manage potential tax risks through proper tax
governance frameworks without interference from
The penchant to establish new taxes and levies external parties.
whenever there is a need to fund a project has
invariably led to multiplicity of taxes and increased Conclusion
challenges with tax compliance. A number of tax From the above, it is necessary that the
practitioners have counseled on the imperative to government takes positive steps towards
streamline the tax systems to ensure efficiency and addressing the varying challenges in the Nigerian
improve the ease of paying taxes in Nigeria. tax regime to ensure the prosperity of businesses
and investments within the country. Applicable
Taxation challenges facing businesses in taxes should be streamlined to eliminate
Nigeria multiplicity of taxes. Although there are a number
Aside from the multiplicity of taxes and the obvious of bills which aim to address some of the
challenge of keeping abreast of all the tax highlighted tax issues, it is important that the
compliance requirements, there are other legislature increases its focus on taxation and
tax-related challenges plaguing businesses in ensure speedy passage of tax bills that will create
Nigeria. One recurring issue for profitable a better tax climate and enhance investments and
businesses in Nigeria relates to double taxation of businesses in Nigeria.
dividends distributed by companies as provided for
in Section 19 of Companies Income Tax (CIT) Act. The importance of an enabling environment for
The literal interpretation of the provisions of the businesses to thrive cannot be over emphasized.
Section requires CIT to be payable on any While the Nigerian government moves to achieve a
dividends paid in excess of the taxable profit of a conducive tax environment by reviewing the
company in any given year. This has created a current tax practices and enabling laws in Nigeria,
challenge as profits which have been previously it is pertinent for taxpayers doing business in
subjected to tax may be taxed twice if paid out as Nigeria or seeking to do business in Nigeria to
dividends in subsequent years. constantly seek professional advice in navigating
the Nigerian regulatory and compliance
In addition to this, there are varying issues that requirements.
could affect businesses negatively such as the
commencement rule under the CIT Act. The

FEATURED ARTICLE
DOING
BUSINESS IN SOUTH AFRICA
CHARTING THE TAX LANDSCAPE
By Veli Ntombella, Head of Tax Advisory Services, SNG Grant Thornton South Africa
ntroduction Tax Incentives

In 2001 South Africa changed its tax system from The Department of Statistics South Africa pub-
source to residence based. Like other residence lished in the second quarter of 2019 that the South
based tax systems, this meant that South African Africa’s unemployment rate increased from 27.6%
Residence are taxed on their world -wide income in the first quarter to 29% in the second quarter.
regardless of the source of income. However, non- Youth unemployment rate also increased from
residence are taxed on their income which is 55.2% in the first quarter to 56.4% in the second
derived from a South African source. quarter. It is clear that as the global economic
environmental and business challenges gives rise
The framework for calculation of tax is based on to acute unemployment, there is a growing need
“gross income” which in terms of Section 1 of the for governments to find more innovative ways of
Income Tax Act1 is defined as: attracting investors. In South Africa there are
several tax incentives and allowances geared to
“in relation to any year or period of assessment, attracting investment and promoting employment
means- creation.
(i) In the case of any resident, the total amount in
cash or otherwise, received by or accrued to or The Employment Tax Incentive (ETI)
in favour of such resident; or The Employment Tax Incentive came into effect on
January 1, 2014. The program was initially
(ii) In the case of any person other than a resident, supposed to end on December 31, 2016 but due to
the total amount, in cash or otherwise, received consultation and discussions with the National
by or accrued to or in favour of such person Economic Development and Labour Council
from a source within the Republic, during such (“NEDLAC”) the program has been further
year or period of assessment, excluding receipts extended to 28 February 2029. According to the
or accruals of a capital nature..” Government this program is intended to reduce the
cost of employing the youth between the ages of
Phillip Haupt2 on “Notes on South African Income 18 and 29 through a cost sharing mechanism with
Tax” says that: Government. The Incentive amount which is
deductible by employers from their PAYE liability is
“if the asset is a revenue asset like (like trading calculated based on a formular taking into account
stock) the amount received on its sale is revenue. If the employees’ monthly remuneration.
the asset is a capital asset (like a holiday house) the
amount received on its sale is capital”. The trade union movement argued that the ETI
Nature of Taxpayer Rate of Tax would encourage employers to get rid of the
existing employees and replace them with inexperi-
Natural persons and special 18% to 45% (sliding scale)
Trusts enced young people in order to take advantage of
the incentive, and thus it would have no real effect
Trusts 45%
on employment creation. However, existing
South African companies 28% employees are protected against unfair dismissal. I
South African branches of 28% believe that the ETI can provide a good platform for
foreign companies the employment of inexperienced young people,
Personal service provider 28%
some of whom have academic qualifications but
companies are unable to find employment due to a lack of
practical working experience, which is a crucial
Small business corporations 0%, 7%, 21%, and 28%
(sliding scale) factor in the labour market.
Micro businesses 0%, 1%, 2%, and 3%
(sliding scale-turnover tax)
1. Income Tax Act no.59 of 1962

2. Phillip Haupt-Notes on South Africa Income Tax, (2019) Thirty-Eight Edition
FEATURED ARTICLE
The Learnership Allowance therefore not surprising that the authorities intro-
The Learnership allowance was introduced in 2002. duced the innovative incentive contained in Section
It allows employers to claim an allowance in 12L of the Income Tax Act.
respect of recognised learnership agreements
entered into between employers and learners, and Section 12L came into effect on November 1, 2013
is intended to be an incentive for employers to train and operates for years of assessment ending
employees in a regulated environment to encour- before 1 January 2020. The section affords a
age skills development and job creation. Eligible deduction in respect of energy-efficient savings.
training contracts that qualify employers for deduc- The deduction was initially calculated at 45% per
tion are those that constitute agreements and KWh or equivalent of energy-efficiency savings. In
apprenticeships registered with Sector Education 2015 the 45% deduction was increased to 95%,
Training Authority (SETA) established under the possibly as a result of scepticism that there was no
Skills Development Act No. 97 of 1988. real benefit in the incentive as the deduction is
subject to tax at the corporate rate, which is
The allowance, to be deducted by the employer, currently 28%. In our view the taxation of the
concerns annual allowance, completion allowance, rebate was largely neutralised by the proposed
learners with disability, reporting requirements and increase of the 45% deduction to 95%. The only
the company income tax return. The conditions for obstacle is the process of verifying the energy
qualifying for the deduction may seem onerous but savings, as there are very few organisations or
are worthwhile, considering the generosity of the individuals in the country with this capability. These
allowance, especially for organisations that employ organisations prescribed by the regulations are
a large number of learners. expected to issue a certificate to the taxpayer
before claiming the allowance. The certificate must
Long delays in registrations with the various reflect the following details:
SETAs, caused by the administrative burden, • The baseline at the beginning of the year of
resulted in an amendment – effective January 1, assessment
2013 – that any learnership agreement not regis-
tered from the inception of the agreement will be • The reporting period energy use at the end
deemed to have been registered on the date it was of the year of assessment
entered into, so long as it is registered within 12 • The annual energy efficiency saving
months of the last day of the employer’s year of expressed in kilowatt hours for the year of
assessment. assessment
• The full criteria and methodology used to do
Venture Capital Investments Allowance the calculation of energy efficiency savings
Section 12J was introduced in 2009. The purpose
of the section is to provide a deduction to investors • Any other information that may be
Venture Capital businesses an upfront deduction of prescribed in the regulations
their investment in the shares of a Venture Capital
Company that are issued to them, without any If the available tax incentives and allowances were
recoupment implications if the shares are sold after the main or sole consideration for investors, South
a period of five (5) years or if capital is returned to Africa would be among the preferred countries.
the investor after a period of more than five (5) These incentives could help promote trade and
years. In terms of section 12J, the investor is business in the country, thereby creating jobs
afforded a deduction of hundred percent (100%) of opportunities.
the cost of the Venture Capital shares issued by a
Venture Capital Company. Conclusion
It is my view that the South African Government
Allowance for Energy Efficiency Savings has successfully demonstrated that Governments
Although power outages have reduced in the last can effectively come up with creative methods of
two years, various reports link South African boosting their respective economies and create
businesses’ lost competitive edge to continued employment opportunities without necessarily
power outages that disrupt business activities, eroding the tax base. Although there are a number
especially in mining and manufacturing. Although of the tax incentives and allowances that could
electricity is still relatively cheap in South Africa, attract investors in South Africa, we have only
outages are a serious concern for both local highlighted a few due to space limitation of this
businesses and potential foreign investors. It is article.

