Supporting investment in the gateway to Africa

Globalaw is a global network of over 100 independent law firms whose presence in Africa helps investors confidently navigate often complex legal systems. Pieter Van der Merwe discusses how investors can make the most of opportunities on the continent.

VDMA Corporate Commercial Attorneys was founded in 2010 as a local, independent commercial law firm in Johannesburg. In 2015, the company joined Globalaw which, according to VDMA Managing Director Pieter Van der Merwe, is a key part of the firm and has been vital for companies wishing to expand their reach in South Africa and the wider region. “We had many relationships with law firms but were interested in a platform connecting lawyers,” says Van der Merwe. “We had several interviews with Globalaw directors and looked at the substance of the firm and its representation in areas we do a lot of work in, like Europe.”

Being part of Globalaw is very much an interactive process. “We regularly attend meetings and contribute,” says Van der Merwe. “It is what you make of it. We also regularly receive instructions from Globalaw firms and we’ve developed a really good pipeline of work.”

Globalaw scrutinises law firms to decide who joins their network and from this, anyone seeking legal representation is assured of quality service through the network. “You need a certain profile as a global, commercial firm,” Van der Merwe explains. “Let’s say a law firm in the UK wants to use a law firm in South Africa – you’d look through indexes, Google, LinkedIn… but through Globalaw, lawyers know and trust me and they send work to me. They don’t need to revert to an index because we have that relationship and interaction. As an established, well-run organisation, Globalaw has good representation worldwide and membership is consistent.”

As a South African business, VDMA has benefited greatly for being part of Globalaw’s reputable platform. “Most of South Africa’s trade is with Europe and there’s good representation in key cities,” says Van der Merwe. “From a South African perspective, we are heavily dependent on inbound investment. South African companies need to go to the more sophisticated markets to present ourselves, our skills and our country. As a firm, we see a lot of inbound work.”

Investing in South Africa

“As an emerging economy, South Africa doesn’t generally do a lot of outbound investment,” Van der Merwe explains. “As far as sector growth is concerned, we’re seeing a lot of growth across all sectors.” He points to the energy sector as a key area of growth for the fast-moving nation. “There’s a lot of inbound investment in renewable energy. South Africa is the principal energy provider for the region and there will be a lot of development in that sector. I think as far as comparable emerging economies go, in terms of the BRICS countries for example, we can become a leader. There’s a lot of growth opportunity which of course leads to a lot of legal and financial work.”

Van der Merwe also points to food and agriculture as areas to watch. “There are a lot of opportunities there, as well as financial services opportunities. I would like to see more investment funds – we see a lot of deals flowing into the country because we’re a growing economy. In my view, there are many opportunities across many sectors.”

Many factors come together to encourage investors to look at South Africa. “We view ourselves to be a rather larger and more stable economy than some of our African neighbours. This leads to us being the first choice for many European businesses to start, then infiltrate and spread into other jurisdictions in Africa. We have a very well-regulated financial sector as well as very talented financial people, lawyers and commercial directors.”

A unique place to do business

“I think there’s good talent here first of all because of the uniqueness of South Africa,” Van der Merwe continues. The country is a bit isolated in global terms. We tend to do a lot of things on our own. Having this large economy in a fairly unique continent, we’re very much innovative by nature. Africa has unique problems and I think that environment creates more innovative thinking. South Africa is a multicultural country with 11 languages and a lot of mixing which I think leads to forward thinking.”

Van der Merwe highlights South Africa’s world-class financial sector, largely untouched by global recession, as an attraction for local and global investors. “It is important because for an inbound investment or startup, you rely more on your financial system in terms of how it’s regulated, its banks and central banks, and how easy it is to do commerce. Our stock exchange is world renowned. This offers a lot of substance and a lot of comfort.”

South Africa’s annual growth stands at about 1% with this figure much higher for cities like Johannesburg. “People see a substantial economy and they want to participate because there are a lot of opportunities which there might not be in other markets like Europe, where it is more competitive and developed.” VDMA is dealing with a lot of inbound work, helped by the Globalaw network. “We’ve helped a prominent oil and gas company on a very large arbitration in the global market. We’ve also helped a Canadian company enter the medical cannabis environment.”

“We in the firm, and in the market overall, are very busy,” Van der Merwe adds, citing that VDMA has just become the number one law firm in South Africa in unlisted mergers and acquisitions. “Work comes from everywhere and we see this continuing for a long time, because if you compare South Africa to comparable countries… I may be biased, but I would always invest in South Africa. I trust our system in terms of integrity and I feel very comfortable with the business environment.”

With many businesses keen to get involved but unsure where to start, how can VDMA and Globalaw help and what must investors remember? “In terms of legal work, every country has its own dynamics and unique culture and politics. In Africa as a whole, it is different than working in more sophisticated markets. I would say you need a bit more on-the-ground experience.”

However, Van der Merwe is adamant that doing business in South Africa is more straightforward than foreign investors may think. “We follow, from a commercial law perspective, almost to the letter what the UK does. If you’ve done global work, this means you’re coming into a system you are already acquainted with, as well as being full of the best practice in the world.”

The gateway to Africa

In this way, South Africa really is Africa’s gateway, allowing investors to enter the market as part of a system they feel comfortable with. “As a relatively new democracy, we are focused on constitutional matters and equal rights. You’re coming into a sophisticated system within the African continent which you can trust to set up your business and to create value.”

For Globalaw, there is an ongoing focus on developing a wider African network. “There’s always a director of Globalaw from an African country,” explains Ven Der Merwe.” The current director is from Morocco. Globalaw makes sure the Continent is always represented.” Even where Globalaw doesn’t have a firm presence yet, it is still very much committed to growth in Africa and to seeking out potential new member firms. “Where there isn’t a member, most firms would inquire from me who to use in a specific country. If we have a trusted contact in that jurisdiction, we will put them forward.”

Comprising 52 countries, Africa is a melting pot of legal systems including, according to van der Merwe, roughly 45% English, 45% French and 10% Portuguese or Belgian. “With many different cultures and political systems, you really need to know your story.

“In wider African markets we focus a lot more on due diligence than usual. For example, you would usually do due diligence on the target asset, but if someone wants to buy a business in Mozambique where the legal system is Portuguese, we do due diligence not only on the asset but also on the people involved, and we do a deeper investigation into the transaction. We also rely a bit more on insurance, especially in countries where it is difficult for us to pinpoint relevant regulations – we visit Lloyds of London and insure the deal with the counter-party or country risk.”

As part of a global network, it is clear VDMA can more confidently point businesses in the right direction – and the number of businesses investing in the region are on the up. “The bottom line,” says Van der Merwe, “is that we’re very excited about our country and the business sector.”