Business
Come on into Africa. The Water is actually Nice.
By Dennis Matanda
You could say that Vicky McPherson and I are friends. We finally met in Addis Ababa many AGOA-Civil-Society-conference-calls later. She is so much nicer in person – and even pardoned my tardiness when I came horribly late for a post- Addis meeting. Aron Ambia and I met only recently at a Greenberg Traurig event. A Harvard-educated attorney, he was also almost minus Ivy League airs. In fact, the one thing that came across was his huge smile. And so, when we sat down for this conversation – I was at my house in New Jersey, while they were at their corporate office in Washington, DC – things could not have gone better.
We started off directly. I wanted to know what could be done to increase the sheer volume of business between the U.S. and Africa. You could almost
hear Vicky smile, and her response was clinically delivered:
‘One of the major impediments from a U.S. perspective’ Vicky said, ‘is just the hesitation on the part of mid-size companies to get into Africa since the multinationals are obviously already in Africa. The huge U.S. corporations are there – and they are doing well and flourishing.
Here, Vicky hesitated and her response took my earlier question to another level: She suggested that instead, we should be asking how we could expand
that middle market – looking into whether or not it’s even feasible for smaller businesses to play in the African market. The focus, she suggested, ought to be on educating medium sized American companies to take advantage of the opportunities in Africa. This would, in simple terms, expand their horizons and especially demystify Africa for them because they, very clearly, have a negative perception of what it means to do business in Africa; a perception not in line with the reality.
‘There’s a wrong perception in terms of the risk, and also, in terms of the real economic opportunities that exist,’ Vicky continued. ‘These two things are completely not in alignment.’ She went on to mention that there are huge gains to be made in Africa, and that this is overshadowed by the belief that American businesses stand to lose so much more.
At this point, I wanted to know what specific role the both of them could play to facilitate the commercial partnership between the two parts of the
world. After all, here they were – both lawyers – one a Kenyan and the other an American.
Again, Vicky went straight to the heart of things. She said that there were already governmental agencies that could do a much better job for those medium sized enterprises best placed to make a killing in Africa. She then cited the Small Business Administration (SBA) who, I discovered does not necessarily focus on Mom & Pop stores as their core business. In fact, when you think about it, small businesses in the U.S. could actually mean medium sized companies and some start ups. Besides, perusing the SBA guidelines, one will find that to garner the agency’s support, the international or outward focus ought to have an American connection as well.
Essentially, because the SBA is keen on making a return, it seems as though they would even be interested in both those medium sized companies that
want to look outside the U.S. and also those not yet looking outside of the U.S. to expand their own margins. Vicky suggested that one way for the medium sized enterprises to get into Africa would be through agencies like the SBA (and perhaps, the Minority Business Development Agency – MBDA), and
via participating in forums where such companies and agencies are playing. Aron chimed in: ‘Vicky is exactly right. Another way would be attending conferences, reaching out expressly to existing clients and throughout the value chain and opening the doors for additional ones to help them create additional opportunities. For example, those who attend our Doing Business in Africa forums in conjunction with the Corporate Council on Africa are
already interested parties and so, providing an additional forum to talk to one another – to collaborate – is another important piece of that as well.’
I then asked: What kind of conventional wisdom would Greenberg Traurig want African countries to know? And at the same time, what would they like
American companies to have insight into if they are going to do business in sub Saharan Africa? I was also curious as to what these two would prioritize in terms of doing better business with the U.S.?
Vicky: I think one first has to start at the government level and that means really reforming sectors to ensure that there are clear corporate guidelines then also talking to the banking sector to shore up African companies so that they are equipped to engage with U.S. companies. These are two of the most important things that can be done that will impact the broader market. Alternatively, a lot of the work that corporate law firms like ours do is corporate sector and government influence. I think transparency in terms of the actual corporate process of establishing companies – the ease with which foreign companies can come in and establish relationships with local partners – some way for foreign companies to come in and test legitimacy, veracity or wherewithal is key.
For example, in the U.S., if you want to work with a company, you can go to any state’s website and do a corporate search and get information about when they were formed – depending on the state – who their directors and officers are; what their registered shared capital is, you can get a certificate of good standing confirming that they have paid all their taxes.
That process is not as transparent and as easy in any African country, with South Africa being the exception. For example, we have an on going issue where local counsel has to fly to the capital city of the country to get a copy of the corporate record – and this slows down the efficiency with which you can do a deal. Because you want to know that a company is abiding by all corporate requirements because that impacts your ability to do anything – a loan, a sale transaction, purchase – all those things are affected by having good corporate governance. These are the requirements needed for people to independently test the company.
Aron: Here, I’d call for an increase in the transparency with which corporate formalities are recognized, governed and then, I’d ensure that there’s good legal representation in both sides of the table – identifying with and putting things like risk into context – like the appropriate provisions and agreements in understanding that these are binding.