FEATURED ARTICLE
DOING BUSINESS
IN WEST AFRICAN ECONOMIC AND MONETARY UNION:
ISSUES RELATED TO FINANCIAL SERVICES AND BANKING
By Mame Ngone Sow, Senior Associate, GENI & KEBE, Senegal
ntroduction The obligation to repatriate proceeds from the sale

This article addresses the key issues relating to the of mining and oil and gas products has been a
obligation to repatriate proceeds from the sale of recurrent point in discussions and negotiations in
mining and oil and gas products, the financial the mining and oil and gas industries.
setbacks that may derive from such an obligation,
and potential solutions to mitigate risks in the West Investors face stringent foreign exchange control
African Economic and Monetary Union (WAEMU) rules and regulations in the WAEMU zone that may
member states. have significant implications on their financial
projections. An early assessment of these
It is intended to give foreign investors operating in implications will help focus discussions on ways to
the WAEMU zone an insight of some financial mitigate the risks and will give them a head start
concerns and issues they may encounter while while conceiving mechanisms and tools that will
projecting to invest in the WAEMU zone, concerns help them manage those risks, take control over
and issues they will have to deal with, in due the currency fluctuations, limit their losses and
course, in order make informed and sound financial maximise their return-on-capital gains. To this end,
decisions. they need to find ways to comply with such an
obligation whilst incurring minimum costs and
The obligation to repatriate proceeds from the sale expenses.
of mined and oil and gas products may cause
financial setbacks to investors if they do not The obligation to repatriate is translated into
anticipate the potential issues and risks practice by the “actual collection”1, in the country
beforehand. of origin, of income from export proceeds. This
must be evidenced by foreign currency sales
Issues related to financial services and banking certificate drawn up by the depository bank, or any
Doing business in foreign countries is not an easy other document attesting to the settlement of the
task and the decision to invest in such countries export transaction from abroad.
should not be taken lightly. Foreign investors may
be exposed to currency risks, especially when they Foreign investors are required to collect their
plan to export products. proceeds from foreign sales2, return them to the
country of origin to be deposited with their
Corporate entities and foreign investors, in general, domiciling bank. That bank is then required to carry
have to assess risks and find effective ways to out the effective repatriation through the Central
mitigate them before any decision to invest in Bank of the West African State (BCEAO).
those countries is taken.
Repatriation is effective when the domiciled bank
Such risks are not to be underestimated, especially transfers the corresponding currencies to BCEAO.
when one is dealing with banking and financial
services. Needless to say, that it may be quite costly for
foreign investors to carry out such repatriation of
The case of the obligation to repatriate proceeds funds from export sales as, theoretically, the funds
from the sale of mining and oil and gas products is have to be converted from a foreign currency (USD
no exception. for example) into CFA Francs and transferred to the
1. TITLE ONE: TERMINOLOGY Article One: Definitions

For the purposes of this Regulation, the following definitions shall apply: Repatriation of income from export proceeds: actual collection of income from export proceeds in the country of
origin, as shown by a certificate of sale in foreign currency drawn up by the domiciling bank or any other document attesting to the settlement of the export transaction from abroad.
Repatriation is completed when the bank concerned sends the corresponding sums to the BCEAO.
2. Article 11, Schedule II: Resident economic operators are required to collect all proceeds from the sale of goods abroad and return them to their country of origin for deposit in the
domiciling bank, within a deadline of one (1) month following the payment due date…
FEATURED ARTICLE
BCEAO. Then, the funds will have to be converted Cognisant of the extent and stakes of such a
back to a foreign currency for transfer purposes. phenomenon, governmental, institutional and
sub-regional authorities are keen to impose strict
Under Articles 4, 7, and 11 of Regulation 09/2010, compliance with exchange control regulations to
some types of payments are allowed to be made prevent massive capital outflows from WAEMU
freely. Those provisions are not always clear-cut, member states.
leaving room for interpretation and
re-characterisation by national authorities. To this end, they sometimes tend to impose
stronger exchange control mechanisms on
The WAEMU States are also subject to relevant administrative, banking and financial institutions
Community Regulations. As such, they are not, in that do not comply with applicable regulations
principle, allowed to provide for derogations on the even under the threat of national financial
obligation to repatriate income from export sanctions.
proceeds and on certain types of payments to be
made offshore. Contributor’s Profile
Mame Ngoné Sow brings years of work
They do so in practice and one has to look at the experience in Canada and the USA back to her
rationale behind such an attitude. hometown of Dakar. She assists foreign investors
with the legal requirements and opportunities in
Foreign investors, though at times allowed by their corporate transactions in Senegal and other
national regulators to keep a portion3 of their sale countries in the West African Economic and
proceeds abroad to make payments such as those Monetary Union, including advising on the
to contractors and the servicing of offshore debts, extension of global lines of credit, syndicated loan
may still face currency exchange risks when their facilities and swap transactions. She also oversees
revenues are transferred back. complex legal matters, due diligence and
regulatory compliance transactions embracing
They will need to look for ways to mitigate those sectors as diverse as aviation, banking, and
currency exchange risks, such as through the finance, as well as energy, oil, and gas.
design of the financial structure and recourse to
hedging mechanisms.
An offshore hedging structure may need to be

envisaged
Though WAEMU residents are allowed to open
domestic accounts in foreign currency and foreign
accounts abroad4, under Article 43 of Schedule II,
Chapter VI of Regulation 09/2010, they may still
encounter problems or have their application to
open such an account refused. If practitioners in
the mining and oil and gas sectors are to be
believed, the rationale behind such a refusal may
be based on the need for national or community
regulators to combat capital flights. The overall
repatriation rate of foreign currencies is said to be
very low.
3. ARTICLE 57, Senegalese Petroleum code:

Subject to compliance with the provisions in force in terms of exchange regulations in the Republic of Senegal, and the derogations granted by the Minister of Finance, the holders of
conventions or service contracts may benefit from the following guarantees:
- the right to collect and freely dispose of funds acquired or borrowed abroad, including revenues from the sale of their share of production, up to the amounts exceeding their tax
obligations and their local requirements for oil operations in the Republic of Senegal;
4. Schedule II, Article 43

In any other case not listed in Articles 41 and 42 above, the opening of accounts abroad by WAEMU residents, either in the name of a natural person or a legal entity, is subject to prior
authorization by the Minister of Finance.
The opening of domestic accounts in foreign currency in the name of residents is also subject to prior authorization by the Minister of Finance. The letter of authorization from the
Minister to the applicant stipulates, according to the reasons for the request, the transactions that may be credited to or debited from the foreign currency account in question. Such
accounts may in no case be credited with cash deposits of CFA Francs or debited in CFA Francs.
The authorizations referred to in this Article are granted by the Minister of Finance upon approval by the BCEAO.
The BCEAO shall report all exemptions granted to the WAMU Council of Ministers

FEATURED ARTICLE
THE RISE OF MAURITIUS

AS A FAMILY OFFICE DESTINATION
By Jimmy How Saw Keng, Client Director, Ocorian Mauritius
Kenny Curpen, Client Director, Ocorian Mauritius
n line with a diversification strategy underpinning (Single) Licence and an Overseas Family Office
wealth management as a new alley for growth for (Multiple) Licence. Given the current dynamics of
the Mauritius international financial centre (IFC) the the market, the potential for multi-family offices
Overseas Family Office licence was announced in with a sharing of administrative costs might be
the 2016-2017 Budget Speech. Adding to the higher than for single-family offices. As an incentive
country's foundation and trust structures the however both will benefit from a five year tax
licence matches the emergence of a growing holiday under the condition that they meet the
ultra-high-net-worth segment (net worth of at least substance requirements of the Financial Services
USD 30 million) both locally and in the wider Commission. Additionally, each family's
region. asset/estate entrusted to a single or multi-family
office should be at least USD five million. Other
Of late Mauritius has attracted a number of requirements apply namely in terms of the
ultra-high net worth individuals (UHNWIs) mainly minimum stated unimpaired capital.
from France and South Africa through investments
in dedicated up-market real estate associated with Family offices provide a broad set of services
residence permits. The beneficial owners of the 20 The classic vehicles to establish a family office are
000 or so global business companies active in the a trust foundation or a limited liability company.
jurisdiction also constitute a potential pool of highly Generally the services provided by a family office
affluent individuals. are quite broad and fall within the following:
trusteeship services, wealth and estate/succession
However, Mauritius has a keen eye on the African planning, portfolio management/investment
market. The number of multi-millionaires on the services, fund management and advisory
continent is growing at a faster pace than performance monitoring, tax optimisation and
anywhere else in the world. Africa as a whole will structuring, legal services, asset protection,
see its UHNWI segment grow by 31% to reach philanthropy and charitable work coordination,
close to 2 600 individuals by 2023. Countries like family education and dedicated concierge services
Egypt Nigeria South Africa and Kenya are set to be (real estate management organisation of private
the largest wealth hubs on the continent. events yacht and aircraft management etc.).
Subsequent to the Budget announcement Typically, family offices are exclusively for family
amendments in 2016 to the Financial Services Act members and family related trusts foundations
2007 introduced both an Overseas Family Office charities and venture capital companies. As a
FEATURED ARTICLE
fast-growing wealth management segment around between the client and the service provider. With
the world they offer a more personalised service regular air connections with Africa set to expand
than wealth managers and private banks. further Mauritius scores well on the proximity factor
Single-family offices usually take the form of a too.
private company managing the investments of
ultra-wealthy individuals with net assets worth It will take some time for Mauritius to be
more than USD 100 million and their extended recognised as a family office destination to the
family. Multiple-family offices cater to families with same tune as the most established wealth
net worth between USD 30 million and USD 100 management jurisdictions of this world. However, if
million that do not have the economies of scale to its ambition is regional it will find in Africa ground
establish single-family offices. to grow.
Risk mitigation and confidentiality is paramount

