PODCAST | African growth — the need to take responsibility

In this edition of Business Law Focus, host Evan Pickworth interviews Michael Foundethakis, recently appointed chair of the Africa steering committee at global law firm Baker McKenzie. Foundethakis has a glass-half-full outlook for Africa, based on recent deal-making activity and success. While this positive outlook does not ignore the need for responsibility and bankability, Baker McKenzie’s prediction is that Africa could well be one of the only major regions to experience faster economic growth in 2022. This reflects a modest improvement on a difficult 2021 for much of the continent.

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Baker McKenzie’s prediction is that Africa could well be one of the only major regions to experience faster economic growth in 2022. The expectation is that oil exporters will gain from rising international oil prices, while non-oil commodity exporters will receive a boost from rising food and industrial raw material prices. Economic growth in China is expected to be moderate in 2022, but a forecast 5% expansion in China’s real GDP will still be sufficient to support continuing demand for Africa’s exports.

Most of the region’s heavyweights — namely Algeria, Angola, Ethiopia, Nigeria, SA and Zambia — are again set to underperform, while the smaller, more dynamic trading economies — especially Senegal, Ivory Coast and Ghana in West Africa, and Uganda, Rwanda, Tanzania and, to a lesser extent, Kenya in East Africa — will lead the way in terms of real GDP growth.

Private equity deal value for targets in Africa contracted sharply following the end of the commodity boom, from a record  $12.02bn in 2014 to $1.44bn in 2017. With the onset of Covid-19 pandemic, 2020 saw such transactions contract further, to just $1.25 billion. However, a significant recovery in deal flow is expected in 2022 and 2023.

 In terms of the legal market, there has been rapid growth in Africa, as well as ever-increasing competition from international, regional and local law and accounting firms. International law firms have continued to form strategic alliances with local law firms and open offices in key jurisdictions, Kenya in particular. More than 4,000 lawyers are focused on winning higher-value cross-border work in Africa, and the quality of legal talent on the continent is high.

Clients are also demanding more diverse teams and lawyers with deep African-based experience in both our African and non-African offices. As such, there is a need to identify global and diverse talent within and outside Baker McKenzie to ensure the growth of its transactional practice in Africa.

Africa is also experiencing high growth from a technology perspective, including investment from global tech companies, and with a tech start-up boom providing opportunities for law firms. 

The firm believes there are considerable opportunities across the continent, but not without responsibility. As well as being bankable and yielding attractive returns, it is becoming increasingly imperative that investment should be sustainable and also provide ancillary benefits to local economies. Simply put, it should be net positive for the region.