Africa 2012 by Optic Juice

africa

ALGERIA ANGOLA BOTSWANA DEMOCRATIC REPUBLIC OF CONGO

LESOTHO NIGERIA MALAWI

MADAGASCAR MAURITIUS MOROCCO MOZAMBIQUE NAMIBIA SEYCHELLES SOUTH AFRICA SWAZILAND TANZANIA

TUNISIA ZAMBIA ZIMBABWE

Out of Africa

A special report on doing business with African countries This report comes with the November 2012 issue of The Manufacturer www.themanufacturer.com

Organised by The Manufacturer in association with Eversheds www.eversheds.com

the next

best thing

Robin Johnson Partner +44 (0) 207 919 4754 robinjohnson@eversheds.com

Boris Martor Partner, Africa Group Head +33 1 55 73 41 53 borismartor@eversheds.com

Editorial

This report was written by partners at Eversheds for The Manufacturer Edited by Will Stirling, Editorial Director w.stirling@sayonemedia.com

Design

Art Editor Martin Mitchell

martin@opticjuice.co.uk

SALES

Henry Anson, Managing Director h.anson@sayonemedia.com In order to receive your copy of the The Manufacturer kindly email p.kealy@sayonemedia.com, telephone 0207 4016033 or write to the address below. Neither Eversheds nor SayOne Media can accept responsibilty for omissions or errors. Terms and Conditions Please note that points of view expressed in articles by contributing writers and in advertisements included in this journal do not necessarily represent those of the publishers. Whilst every effort is made to ensure the accuracy of the information contained in the journal, no legal responsibility will be accepted by the publishers for loss arising from use of information published. All rights reserved. No part of this publication may be reproduced or stored in a retrieval system or transmitted in any form or by any means without prior written consent of the publishers.

Robin Johnson and Boris Martor, partners at Eversheds, introduce TM’s supplement on Africa, and explains why the continent represents a great opportunity for UK manufacturers.

arlier this year, Eversheds’ industrial engineering group was pleased to work with The Manufacturer to produce the China in your hand supplement, a stand-alone report that focused on inward investment from China, but also discussed a number of business law issues you need to be aware of when dealing with a Chinese counterparty. This supplement follows in a similar vein but instead focuses on the business issues you could face when doing business throughout Africa. We are delighted to have this opportunity to continue our long-term sponsorship arrangement with The Manufacturer. Eversheds set up its industrial engineering group three years ago in response to clients telling us that what they really needed were lawyers who understood their business. The group covers every aspect of law and business, not just the particular element of the law and business of manufacturing, so it is horizontal rather than vertical. During the last three years, we have also found that the clients who want this service aren’t just engineering companies; hence the renaming of our group to Diversified Industrials. This name change reflects the fact that our knowledge and expertise is also valued by chemical manufacturers, aerospace,

defence and security manufacturers, and automotive manufacturers. As I mentioned in our China in your hand supplement, we are a business that, in a world of slow growth and uncertain economic times, has bucked the trend and seen significant growth from this sector approach. The group is unique in the sense that it is very international in nature and, every month, we produce international newsletters on legal issues in a global manufacturing environment. Our clients and The Manufacturer readers deal with international needs every day, whether these relate to distributors, currency risk, letters of credit, direct sales, CE marking, international logistics issues or export controls. Even if you only have an operation in the UK, you will still be dealing with international companies.

africa SUPPLEMENT 2012 INTRODUCTION

Every business is always looking for new opportunities to grow. When reading this supplement, you will no doubt have already seen opportunities in Asia and the Middle East and will already be dealing with counterparties from those regions on a regular basis. Africa is the next big opportunity. As the mature European economies stagnate and the new economies in Asia become equals to Europe, Africa will grow significantly. For that reason, Eversheds established an Africa-focused group some five years ago and has developed its presence in North Africa and South Africa since then. We now have offices and a network of more than 50 firms on the African continent. From the historic colonial activities of Europeans in the early 20th century and through the independence movements in the 1960s, relationships with Europe remain strong, though in recent times the Chinese and Indians have been making significant inroads into bilateral relationships with Africa. While Africa is a vast continent and its individual parts are distinct – northern Africa, sub-Saharan Africa , eastern Africa, Christian Africa and Muslim Africa – in fact (and this surprises a lot of people) the laws in those distinct parts are remarkably standardised. Indeed, Eversheds has been an adviser to many regional organisations developing legislative frameworks or investment projects, such as OHADA (the organisation for harmonisation of business law in Africa) and CEMAC (the Central African Economic and Monetary Community) in West and Central Africa. The number of pan-African organisations offering business organisations some advantages to develop around the continent through hubs, and covering these regions from one location or entity recognised in a whole geographical zone having a critical mass, has developed significantly. Economic and trade development has triggered the need for standardised and synchronised laws to ease trade in very much the same way as the EU has done and continues to do. One major advantage of Africa compared to, say, Asia is the lack of significant time zones issues; you can work with Africa during the normal working day. Reports of corruption and the safety of supplies and people in Africa are issues that often hold businesses back. There is also the fear of political unrest. In fact, while one

must always be vigilant, if some of the largest multinational manufacturers are able to do business in Africa, it must mean the risks are exaggerated. In reality, Africa is changing from a continent described as difficult to a continent considered, by all the leading consulting firms such BCG and McKinsey and investment banks such as Goldman Sachs or Lazard, to be the future of the 21st century. Africa has vast natural resources and an ever-growing population, many of whom speak English or French as their first or second language. The middle class consumer population on the continent is now much larger than in India. While China may be looking to invest in Europe, the opportunity for UK manufacturers is one of exports to Africa, to service not just local companies but also, and even more importantly, the large multinationals who are already operating there.