to African UHNWIs
“The number of multi-
In spite of a growing number of affluent individuals, millionaires on the continent
Africa remains prone to geopolitical and currency is growing at a faster pace
risks whilst ease-of-doing-business and economic
freedom often lags behind the rest of the world. than anywhere else in the
For the continent's 'nouveaux riches' risk world.”
mitigation is top of mind especially due to the
family's assets often being located in their country Contributors’ Profiles
of residence. Together with the quest for safer Jimmy How Saw Keng is the Client
jurisdictions confidentiality comes as a bonus when Director at Client Director, Ocorian
choosing overseas family offices to manage the Mauritius, Jimmy has over eight years’
family's wealth. experience in the Corporate Services
sector. Since 2009 he has overseen
There is no single ideal jurisdiction to house a business development, client relationship
family office. Depending on the needs of UHNWIs a management, company formation, regulatory and
host of factors come into play including low compliance matters, and the management of ICT in
taxation, no exchange control and free flow of Mauritius.
capital, sound legal system, political stability, data
protection and confidentiality, qualified workforce Jimmy started his career in the civil and
and location and proximity. environmental engineering sector in the US. He
now has over seven years' experience in site due
Africa's hub for private wealth? diligence, identifying environmental liabilities for
Mauritius ticks the box on all of the above real estate holdings, site investigation, risk
attributes. In particular it satisfies the prospective assessment, design and construction
family office client on the two uppermost criteria of management.
risk mitigation and confidentiality. The Mauritius
Data Protection Act of 2017 aligns with Kenny Curpen, Private Client
international benchmarks. Our legal system a Director, Ocorian Mauritius. Kenny is
hybrid of English Common Law and French Code responsible for promoting and
Civil gives predictability to all from delivering Ocorian private wealth
English-speaking as well as French-speaking solutions, namely in terms of trusts,
Africa. There is also no lack of professionals in foundations and other structures.
Mauritius whether accountants, lawyers or
investment specialists. Prior to joining Ocorian, Kenny spent almost 10
years' as Senior Manager in the trust solutions
Location and proximity are practical considerations division of a global bank. His duties included
that may limit our field of traction relative to Africa assisting the division head in the day-to-day
the continent closest to us. Indeed, they bear their management of the division. In this capacity, he
weight in the decision process on the principle that was also involved in the setting up of many trust
family office services are highly personalised. As structures and companies in various jurisdictions.
such they involve frequent face-to-face meetings Kenny is bilingual in English and French.

SPECIAL FEATURE
WHY
AFRICA’S INDUSTRIALIZATION
WON’T LOOK LIKE CHINA’S
By Ndubuisi Ekekwe, Founder African Institution of Technology
hina designed and executed a policy that leading AI player.

shrank the industrialization process in a mere 25
years — something that many economies took at It is in these technological advancements that
least a century to do. That redesign has brought China can continue to dominate while Africa may
immense dislocation in global commerce and struggle. AI is expected to distort the equilibrium of
industry, enabling China to become one of the the global labour market, eliminating many factory
world’s leading economies. jobs. Most Western companies will use AI to do
most of the manufacturing jobs that they are
China’s success has led many African capitals to currently outsourcing to China. Indeed, AI will
pursue the country’s same industrialization trajec- create a massive shift in how products and
tory. Over the last few years, African leaders have services of the 21st century are developed, manu-
been pursuing policies designed to mimic the path factured, and distributed.
China took. Some of these policies include creating
special economic zones after China’s Shenzhen If the manufacturing jobs by global entities like Dell,
and positioning the manufacturing sector as a HP, and Siemens do not need to be outsourced,
fulcrum to attract investments and create new jobs. the expected opportunity Africa is banking on may
Despite these efforts, Africa has yet to advance in not materialize. African leaders have expected that
its industrialization at the same speed China did. as China rises further, its wage levels will create
disincentives for global manufacturers to continue
Put simply, the things that worked for China will sending work there. As that happens, they hope
not work for Africa. countries like Ethiopia, Rwanda, and Kenya can be
seen as reliable alternatives that provide affordable
China had already won sizable global manufactur- labour with enough infrastructures for basic manu-
ing, accounting for more than 32% of the world’s facturing. But with AI advancements decreasing
industrial production as of May 2019. It became outsourcing, the availability of cheap wage
the world’s manufacturing capital through a combi- becomes irrelevant. China understands that, and is
nation of factors, including optimal infrastructure investing heavily to win the race of advanced
and price-competitive local manufacturing talent. In manufacturing, tapping into the capabilities it
doing so, China created a well-differentiated acquired by making things for the world. If any
comparative advantage that made companies from outsourced manufacturing will remain, it is the
the U.S. and Europe — and later, other parts of the advanced manufacturing. Based on available
world — outsource manufacturing activities to reports, Africa is not preparing for that level yet, as
China. it continues to struggle with basic enablers like
electricity, challenges that many countries solved
For more than three dozen years, a virtuous circle many decades ago.
was created: The availability of demand from the
U.S. and Europe provided China the opportunity to Africa can find the paths to industrialization, but in
invest to meet its needs. And over time, China ways that do not mimic China’s. Here are some of
moved from basic manufacturing into advanced the paths for the continent; some are already in
manufacturing domains, where state-of-the-art progress and need to be deepened:
technologies are used to improve processes and
many lower-skill processes are automated. Conse- Encourage internal consumption and intra-trade
quently, China has improved its capabilities in Africa should build processes to improve internal
robotics and broad emerging technologies like consumption, rather than focusing on using cheap
virtual reality, augmented reality, and artificial labour as a comparative advantage for global
intelligence. Today China is recognized as a manufacturing. If Africa expands internal consump-
SPECIAL FEATURE
tion by trading more among member states, poorly functioning logistics markets may be a
decoupling from old colonial trade routes, it can greater barrier to trade than tariffs and nontariff
industrialize, as it has sizable markets to support barriers.” Africa needs more deep seaports, railway
the growth of companies. Today, the share of lines, airports, and other critical enablers of
intra-African exports as a percentage of total modern commerce in order to advance. It remains
African exports is about 17%, well below the 69% more expensive for an operating factory in Accra,
recorded for Europe and 59% for Asia. Improving Ghana, to import coffee from Rwanda than from a
intra-African commerce will advance the continent. Paris-based company, for instance. And most
exports outside Africa are unprocessed raw materi-
Push forward the Free Trade Agreement als that, because of supply chains and the dispa-
The African Continental Free Trade Agreement, rate natures of the markets, have not stimulated
which entered its operational phase on July 7, will local processing. Investment in infrastructures will
remove some inherent barriers for intra-continental close the gaps.
trade that have caused most African countries to
favour trade with European countries and other Invest in education
global counterparts, rather than with African Africa also needs to invest in education to compete
nations. The agreement has been designed to and advance its citizens so that it can boost
make goods produced in Africa move within the internal consumption. The continent must make
continent at negligible tariffs. The expectation is primary and secondary education compulsory —
that manufacturers will be incentivized to invest in and free — while boosting quality by committing
Africa in order to have access to the integrated more resources to education. Unless Africa can
market. If it works as planned, the trade agreement educate its citizens to compete with the best in the
will be a catalyst to African industrialization. world, it will struggle to rise.
Create a single African currency As robotics and AI advance, most countries will
The planned currency got a boost when a regional keep their production processes at home, eliminat-
economy, the Economic Community of West ing the need for cheaper labour abroad. In this
African States, announced plans to launch the ECO redesign, Africa’s competitor is not China; robots
as a regional currency in 2020. The expectation is and AI are the real competitors. Africa can no
that once regional economies have monetary union longer depend on global manufacturing to become
convergence, a continental-level monetary union industrialized, nor can it simply mimic China’s
will be formed. A single currency will reduce policies. But if Africa educates its citizens,
barriers in trade by eliminating multiple exchanges, integrates effectively on trade and currency, and
wherein currencies have to be converted to one of improves intra-African trade, its industries can
the leading global currencies, like the U.S. dollar, compete at least to serve its local markets. Where
euro, or British pound sterling, before trading in that happens, Africa can attain industrialization
Africa. This drastic reduction on trade frictions will faster by scaling indigenous innovations and
boost industrialization. utilizing AI as enablers.
There are risks to these structural redesigns, Contributor’s Profile

however, which must be managed. A union arising Ndubuisi Ekekwe is a founder of the non-profit
out of the single currency will require a suprana- African Institution of Technology and Chairman of
tional bank to coordinate monetary policies, Fasmicro Group. He invented and patented a
depriving member countries of individual flexibility robotic system used in minimal invasive medical
on areas of monetary policies. The implication is robots. The United States Government acquired
that some bigger economies will have undue assignee rights to the technology in 2017. Dr
influence on the performance of the union. Without Ekekwe holds two doctoral and four master’s
careful management, the smaller economies degrees including PhD in electrical and computer
affected could experience welfare losses, making engineering from the Johns Hopkins University,
them worse off than before the integration. USA. He earned B.Eng electrical and electronics
engineering from Federal University of Technology
Improve infrastructure Owerri where he graduated as his class best
In its 2019 African Economic Outlook, the African graduating student.
Development Bank wrote that “trade costs due to