One of the reasons there’s such push back with respect to using the governing law of most African countries is that there’s just not enough clarity in
terms of what remedies could be down the line.
Dennis: So, are we, ostensibly talking about doing things the African Way, and making certain exceptions. Here, both Vicky and Aron laughed.
Vicky: On some level, this is true – meaning if we have to get on a plane more often than you normally would, then you are doing things the African way – Or you could do things via electronic ways. But there’s a different level of building relationships that is required in the African context that we are not used to here in the States – and one needs to get over that. And that is doing it the African way.
This is acceptable
Social networks are key and relationships are key anywhere. Not trusting someone is different than not simply liking them – and experience shows that
there’s a measure of personal comfort required in Africa. Because legal frameworks aren’t as solid in Africa in some instances, one does rely on that and so you sometimes rely on social networks in a different way.
This is similar to Asia in fact.
Dennis: What then, in your collective opinion, is the ideal trade and investment partnership between the U.S. and Africa?
Vicky: We must change the paradigm: There’s nowhere else in the world where we say: ‘How do we improve the U.S.- South American relationship; or
the U.S. – European Union partnership; or the U.S. – Asian Relationship. So, the first thing is to change the conversation. I do not even think it is appropriate to say: How do we change the U.S. – Africa pact? But it needs to be really driven; especially from an American perspective, by the U.S. interests. And so, the question is: How do we expand U.S. economic growth through a relationship with strategic African partners? That might be a better question. Everyone is not going to be our partner and so, we need to figure out, strategically, where we are best served because aid, for instance, is cyclical and so, it has to be based on an independent U.S. interest because just aid depends on who is in power. But if it is about U.S. interests, that is always constant.
Dennis: Aron, what would you like to see changed?
Aron: We must figure out what types of specific bilateral agreements are required. There needs to be a recognition that not all African countries are in the same position. A better recognition of tiered benefits would probably be helpful; to support some of the under-performing economies, those that have benefits – not to phase them out but to give an advantage to those still developing or emerging.
Dennis: Are you two suggesting that South Africa receive special treatment or be handled differently when it comes to the African Growth and Opportunity Act (AGOA) benefits and privileges?
Vicky: I do not think its graduating since South Africa is still a huge part of the African economy and so, if it goes, certainly this will have ripple effects throughout the continent. And so, I do not think it’s appropriate to talk about graduating. Additionally, to go back to how we should think about the U.S. and Africa commercial relationship afresh: We need to look at two levels: Government-to-Government | Business-to-Business. What we’d like to see more – and we see an emerging trend – is the U.S. government involving itself in the commercial interests that are found in Africa.
And of course, we have Power Africa and Trade Africa initiatives from the Obama Administration – and so, when the U.S. government involves itself
specifically in African economies, you then have the second level of the private businesses following on this pathway that the U.S. has created for them. This has a more sustainable and more consistent plan to address some major fears and issues that U.S. businesses need to (delve into Africa). The U.S. needs to forge a way, saying: ‘Come on in – the water is nice.’
With that, we ended the conversation. After they were gone, I couldn’t stop thinking about the astute observation – the one about personal relationships trumping the system. I thought of how similar things were in both Africa and America. And I remembered: It is, indeed, much easier to do business with someone you don’t like in the U.S.
Vicky Beasley McPherson focuses her practice on corporate transactions, with an emphasis on mergers and acquisitions and project finance. She also has experience advising on initial and follow-on private equity investments for early-stage companies and strategic investments on behalf of private equity firms. Her representative matters on behalf of institutional and private equity investors include domestic and international fund formation, real estate joint ventures and corporate finance in connection with the acquisition and management of portfolio companies. Vicky represents clients
from around the world, including those located in Africa, Eastern Europe, Asia and South America. She is an integral member of the firm’s Africa Practice Group.
As part of her general corporate practice, Vicky advises clients on corporate investment strategies, governance matters, private equity and real estate investments, secured and unsecured debt financings, mergers, stock and asset transfers, corporate acquisitions and divestitures,
corporate reorganizations, and venture capital.
Aron John Ambia is an experienced Kenyan lawyer working with Greenberg Traurig’s Africa Practice. He joined Greenberg Traurig in September 2013 as a Foreign Associate in the Corporate & Securities Department and focuses on project finance, private equity and energy transactions. His practice also focuses on mergers and acquisitions, energy & infrastructure, as well as private equity. Prior to joining Greenberg Traurig, Aron worked with Kaplan & Stratton Advocates in Nairobi for over 3 years. While at Kaplan, he was part of transactional teams that handled some of Kenya’s largest privatization projects as well mergers and acquisitions. In addition, Aron advised leading international non-governmental organizations on their Kenyan operations.
Aron’s passion is to see his clients thrive in Africa through excellent legal representation. He is an alumnus of the University of Nairobi Law School and Harvard Law School.