Energy is one of the biggest draws for international investors looking to enter the North African legal market. Foreign direct investment is expected to increase throughout this year and the next in the energy sector, with a special interest in renewable energy thanks to the commercial opportunities anticipated from the 2016 Morocco Climate Conference.
Although law firms claim that there are still few opportunities to work on cross-border deals involving Algeria, Morocco, Tunisia and Egypt, there are strong indications of a mature market that is setting up similar deal structures to mirror other commercial markets in Europe or the US.
Morocco continues to be a focal point for international firms looking to enter the African market or expand their footprints in the continent, although the emergence of investor interest in Western and Central African countries as sources for revenue may provide future competition. Lawyers from international firms in the region discuss their experience.
Q: What are the main trends that you have seen in the North Africa legal market in the last year?
Norton Rose Fulbright Europe, Middle East and Africa head of Energy Anne Lapierre: Africa’s GDP growth has led to continued interest in the region and a marked increase in foreign investment, with regions such as Europe offering less development opportunity.
The energy sector is a perfect example of this thriving situation. Two countries in particular are going through a phase of growth. Morocco is becoming increasingly important in the renewable energy sector on a global scale alongside other large energy projects taking place in the country. Egypt is also very strong in renewables and we are likely to see a lot of activity following the recent discovery of a sizable offshore gas reserve in the Egyptian Seas of the Mediterranean.
Dentons Morocco managing partner Patrick Larrivé: We are witnessing two main trends that we believe are of particular relevance in the North African market: the development of more sophisticated deal structures (similar to the structures used in more mature markets such as Europe or the US), and an increase in work involving inter-Africa deals. This reflects our move to position Dentons Morocco as a hub for clients wishing to do business in African French-speaking countries.
The local angle: Algeria
Bourabiat Associés partner Foued Bourabiat provides a snapshot into the Algerian market.
Q: How has international investment in energy, infrastructure, TMT and real estate changed in the last five years?
Due to legal constraints imposed to investors by Algeria, since 2009 the investment climate has not attracted large foreign direct investments (FDIs). The drop of oil prices may force Algeria to seek more FDIs.
Q: What are the biggest risks and benefits of businesses investing in the region?
Political and legal stability may be perceived as potential issues in Algeria. The upside is that businesses can benefit from a country with little competition in many sectors and high margins.
Q: Has your law firm strategy changed to capitalise on international investment? If so how, or why not?
We are working almost exclusively with international investors and seeing more and more diversification of the geographic sources of the investments. In our experience there is no unique hub. We need to travel more to be closer to the clients.
Q: How important has cross-border work become to your firm?
It represents more than 60 per cent of our activity. Cross-border transactions involving neighbouring countries are unfortunately still relatively rare.
Q: What are the main areas of opportunity you have seen for your firm in the region, and how is your firm planning to respond to these opportunities?
Lapierre: Following the 2015 Paris Climate Conference (COP 21) in 2015, the COP 22 that will take place in Marrakesh in 2016 will support an ambitious vision for the development of renewables on the African continent.
As an example, the ambitious objective of 52 per cent of renewable energies in the Moroccan energy mix by 2030 set by King Mohammed VI will support an unprecedented growth in the sector under the leadership of the Moroccan Solar Energy Agency.
Larrivé: More of our clients are seeking to invest outside North Africa and increasingly look to Western and Central African countries as new sources of revenue.
Our knowledge of both West and Central Africa means that we can navigate clients through doing business in Africa successfully. This reflects our strategy of using Morocco as a hub to take clients into whatever country they wish to enter in French-speaking sub-Sahara and specifically those that use OHADA Law.
For clients investing in Morocco (or using Morocco as a gateway) strong relationships with the local business and governmental communities are key. Our team is ‘in and of’ the community and can draw on those relationships to service clients’ needs.
Q: How is international investment affecting local firms’ work in these countries?
Lapierre: The ambitious development of energy and infrastructure projects in North-Africa (and Africa in general) has a major impact on the economies of the countries involved. Structured investment plans as seen in Morocco, for example, are attracting a lot of new players, foreign and local, creating new jobs and business opportunities in the region and strengthening the economic landscape.
Larrivé: North African firms have worked closely with international firms for a significant amount of time. For example, Morocco’s legal market
is mature so the impact of international firms is evident through local and international firms working much more closely together in order to service clients.
International investment means the quality of service provided by local firms increasingly matches that of international firms.
Q: What are the key strategic goals for your firm in 2016 in North Africa?
Lapierre: Norton Rose Fulbright is prominent in the region for infrastructure and energy projects and has been for almost 30 years. We look forward to continuing our work on existing and future major development projects to assist ongoing growth in the region. We are committed to the market and our relationships with both public and private clients in North Africa.
Larrivé: Africa is a core part of our global strategy and the firm’s commitment to the region dates as far back as 1964 when Dentons opened in Cairo, Egypt.
Following the launch of our Casablanca office in 2014 and a very successful first year, our focus remains on developing Dentons Morocco as a hub for French-speaking African countries.
Read more about the African legal market online at TheLawyer.com/Africa