FEATURED ARTICLE
THE RULE OF LAW’S

ROLE IN ATTRACTING FOREIGN INVESTMENT
By Andrew Skipper, Partner and Head of Africa, Hogan Lovells South Africa
he strength of the Rule of Law in a country ranks Democratic Republic of the Congo, Cambodia, and
among the top three considerations when Venezuela. These top performing countries are
multinationals make decisions about where to locate generally prosperous and peaceful, in stark contrast
foreign direct investment – above considerations such to the bottom performers.
as the cost of doing business and access to national
and regional markets. The Business for the Rule of Law Framework from the
UN Global Compact seeks to engage businesses to
In its simplest form, the Rule of Law means that "no support the building and strengthening of legal
one is above the law". It is the foundation for the frameworks and accountable institutions. It
development of peaceful, equitable and prosperous acknowledges that all stakeholders, including
societies. government and business, must recognize that there
is a compelling business case for respecting and
For the Rule of Law to be effective, there must be: supporting the rule of law.
Equality under the law; transparency of law; an
independent judiciary; and access to legal remedy1. Rule of Law 2030 builds on the empirical research
presented in Risk and Return and takes on the
Where investors experienced Rule of Law challenges challenge set out in the Sustainable Development
– particularly political instability, arbitrary or Goals (SDGs) and UN Global Compact in the
discriminatory treatment and intellectual property Business for Rule of Law Framework by forming
violations – it also revealed that they are liable to strategic, sustainable partnerships with business and
reduce or even withdraw investment. government to strengthen the Rule of Law.
These are some of the findings of "Risk and Return: The Framework quotes the Risk and Return in
Foreign Direct Investment and the Rule of Law", support of its conclusion that: "For businesses, an
based on a survey of over 300 senior decision makers operating environment which is governed by the rule
at Forbes 2000 companies with global annual of law, provides the basis for commercial certainty
revenues of at least US$1 billion. Hogan Lovells and creates the foundation for long term investment
alongside the Bingham Centre for the Rule of Law and growth, and sustainable development for all".
and the Investment Treaty Forum at BICIL, the
Economist Intelligence Unit and the British Institute of Contributor’s Profile
International Comparative Law published Risk and Andrew Skipper leads Hogan Lovells' Africa
Return in 2015. practice, overseeing one of the most dynamic and
entrepreneurial groups within the firm. With his roots
The foundational values of South Africa’s in commercial law, Andrew has and continues to act
constitutional democracy include human dignity, for a wide range of businesses, from sports to
equality, freedom, transparency and accountability, consumer, agribusiness, and pharmaceuticals. Most
and the rule of law. recently, this has involved him advising on
complicated and sophisticated contracts across
However, the latest Rule of Law Index, released by various countries in Africa, in addition to assisting
The World Justice Project (WJP), which measures rule multinational corporates all over the world.
of law adherence, shows that over the last year South
Africa dropped three positions for overall rule of law As a partner in the Corporate Commercial practice,
performance to 44 out of 126 countries. Andrew is renowned for his work and considered by
clients as a 'star...very calming influence...has the
The new WJP Rule of Law Index scores show that ability to crack through difficult negotiations' in the
more countries declined than improved in overall rule Legal 500 2013. Clients often comment on how much
of law performance for the second year in a row, they enjoy working with him, not only because of his
continuing a negative slide toward weaker rule of law excellent legal skills covering joint venture
around the world. agreements, outsourcing, and supply and distribution
arrangements, but also because of his
The top three overall performers were Denmark, problem-solving approach and down-to-earth
Norway, and Finland; the bottom three were the manner.
1 We use this formulation, first developed by LexisNexis, as our working definition.
FEATURED ARTICLE
FUNDING MODEL FOR THE

DEVELOPMENT OF MINERAL
RESOURCES IN AFRICA
By Mame Ngone Sow, Senior Associate, GENI & KEBE, Senegal
ntroduction  The price to pay for this kind of financing is a

Africa is rich in mineral resources and its existence limit to the ability of the company to maintain a
represents real potential and significant financing certain level of control.
needs.  The existence of potential conflicts as having to
work with other partners can create
The mining sector continues to attract many disagreements and tensions when stakeholders
investors even if it turns out to be a risky sector. do not share the same management methods.
Faced with significant financial needs and the Debts or bank loans: The classic bank loan is usually
narrowness of the banking and financial market on accompanied by the taking of collateral (s) which
the African continent, holders of mining projects limits the risks for the lender (s) in case of difficulties
tend to resort to innovative financing mechanisms, of repayment.
given sometimes, limitations of the traditional
methods. Syndicated loan: It gathers a pool of banks which
decide to provide financing to a borrower where:
Different financing options are possible for mining  The funds to be mobilized are considerable
projects and are often linked to the different phases  Banks are subject to ceilings related to the
of the mining project, namely the exploration, financial capacity of the borrower
development and production phases.  They are often reluctant to take, alone, risks for
which they do not always master the specifics
Traditional financing mechanisms unless they have a real expertise in the sector
Traditional mechanisms include equity financing and through the presence of experts in gold and
debts or bank loans, which are two common other metals.
financing methods that can be combined.
Some advantages of the syndicated loan include:
Companies do generally have a choice between  The borrower retains some control and
seeking debt or equity financing. The choice, most autonomy as to how it is managed
often, depends on the most easily accessible source  Planning is easier and the amount of capital and
of financing, its cash flow and the importance of its interest to be repaid each month is known in
ability to maintain a certain level of control. advance. This facilitates budgeting and financial
planning.
Equity financing: The company uses private
investors or investment companies to find the equity Debt financing has its limits and disadvantages
it needs for its activities. which can range from:
 High costs
The advantages of such a method include:  Qualification requirements, the need to have a
 The company is safe from the high cost of credit good credit rating to access funding.
when rates are high  Need for financial discipline to make repayments
 It is not required to make a monthly payment to on time.
repay a loan, which can be advantageous, As a result of the narrowness of the banking and
especially when the company does not initially financial market in Africa, holders of mining projects
generate a profit. tend to resort to alternative financing mechanisms.
 No payment or interest charges, unlike in debt
financing. Alternative financing mechanisms
 Beneficial when the company wants to maintain Alternative financing mechanisms may include:
a certain autonomy in its management.  Financing in the form of IPO or bond issue
 Financing via investment funds or sovereign
Disadvantages include: wealth funds

FEATURED ARTICLE
 Convertible bonds Are these royalty payments to the foreign investment

 Royalties fund authorized under Articles 4 and 7 of Regulation
 Streaming No. 09/2010 / CM WAEMU on the external financial
relations of Member States of the WAEMU?
We’ll put the stress on Streaming and Royalties as
alternative financing mechanisms as they have If they are, are they subject to the authorization of
caught up our attention in recent years. the Minister in charge of finance (MoF) and the
BCEAO?
Streaming: It is often used during the development
phase. Answers from the Ministry of Finance
The royalty payments to the foreign investment fund
In return for a financing advance made to the were authorized payments under Articles 4 and 7 of
company, the investor is granted the right to said Regulation.
purchase a portion of the future production of the
mine, up to 20% of the production. They were granted in return for the repayment of a
loan repayment authorized under Article 7.
Royalty Financing: The mechanism works as follows:
 Funds are allocated to the Mining Company for The transfer abroad of sums required for the
a percentage of the future gross revenues that payment of royalties by a resident is not subject to
will be generated on the mining project; the prior authorization of the Minister in charge of
 Applies on 100% of the production. Finance (MoF) in accordance with the provisions of
 Has no limit in time or maximum production; Article 7 of this Regulation.
Such a financing mechanism can be used earlier in The representatives of the MoF carefully reminded
the development phase of the project and is often some prerequisites in the following terms:
combined with other means of financing.  The repayment of a loan contracted abroad by a
resident can only be realized if the borrowed
It presents appreciable advantages that include: money is made available to the borrower in the
 For the Company, there is no payment to be country in accordance with the provisions of
made until the project is in production. Article 11 (Chapter II, Annex II to said
 No risk of default other than non-payment of Regulation).
royalties;  Finally, they also pointed out that the repayment
 For the investor, royalties can be quite of a loan granted by a non-resident cannot be
substantial in the long run if the resources are directly realized on the export revenues before
large and can be increased. However, the future their actual repatriation to the country of origin
nature of cash inflows can make it difficult to of the resident economic operator.
obtain an attractive rate of return on this
funding. This mechanism may be advantageous when the
repayment of a non-resident loan is based on
As mentioned earlier, royalties as an alternative royalties to be calculated on the gross revenues
financing mechanism have caught up our attention from the sale of goods made locally.
in recent years.
It will be less advantageous, more expensive if the
Illustration repayment of the loan was to be made on export
A mining company incorporated under Senegalese earnings, in which case they have to be repatriated
law resorted to royalty financing to obtain a to Senegal (additional exchange costs ...) before
long-term loan of a maximum of 100 million US they can be used to repay the loan through royalties.
dollars to enable it to proceed to the construction
and the development of its mine in Senegal. Conclusion
In return, the Foreign Investment Fund was to earn Royalty financing entails some benefits, at least
interest on the principal amount of the Loan as well compared to debt and equity financings, for
as royalties, which were to be calculated based on borrowers needing financing without being obliged
the basis of the gross proceeds from the sale of to submit significant collaterals, diluting its equity
gold. These royalties were to represent 1.1% of interests, compromising control over ownership.
these revenues. It’s a funding model that may be applied to other
sectors, it’s not specific to the mining sector.
Two main concerns were raised at the legal level:
SPECIAL FEATURE
AFRICA’S CITIES ARE ABOUT TO

BOOM OR EXPLODE
By Judd Deveron, Director, Center for Strategic and International Studies
Todd Moss, Executive Director, Energy for Growth Hub
frica is rural. Or that’s what senior Western communicable and non-communicable diseases.
officials envision when they talk about the continent. AIDS prevalence is generally higher for urban
America’s top diplomat for the region, Tibor Nagy, populations than rural peers, and obesity is rising.
recently said that Africa is “by and large an
agricultural society.” He isn’t alone: Germany’s Africa’s path to joining the global economy rests on
recent Marshall Plan with Africa insists that “rural the success or failure of its cities, not on its rural
areas will determine Africa’s future.” communities. Despite breathless press – such as a
New York Times article on efforts to “make farming
This is wrong. Dangerously wrong sexy” - agriculture provides poor employment
Africa is increasingly urbanized, and its future will be prospects, especially for the young and educated.
shaped not in sleepy remote spaces but in the Similarly, a wave of new donor efforts to electrify
dense vibrant clusters of Lagos, Addis Ababa and Africa are mostly focused on delivering small solar
Kinshasa. Big cities are becoming the engine of the home systems in rural areas. These can provide a
continent, with huge implications for future energy few lights for poor remote households, but they are
needs, security, governance and public services – inadequate for the needs of city lifestyles and
as well as rising risks if urban growth is poorly useless for industry and commerce where jobs are
managed. created. Given all this, it’s shocking that Western
efforts to aid the continent continue to be focused
According to the World Bank, urbanization is the on an outdated rural paradigm; they must reorient
single most important transformation the African toward the cities.
continent will undergo this century. Sub-Saharan
Africa is already 40 percent urban, while tens of According to the United States Agency for
millions of people are flooding into cities every year. International Development’s foreign aid dashboard,
By 2050, it’s estimated that the continent will host at Washington spends more than twice as much on
least nine “megacities” of more than 10 million rural areas than urban areas in sub-Saharan Africa.
people and more than two dozen in excess of 5 Out of the 16 compacts made by the Millennium
million, about the size of metropolitan Washington. Challenge Corporation that don’t directly address
Many are far off the current radar: Antananarivo in energy, only Zambia’s program is focused on urban
Madagascar; Guinea’s capital of Conakry; and challenges rather than rural poverty, agriculture,
N'Djamena, Chad. health services and the like. Among individual
donors, only the U.K.’s Department for International
Cities, of course, have for millennia been the locus Development is committing significant resources to
of economic activity, wealth creation and especially programme and research targeted at municipalities.
jobs. By one detailed measure, Africa’s consumer
class is already more than 300 million and heavily Meanwhile, U.S. security forces are fixated on
concentrated in a handful of large metropolitan ungoverned spaces in the Sahel or Somalia, while
areas such as Cairo, Johannesburg, Kinshasa, some of the most devastating terrorist attacks have
Lagos and Luanda. The African Development Bank occurred in cities, including in Bamako in 2017 and
estimates that up to 12 million young Africans finish Nairobi in 2013. This is only going to get worse as
school and join the job market each year. The most extremist groups base operations in urban areas to
attractive, well-paid and high-productivity jobs - in tap into financial networks, get access to airports
finance, information technology, creative arts, data and other ways to transit international borders and
processing and even manufacturing – will nearly all waterways, and exploit a rich set of soft targets
be in densely populated clusters. such as hotels, shopping centers and diplomatic
facilities.
But, of course, urbanization has serious downsides.
On average, 60 percent of Africa’s city dwellers live How can the U.S. and its allies change their
in slums, and they suffer disproportionately from approaches to face the challenge Africa’s

SPECIAL FEATURE
burgeoning urban areas will pose? Here are four increase counterterrorism capacity, only Kenya has
good ways to start: a policing component. Far more funding should be
redirected from the military to police, as well as to
First, U.S. policy and investments should be shifted enhanced police participation in U.N. missions.
heavily toward major urban clusters, rather than to There's also utility in producing more city-level
countries as a whole. USAID could program more analysis of security trends (one of us, Judd,
funds to tackle urban development, while the previously worked in the intelligence community,
Millennium Challenge’s city program in Zambia although his opinions here are strictly his own).
could be replicated with subnational compacts
across the continent. The new U.S. Development American and other Western aid for African
Finance Corporation, launched by the Trump economic growth and security isn’t simply a
administration, will have even more tools at its giveaway to poor nations – it can create new
disposal to support investments in urban markets for companies and be a vital component of
infrastructure, technology and services. It could national security in the age of global terrorism. Yet
even organize a Smart City initiative to accelerate U.S. policies are badly misaligned with Africa’s
partnerships between African cities and U.S. future. Washington must shed outdated notions that
technology companies on security, traffic, water and Africa is composed of farming villages and empty
power services, and more. deserts, and follow the data showing the continent
is becoming younger, more dynamic, more
Second, the U.S. could boost diplomatic energy-intensive, and undeniably urban.
engagement with municipal leaders. U.S. embassies
can develop closer ties to the region’s governors Contributors’ Profiles
and mayors, while senior U.S. policymakers could Judd Devermont is the director of the Africa
welcome high-performing municipal leaders to program at the Center for Strategic and International
Washington and visit African city halls during foreign Studies and an adviser to African investment
trips. In February 2019, the Mayor of Paris hosted platforms. Prior to joining CSIS, he served as the
her counterparts from Cape Town and Durban, national intelligence officer for Africa from 2015 to
South Africa, and other international cities led by 2018. In this position, he led the U.S. intelligence
women to discuss climate-change challenges. community’s analytic efforts on sub-Saharan African
issues and served as the DNI’s personal
Third, Power Africa, a multi-agency U.S. representative at interagency policy meetings. From
government electrification initiative launched in 2013 to 2015, he was the Central Intelligence
2013, needs to make large-scale power for big cities Agency’s senior political analyst on sub-Saharan
a priority. All successful urban areas are Africa. Devermont also served as the National
energy-intensive, while the cost and reliability of Security Council director for Somalia, Nigeria, the
energy is a top constraint to job creation. Much of Sahel, and the African Union from 2011 to 2013. He
Power Africa’s attention has been on “last mile” has a master’s degree in African studies from Yale
rural connections. Indeed, it’s important to get University and a bachelor’s degree in history from
electricity to communities that have never had it, the University of California, Los Angeles.
and energy-intensive agriculture will be needed to
boost food production to feed all the new city Todd Moss is the founder and executive director of
dwellers. But in too many places, rural electrification the Energy for Growth Hub. He is also a visiting
has come at the expense of tackling high costs and fellow at the Center for Global Development, a
low reliability for industrial and commercial energy non-resident scholar at the Center for Energy
consumers – they are the anchors for any modern Studies at Rice University’s Baker Institute, and a
power system and will be the lifeblood of the rising fellow at the Colorado School of Mines’ Payne
megacities. Institute. Previously, Todd served as U.S. Deputy
Assistant Secretary of State for African Affairs, as
Finally, the U.S. has to increase the money and the chief operating officer of CGD, and has worked
training it provides to African police forces, not just at the London School of Economics, Georgetown
militaries. According to the Security Assistance University, the World Bank, and the EIU. He is a
Monitor, police received less than 2% percent of widely recognized expert on energy, development
U.S. funding for sub-Saharan security services. Of finance, and foreign policy who has testified to the
the five sub-Saharan African countries in the U.S. Congress ten times. He holds a PhD and MSc
Security Governance Initiative, a joint endeavor from the University of London’s SOAS and a BA
launched by the Barack Obama administration to from Tufts University.
SPECIAL FEATURE
THE CARBON TAX ACT MAKES

SOUTH AFRICA’S POSITION CLEAR
By Athi Jara, Director, Gwina Attorneys South Africa
n 22 May 2019, the President signed into law is a developing country; and (ii) the fact that
the Carbon Tax Act 15 of 2019, which came into international treaties, such as the Paris Agreement
effect on 1 June 2019. The Act aims to impose a (which South Africa ratified), recognise the principle
carbon tax on emitters of greenhouse gases. The of common but differentiated responsibilities
Act is illustrative of South Africa’s view on global between developed and developing countries. This
issues such as climate change and global warming. principle essentially assigns different
In particular, the preamble of the Act recognises responsibilities (including financial responsibilities)
that global climate change is “scientifically for combatting climate change between developing
confirmed” and that greenhouse gas emissions in and developed countries. In doing so, the Paris
the atmosphere are due to “anthropogenic” or Agreement and other international environmental
human activities. law treaties recognise the need for developing
countries to develop their economies and address
In the spirit of this recognition, the Act states that it important developmental issues that may not
has become necessary to contribute to global necessarily be a priority in the more developed
efforts to stabilise greenhouse gas concentrations countries. South Africa is a developing country that
in the atmosphere. The preamble of the Act also is experiencing unemployment, recent slow
recognises the polluter pays principle – i.e. that the economic growth and the need to address poverty
costs of remedying pollution, environmental alleviation. It is through the lens of these factors
degradation and consequent adverse health effects and differences that the provisions of the Carbon
must be paid for by those responsible for harming Tax Act must be considered.
the environment.
The Act provides for the levying and collection of
Interestingly, the Carbon Tax Act does not the carbon tax for the benefit of the National
distinguish the role played by mostly developed Revenue Fund. To this extent, companies or
countries in contributing to global warming and entities who conduct activities which result in
climate change from the lesser role that has been greenhouse gas emissions in South Africa are
played by developing countries. This is particularly liable to pay the carbon tax.
relevant in light of the fact that (i) South Africa itself

SPECIAL FEATURE
The carbon tax is levied in respect of the sum of rates of unemployment and the need to address
greenhouse gas emissions of a company in a tax poverty levels in the country. South Africa, as a
period expressed as the carbon dioxide equivalent developing country, should always prioritise
of those greenhouse gas emissions resulting from development. Although this development should
fuel combustion and industrial processes, and not be at the expense of the environment,
fugitive emissions. particularly in light of the environmental protection
in the Bill of Rights (in section 24 of our
The rate of the carbon tax on greenhouse gas Constitution). However, a more development-
emissions is imposed at an amount of R120 per oriented approach to achieving sustainable
carbon dioxide equivalent on the greenhouse gas development should be adopted.
emissions of the company involved. This rate of tax
is to be increased by CPI plus 2% per year until 31 Whether the implementation of the Carbon Tax Act
December 2022. After 31 December 2022, the rate will achieve a reduction in greenhouse gas
of tax will increase by CPI. emissions or instead, present a further obstacle to
our development and economic growth as a
The Act provides for the calculation of the amount country, is yet to be seen.
of tax payable. This calculation takes into account
the total fuel combustion related greenhouse gas “The Act provides for the levying
emissions of the company, the petrol and diesel and collection of the carbon tax for
related greenhouse gas emissions of the company,
the total industrial process related greenhouse gas
the benefit of the National Revenue
emissions of the company and the total fugitive Fund. To this extent, companies or
greenhouse gas emissions of the entity involved. entities who conduct activities
which result in greenhouse gas
The Act also provides for a special carbon tax emissions in South Africa are liable
calculation for those entities who generate
electricity from fossil fuels. In this regard, the
to pay the carbon tax.”
renewable energy premium and the environmental
Contributor’s Profile
levy imposed by the Customs and Excise Act 91 of
Athi Jara is a Director at Gwina
1964 is deducted from the carbon tax payable.
Attorneys and heads the Mining and
Environmental law focus area. Athi
Certain “allowances” are made in respect of,
is an expert on mining and
amongst others, fossil fuel combustion, industrial
environmental law. She was part of
process emissions and fugitive emissions. The Act
the team of experts that advised the
also provides for the use of carbon offsets which
Department of Energy and National Treasury on
will reduce the amount of carbon tax payable by
how to roll out and implement South Africa’s
the taxpayer.
Renewable Energy Independent Power Producers
Programme. She concentrates on mining,
In terms of the Carbon Tax Act, the current tax
environmental and climate change, occupational
period begins on 1 June 2019 and ends on 31
health and safety, labour, energy and public
December 2019, and the following periods will
procurement law.
commence on 1 January of each year and end on
31 December of that year. Carbon tax is payable
In 2019, at 32, she was featured as one of the Mail
for every tax period.
and Guardian’s 200 young thinkers to watch. Athi
did her articles at Eversheds (Routledge Modise
While South Africa must be applauded for the
Inc.) from 2009 to 2011. In 2011, she moved to
strides that the country has taken in order to
Bowman Gilfillan as an associate.
contribute to addressing the global issue of climate
change – such as the tabling of the Climate
From 2014 to 2017, she was a senior associate at
Change Bill in June 2018 and now the signing into
Edward Nathan Sonnenberg Inc. She then moved
law of the Carbon Tax Act – such strides should
to LNP Attorneys Inc., where she was a Director
always be mindful of the everyday realities and
and head of Mining and Environmental Law
challenges facing the country. These challenges
Department.
include recent slow economic growth, growing
SPECIAL FEATURE
A HAWK’S VIEW ON COMMENCEMENT

AND TERMINATION OF BUSINESS RESCUE PROCEEDINGS
WILL COMPANIES BE RESCUED

UNDER THE COMPANIES ACT OF 2008, ACT NO 71?
By Bongani Memani, LNP Attorneys Inc. South Africa
usiness rescue proceedings may be business judgment assumes paramount

commenced in one of two ways, namely: by a importance to ensure the sustainability of a
board resolution1 or by an application to court by business. Relying on information provided to them
any affected person to place a company under by various specialists in the employ of the
business rescue.2 An affected person includes: a business, the directors would then make the
shareholder, a creditor and any registered trade decision to commence business rescue
union representing employees or each proceedings. However, the irony of conferring
non-unionised employee with their representative.3 utmost power to resuscitate a company, on the
people under whose management the company
A board resolution commencement, as provided ended up in financial distress, the power to
for by section 129 of the Act.4 Before the business resuscitate is remarkable. The granting of that
rescue proceedings commence, there must be a power is also negative to its success because
board resolution by the company’s directors.5 For directors are inclined to want the company to trade
that resolution to be passed, the board must be out of difficulties through liquidations. Meaning that
satisfied on reasonable grounds that the company they can have a reluctance to seek help and
is financially distressed and that it appears that commence business rescue proceedings because
through the application of the business rescue of the fact that they know that an outsider will be
mechanism, the company may potentially be brought forward to take over all their managerial
resuscitated.6 The existence of reasonable grounds functions.7
to support a conclusion that a company is
financially distressed depends largely on whether it If a company fails to comply with all of the above
is reasonable that the company would be able to mentioned requirements, the resolution of a
pay its debts in the ensuing six months. business rescue becomes a nullity and a company
may not file another resolution unless a period of
Given the amount of power that section 129 three years has elapsed.8 The three year
confers on directors, the soundness of their requirement is rather a bit harsh, onerous and
1 Dennis Davis Farouk Cassim, Walter D Geach, at al Companies and other Business Structures in South Africa 2ed (2011) at 228
2 Section 131
3 Section 128 (1) (f)
4 Section 129 of the 2008 Companies Act gives us the procedure to begin business rescue proceedings by a company resolution
5 Section 129 (1) (a)
6 Section 129 (1) (a) and (b)
7 Op cit (note7) at 13
8 Section 129 (5) (a) and (b)

SPECIAL FEATURE
perhaps unreasonable for the reason that it is creditors, the intention for them applying for a
unlikely that a company, especially in a developing business rescue will necessarily be based on short
country in the mold of South Africa, would survive term reasons, meaning that their interests always
3 years in financial distress while waiting to only lie on achieving the secondary goal as
commence business rescue proceedings. Section opposed to the primary goal of a business rescue
129 (7) gives a disadvantage to the financially as per s128 (b) (iii),15 to:
distressed company as it states that if the board
has reasonable grounds that the company would “facilitate the rehabilitation of a company that is
be financially distressed but does not adopt a financially distressed by providing for the
resolution it must deliver written notices to the development and implementation, if approved, of a
affected persons setting out the financially plan to rescue the company by restructuring its
distressed test in s128(1)(f).9 affairs, business, property debt and other liabilities
and equity in a manner that results in a better
That disadvantage is from the fact that even return for the company’s creditors or shareholders
though the company is not yet placed under than would result from the immediate liquidation of
business rescue, the moment the affected people the company.”16
get the notices they would cancel all the overdrafts
and credit facilities, the company has and creditors The above seems to suggest that once off
would only insist on cash transactions.10 A smaller creditors would only have interest in the immediate
proportion of entities would want to do business time the company manages to pay their debt, what
with that company feared to be under financial happens in the long run of the company would not
distress. This suggests that the business rescue concern those once off creditors as their main
procedure is accompanied by a potential loss of interests would have been satisfied since their debt
business. Moreover, lost business opportunity in would have been paid up. That being said, those
South African companies could inflict a serious creditors as affected persons would always misuse
blow on the company as our economy has not that section of putting the company under a
reached that point where companies get many business rescue in favour of their interests only as
business deals without competing for them. opposed to the main aim of a business rescue of
Relating to the other procedure, i.e. the one by saving the company as a going concern. Cases like
which commencement is made by the court as per Oakdene Square Properties17 show in practice
s131 of the Act.11 The court procedure starts by an how a creditors' aim may not be to rehabilitate the
affected person applying to court to place a company but to get their debts paid back
company under business rescue proceedings.12 immediately.18 I submit that the Act should have
Similar to s129, such an application must be filed clarified the difference between once off creditors
with the Companies and Intellectual Property and long term creditors and only long term
Commission (the ‘‘Commission’’) the company and creditors who have an interest of working with the
all affected persons.13 financially distressed company in the future should
be the only ones regarded as affected persons
However, the court procedure raises concerns: one under the Act. The courts should give principal
of the main purposes of a business rescue is to emphasis to the first goal under s128 (b) (iii) which
make sure that the continuity of the business is aims at maximising the likelihood of the company
preserved for many years.14 When it comes to continuing in existence on a solvent basis.
creditors which are also included as affected
persons and who are entitled to make an Moreover the court method under section 131 to
application for a business rescue for the best commence business rescue could also operate
interests of the business to continue as a going even if the company is already under liquidation
concern, the s131 procedure becomes very ironic. proceedings as it can suspend these liquidation
This is so because if it is the case of once-off proceedings,19 however a board resolution cannot
9 Section 127 (1)

10 Annelli Loubser The business rescue proceedings in the Companies Act of 2008:Concerns and Questions (part 1) TSAR 2010 (3) at 504
11 Section 131 of the 2008 Companies Act gives us the procedure to begin business rescue proceedings by a court order
12 Section 131 (1)
13 Section 131 (2)(a)(b)
14 Section 128 (1) (b) (iii)
15 The second goal of the business rescue as per s128 (b) (iii) states that …if it is not for the company to so continue in existence, results in a better return for the company’s creditors or
shareholders than would result from the immediate liquidation of the company.
16 Section 128 (1) (b) (iii)
17 Oakdene Square Properties (Pty) Ltd v Farm Bothasfontein (Kyalami) (Pty) Ltd 2012 (3) SA 273
18 Ibid para 19-48
19 Section 131(6)
SPECIAL FEATURE
suspend liquidation proceedings.20 It seems affect the business rescue by stating that, what if
unreasonable for a court to be able to suspend the company was a litigating one which is involved
liquidation procedures and a board resolution to be in numerous pending litigations, they would not
unable to do so when liquidation proceedings have just publicise their information since they must
already started because this provision indirectly adhere to the private and confidentiality principle.26
undermines the autonomy or freedom of directors With that a business rescue would not commence
needed to exercise their business judgment21 and since the information would not be readily available
as I interpret it, it could mean that the directors are to an affected person.
not allowed to make bona fide mistakes as their
decisions are irreversible. I also submit that it can Section 131 of the business rescue proceedings
only be expected that the court sets aside makes the task onerous to an affected person to
liquidation proceedings because they invariably challenge the resolution. Can all affected persons
derive from a court decision and, as such, a court have the expertise of interpreting the documents
can be able to review its own decision. which give evidence that the business rescue
would succeed or not? In other words, would the
The court in making a decision on whether to grant survival of the company be dependent on the one
an order commencing business rescue must creditor who is able to understand the concepts
consider the following: (i) whether the company is underlying business rescue? This concern was
financially distressed22; (ii) whether the company apparent in the Midnight Storm Investment27
has defaulted on its public regulation, contractual case, where one of the factors the court
or labour-related obligations; or (iii)‘whether any considered for the refusal of business rescue
obligations emanating from public regulations, proceedings to commence was because of the fact
contracts or labour-related matters have been that the creditor (the affected person in the case)
defaulted on by the company’.23 Section 131(4) on applying failed to obtain the evidence of the
(a)(ii)24 which talks about a business defaulting is operational costs of the company as he had less
quite vague and unclear because it produces information or intellectuality to understand the
floodgates of interpretations, meaning that a single internal affairs of the company.28
default may also suffice, rather than a series of
defaults. This renders insignificant the requirement In the court driven procedure, after it has been
of whether the company would be able to pay its determined that the company is financially
debts in the ensuing period of 6 months. The fact distressed, the court must make an order
that the company defaulted for a month does not appointing an interim business rescue practitioner
mean that it will continue failing to pay its debts in nominated by the affected person with prior
the upcoming periods. ratification from the majority of creditors and
someone who satisfies the requirements of section
When considering the fact of whether the company 138 which is going to be explained below.29
could be reasonably rescued in terms of a court However, giving power to affected persons to
order, the South African jurisprudence of the courts nominate a practitioner is again risky in this s 131
on the determination of it rather raises a higher (5) provision even though the Act gives guidelines
benchmark on the affected person, an example of who qualifies to be a practitioner.
could be recited in the Oakdene Square Properties
case, where the court required the affected person The nomination process in business rescue could
to produce information of the pending litigation be biased or fraudulent, for example an affected
actions where the company was involved in so as person could use that power to nominate to their
to calculate the financial implication for a business advantage by nominating someone that they
rescue to commence.25 Fidelis Manyuchi gave an secretly know will support their interests at all
example of how the difficulty of access to times regardless of the requirement that
asymmetric information by affected persons could practitioners must be independent. In addition to
20 Section 129 (6)

21 Section 76 (4) states that , ‘In respect of any particular matter arising in the exercise of the powers or the performance of the functions of director, a particular director of a company- (a)
will have satisfied the obligations of subsection (3) (b) and (c) if- (i)the director has taken reasonably diligent steps to become informed about the matter; (ii)………………
22 Section 131 (4)(a)(i)
23 Section 131 (4)(a)(ii)
24 Section 131 (4)(a)(ii) states that, court order to begin business rescue proceedings- (4) After considering an application in terms of subsection (1),the court may- (a) make an order
placing the company has failed to pay over any amount in terms of an obligation under or in terms of an obligation under or in terms of a public regulation, or contract, with respect to
employment-related matters or ……
25 Fidelis Manyuchi, ‘A Critique to rescuing failing businesses: A Legal Perspective (2014) Journal and Commercial Law & Practice (forthcoming) at 7
26 Supra (note 44) para 19-48
27 Southern Palace Investments 265 (Pty) Ltd v Midnight Storm Investments 368 Ltd 386 Ltd 2012 (20) SA 423 (WCC)
28 Ibid para 24
29 Section 131 (5)
SPECIAL FEATURE
that, it is obvious the affected person would When does a South African Business Rescue
dispute the independence of a practitioner if he or Process Really Begin and End?
she is acting to support his or her personal The start of a business rescue and its end must be
interests. I submit that it is viable to grant the duty determined so as to establish the time when the
of nominating the business rescue practitioner to claim by the creditors to the company under
the directors mainly because directors always have supervision is suspended. Starting with the board
an important duty to act in the best interests of the resolution procedure, the process commences by
company because of the fiduciary duties that the the board of the company filing the resolution with
directors owe to a company as per the Act.30 the Commission.31 If the company does not comply
with the requirements specified in s129 (3) and (4),
Analysing the two procedures in a nutshell, it is the company must file a further resolution after the
quite difficult to differentiate the board resolution elapse of 3 months after the first resolution was
from the court order. That is so because the board filed.32 When it comes to a court order in terms of
resolution is a cycle of reaching also to a court section 131, the proceedings commence when an
order as it could be challenged by an affected affected person applies to the court and ends
person of which it is taken back to the realms of when the court suspends the liquidation process in
the court to make a final decision upon it. The place for a company to be under supervision.33
South African business rescue proceedings are at
a risk of not rescuing any company in a financial Furthermore, the way the proceedings end is also
distress situation because it is quite difficult to take in the court’s realms of power because the first
away power from someone who really knows how way they could end it is by the court setting aside a
a company internally functions and give power to a resolution of the directors and placing the
stranger i.e. the practitioner who barely knows company under liquidation proceedings.34 How is it
anything about the company to decide what is viable for the judiciary to be the sole controller of
really the best thing for it. Another issue is that the financial matters when it is such a slow
provision that grants the court the power to remove organisation which makes a decision after many
the company under supervision and resort to documents have been filed and after many
liquidation proceedings , has a negative effect on arguments have been made for and against a
creditors getting a return owed to them, as the claim? Judicial processes are just onerous
company has to incur double expenses with the procedures, and with that, the corporate rescue
appointment of a liquidator and further the regime has a potential of getting delayed, resulting
previous appointment of a practitioner in business to an inevitable demise of the business.35 In
rescue. addition, during those procedures, what would be
the state of the financially distressed business in a
Much criticism could be leveled on differentiating developing country like South Africa with a slowly
the two methods of starting the business rescue growing economy, since courts have many
proceedings as it seems that the power of the procedures which tend to be costly, indirectly
court is a determinative factor and its limitation by meaning that business rescue proceedings
the board resolution is just a pretentious concept increase bankruptcy costs because of their long
as on both procedures, the court has the power to duration. Once more the South African business
set aside a resolution to place a company under rescue regime needs to be given a hawk’s view for
liquidation when there is no reasonable prospect of it to be successful.
rescuing it. Thus, there is very little support or
justification for having two separate business
rescue procedures if court intervention assumes
such a significant role in both.
30 Section 76(3)(a)(b) states that a director must perform his/her functions (a) in good faith and for a proper purpose (b)in the best interests of the company.
31 Section 132 (1) (a) (i)
32 Section 132(1) (a) (i) (ii)
33 Section 132 (a) (b) (c)
34 Section 132 (2) (i) (ii)
35 Frisby S In Search of a Rescue Regime: The Enterprise Act 2002 (2004) 67 Mod LR 247 at 248
FEATURED ARTICLE
INVESTING IN RWANDA: FINDING OPPORTUNITY IN

THE LAND OF A THOUSAND HILLS
By Jonathan Mazumdar, Strategic Advisor, Rwanda Development Board
Guy Baron, Chief Investment Officer, Rwanda Development Board
n 1994 few would have contemplated investing in external balances. Rwanda was one of only five
Rwanda. A quarter century onwards, much has countries in Sub-Saharan Africa rated by the IMF
changed. with a low risk of debt distress in 2018 (out of 35
total) and has steadily reduced dependence on
Last year, Rwanda was the fastest growing foreign aid by increasing domestic tax revenues to
economy in Africa, with GDP growth of 8.6%.1 But 16% of GDP.3 Inflation is low – 1.4% in 2018 – and
this was no surprise – the country has sustained well within the central bank medium-term inflation
7.5% growth for the last decade, driving a steady target of 5%, while over two-thirds of external debt
and rapid economic transformation built on the is concessional. As external validation, Rwanda
foundations of political stability, strong maintains steady and improving sovereign credit
macroeconomic fundamentals, and a conducive ratings: B+ from S&P and Fitch, and B2 from
investment climate. Rwanda now ranks 29th globally Moody’s.
in the World Bank Doing Business index – 2nd in
Africa and the only low-income country in the top Of course, an attractive investment climate requires
30 – and attracts foreign direct investment (FDI) efficient regulation and business-oriented policy,
inflows of 4% of GDP.2 and Rwanda delivers here as well. Starting a
business is easy; today online systems allow for
Change of this nature does not happen by chance; new business registration in under six hours.
it requires long-term vision and commitment. Setting up is streamlined; the One Stop Center at
Following the period of relief and reconstruction, the RDB consolidates key license and permit processes
Government of Rwanda initiated a series of under one roof, including visa application,
coordinated national development strategies, which environmental certification, notary services, and
articulated clear targets for economic and social intellectual property registration. Foreign investment
performance. This process continues today, with is welcome; there are no restrictions on foreign
the impending Vision 2050 setting out the ambition ownership or profit repatriation and US dollars are
to become a high-income country by 2050, building readily available. Furthermore, investors registered
on the National Strategy for Transformation (NST1) at RDB gain access to attractive incentives outlined
which details the current period through to 2024. in the Investment Code and a dedicated customer
Rwanda may be limited in land size but its care representative. Together these efforts and
aspirations stretch far beyond the horizon. reforms have propelled Rwanda’s rise in the World
Bank Doing Business rankings from a low of 150th
While public investment has underpinned economic in 2008 to 29th globally in 2019, ahead of countries
growth for many years, achieving such ambitious such as Japan, Belgium, and Israel, dispelling the
objectives will undoubtedly be driven by notion that developing countries can’t be
private-sector investment and growth. Recognizing competitively investor-friendly.
this early, in 2008 the government created the
Rwanda Development Board (RDB), the agency The focus on creating an attractive investment
tasked with accelerating economic development in environment and accelerating targeted investments
Rwanda by enabling private-sector growth. RDB is has produced results. The value of investments
the one stop shop for investors doing business in registered at RDB, a prospective measure of
the country, and home to business registration, investor commitments, has rocketed from $400M in
investment promotion, and sector development. 2010 to over $2B in 2018. But after all the analysis
of business climate, ultimately investors seek
Among RDB’s key mandates is to foster an opportunities for returns. Rwanda offers many such
attractive investment environment against the compelling investment opportunities based on two
backdrop of strong macroeconomic fundamentals – intersecting theses – an emerging business and
prudent fiscal policy, stable prices, and sustainable innovation hub for East Africa and focus on
1. World Bank, WDI.

2. World Bank Doing Business 2019.
3. IMF Country Report No. 19/211 & Regional economic outlook: Sub-Saharan Africa, 2019.
FEATURED ARTICLE
high-value goods and services. Bureau was established and in 2016 the country
inaugurated the Kigali Convention Center, a
As a relatively small, logistically constrained nation, world-class conference venue that forms an iconic
Rwanda offers a different value proposition than the part of the cityscape. Just three years later, Kigali is
giants of the continent like Nigeria and Ethiopia. now the 2nd most popular destination in Africa for
Strategic location in the heart of East Africa, the international business meetings and events, behind
fastest-growing region on the continent with five only Cape Town.4 Rwanda has quickly established
economies growing above 5%, provides access to itself as both a leisure and business tourism
a large regional market. Rwanda is uniquely destination, fuelling growth in accommodation and
situated to serve nearly 200M people across services and creating increasing demand for
neighbouring Democratic Republic of Congo, upstream investment opportunities in construction
Uganda, Burundi, and Tanzania, especially and building materials.
proximity sub-regions more easily reached from
Kigali than other national capitals. Manufacturing More broadly, services, which now contribute nearly
and export access are offered to even larger half of GDP, present clear investment opportunities
markets, under Rwanda’s inclusion in free trade and pathways for structural change. Modern ICT
areas, such as the East African Community (EAC) infrastructure and a young, increasingly educated
and the Common Market for Eastern and Southern workforce forms the basis for growth in technology
Africa (COMESA). Value-added light manufacturing, and professional services. Rwanda features 95%
such as high-tech electronics assembly, is just one 4G LTE coverage and ranks 1st in East Africa for
example – in October the very first “Made in network readiness.5 Over 70% of the population is
Rwanda” smartphone manufacturing plant opened under the age of 30 and nearly a third is fluent in
in the Kigali Special Economic Zone. English or French. In response, leading educational
institutions have established a presence in Rwanda,
Increasing flight connectivity, through the expansion including Carnegie Mellon University, African
of RwandAir and entry of international airlines, Leadership University, and the African Institute for
opens new opportunities to export directly to Mathematical Sciences. Together with corporate
developed markets in Europe, the Middle East, and clients these universities will anchor the planned
Asia. Beyond traditional exports such as tea and Kigali Innovation City, a pan-African technology and
coffee, which continue to grow and attract quality innovation hub.
premiums in international markets, Rwanda is
rapidly diversifying agriculture production into ICT companies are following already, with a number
high-value horticulture products including cut of high-profile examples. After launching in Nigeria,
flowers, fruits and vegetables, and items such as Andela, a software development outsourcing
nuts and chillies. The flagship Gabiro Agribusiness organization, has set up its African hub in Kigali to
Hub – a 15,600 hectare modern irrigated farm train and place software engineers. Startups also
planned to be launched in partnership with a global view Rwanda as an attractive proof of concept
agricultural technology firm – and new weekly destination to test business model innovations
commercial cargo flights to Europe put these before scaling to other markets. Adaptable
opportunities within immediate reach of investors. policymaking attracted Zipline, a commercial drone
delivery company for urgent medicine, to launch in
Strong governance, focused positioning, and Rwanda; the company now boasts a ‘unicorn’
complementary public investment also create the valuation and is expanding to new geographies.
potential for sustainable, premium services. In the Within its rapidly growing innovation ecosystem,
early 2000s, Rwanda committed to conservation locally grown startups are also emerging to tackle a
and invested in the recovery of Volcanoes National range of challenges across sectors such as
Park, home to the endangered mountain gorillas. agriculture, energy, transportation, healthcare and
Few would have bet on tourism at that time. Yet others.
today the gorilla population is thriving and tourism
is the country’s largest earner of foreign exchange, While Rwanda has already travelled far, the journey
generating over $370M of export revenue in 2018. is just beginning. The country is on the move and
The country has set an ambitious goal of doubling options for private investment to contribute to the
tourism-related revenues by 2024. economic transformation ahead abound. The land
of a thousand hills is increasingly a land of a
Building from that base, the Rwanda Convention thousand opportunities.
4. International Congress and Convention Association, 2019.
5. WEF Network Readiness Report, 2016.

Intoafrica October 2019

Uploaded by

Copyright:

Available Formats

Intoafrica October 2019

Uploaded by

Document Information

Original Description:

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Intoafrica October 2019

Uploaded by

Copyright:

Available Formats

OCTOBER 2019

THE OUTLOOK FOR INVESTMENT THE RULE OF LAW’S ROLE IN

WHERE TO INVEST IN AFRICA 2020: AFRICA’S CITIES ARE ABOUT TO

AFRICAN INSTITUTIONAL INVESTORS CHARTING AFRICA’S BUSINESS TER

THE OUTLOOK FOR INVESTMENT IN AFRICA

RISKS AND REWARDS

Figure 1: Africa Risk-Reward Index

WHERE TO INVEST IN AFRICA 2020:

Charting Africa’s Business Terrain | 7

AFRICAN INSTITUTIONAL INVESTORS

CHARTING AFRICA’S BUSINESS TERRAIN

widespread internal and international

Why Invest in Botswana

Below are some of the summary points on

Charting Africa’s Business Terrain | 11

DOING BUSINESS IN ETHIOPIA

ntroduction commericial Register. Commercial registration is a

sectors into four broad categories of (i) sectors Exiting a Business

DOING BUSINESS PERSPECTIVE ON GHANA AS

hana’s Economy at a glance

recorded a 22.3% improvement in profit-after-tax

In addition to withholding tax on employees’

Charting Africa’s Business Terrain | 15

ntroduction aimed at improving the Country’s balance of trade.

Charting Africa’s Business Terrain | 17

ntroduction Tax Incentives

1. Income Tax Act no.59 of 1962

Charting Africa’s Business Terrain | 19

ntroduction The obligation to repatriate proceeds from the sale

1. TITLE ONE: TERMINOLOGY Article One: Definitions

An offshore hedging structure may need to be

3. ARTICLE 57, Senegalese Petroleum code:

4. Schedule II, Article 43

Charting Africa’s Business Terrain | 21

THE RISE OF MAURITIUS

Risk mitigation and confidentiality is paramount

Charting Africa’s Business Terrain | 23

hina designed and executed a policy that leading AI player.

There are risks to these structural redesigns, Contributor’s Profile

Charting Africa’s Business Terrain | 25

THE RULE OF LAW’S

FUNDING MODEL FOR THE

ntroduction  The price to pay for this kind of financing is a

Charting Africa’s Business Terrain | 27

 Convertible bonds Are these royalty payments to the foreign investment

AFRICA’S CITIES ARE ABOUT TO

Charting Africa’s Business Terrain | 29

THE CARBON TAX ACT MAKES

Charting Africa’s Business Terrain | 31

A HAWK’S VIEW ON COMMENCEMENT

WILL COMPANIES BE RESCUED

usiness rescue proceedings may be business judgment assumes paramount

Charting Africa’s Business Terrain | 33

9 Section 127 (1)

20 Section 129 (6)

INVESTING IN RWANDA: FINDING OPPORTUNITY IN

1. World Bank, WDI.

You might also like