SADC – Corridor into Africa Where to start in Africa? The Southern Africa Development Community (SADC) is maybe the best gateway for conducting business on the continent, says Rajen Ranchhoojee

African standard Standardised business law and standardised monetary communities help to make foreign investment in many African nations an attractive opportunity, say Boris Martor and Jawad Fassi-Fehri

Doing business in North Africa Oil, gas, a strong civil law base and greater political stability. North Africa cannot be ignored as a market, says Eversheds’ Jawad Fassi-Fehri and Mohamed Oulkhouir, Partner, CWA Morocco Casablanca & Tangiers, in cooperation with Eversheds LLP.

In the field Stuart Dutson explains how Eversheds is well-placed to serve clients in Africa, with experience in African law but also in the countries where the money comes from – like the Middle East.

One of our clients in drilling services for oil and gas and mining has set up branches or companies in over 15 African countries in the last three years. They have followed their customers into jurisdictions they never thought they would enter. Eversheds assisted them on all legal and tax aspects. Corruption and local partner corruption is a big issue, but we have found that Africans are aware of this and recognise that the old colonial ways they, ironically, learnt from the British are not fit for the modern world. Instead, with average wages being so low, most agents/distributors will enter into arrangements with you that are highly remunerative for them; they are keen to minimise any risk of losing the contract, and their livelihood, through falling foul of the UK Bribery Act. Of course, you need to be diligent and carry out appropriate checks on (and training of) third parties. At this stage, I would not expect current readers to be actively setting up significant manufacturing activities in Africa (even if we accompany several clients on a number of manufacturing developments in Morocco at the moment). However, within the next five to ten years, I would expect this to change. South Africa is already open for business and has relatively extensive cheap, but quality, manufacturing. Black empowerment rules mean that, in any major African economy, like Nigeria for example, you will need local equity partners such as a joint venture or minority interest, which are, for instance, being reinforced by the recent Nigerian Content Act. With cheap labour, the lack of language barriers, the same time zone and increasing modern law conformity across vast areas of the continent, Africa should be very much on your mind and every company should have an Africa strategy. We present below a number of contributions from our Eversheds’ Africa Group, on doing business in North Africa; on the harmonisation of business laws in the western and central parts of the continent; and on doing business in South Africa and the Southern African Development Community (SADEC) region. Enjoy reading.

Durban’s port is South Africa’s busiest

SADC:

the corridor into Africa Rajen Ranchhoojee, an Eversheds partner based in Johannesburg, explains why the Southern Africa Development Community represents the first port of call for companies that want to enter the African market.

Rajen Ranchhoojee Partner +27 11 523 6234 rajenranchhoojee@eversheds.co.za

frica is a rising economic giant with a growth trajectory that has begun to astonish the world. The McKinsey Quarterly reported a 4.9% economic growth rate per annum, from 2000 to 2008, in the total gross domestic product (GDP) on the continent. Africa’s collective GDP, at US$1.6 trillion in 2008, was roughly equal to that of Brazil and Russia, making the continent amongst the rapidly growing economies in the world. Africa’s 2012 GDP growth forecast has been set at around 4.5% by the African Development Bank (‘the Bank’). According to the Bank, the continent’s economy will grow by a further 4.8% in 2013. The key factors behind this growth trend include active steps taken by African

states to improve macroeconomic conditions and the implementation of macroeconomic reforms to create a business climate conducive to international trade and investment. The practical measures include: the opening of trade; the lowering of corporate taxes; the strengthening of regulatory and legal systems; the provision of physical infrastructure to facilitate trade. According to the 2012 International Monetary Fund Economic Outlook, subSaharan Africa, at a 5.5% growth rate, is second only to developing Asia in its expansion. The Southern Africa Development Community (SADC) is undoubtedly a focal point for conducting business on the continent. SADC is comprised of the following member states: Angola, Botswana, Democratic Republic of Congo, Lesotho, Malawi, Madagascar, Mauritius, Mozambique, Namibia, Seychelles, South Africa, Swaziland, Tanzania, Zambia and Zimbabwe. SADC’s market represents a growing economic grouping within the continent. Internationally, this has been referred to as the entry point to doing business in Africa; we call it the doorstep to doing business at home.

Free trade In terms of the SADC Protocol on Trade (‘the Protocol’), the member states agreed to introduce various policies that would lead to the liberalisation of trade within the

africa SUPPLEMENT 2012 SADC: THE CORRIDOR INTO AFRICA

SADC jurisdiction. With the Protocol acting as the binding legal document, the Council of Ministers of SADC also adopted the Regional Indicative Strategy Development Plan (RISDP) as a blueprint for regional integration. Undoubtedly, the biggest achievement to date of these initiatives is the implementation of the SADC Free Trade Area (FTA) in 2008. Through its implementation, 85% of intraSADC trade received duty-free treatment. In 2012, the final year of the Protocol’s implementation, almost all tradable goods are duty-free. In accordance with the RISDP, the member states are currently in negotiations to set up the SADC Customs Union, where the members will agree on one external tariff regime to be applied. In 2004, the Protocol was notified to the World Trade Organisation (WTO) under Article XXIV of the General Agreement on Trade and Tariffs. An examination of the provisions of the Protocol reveals a close connection between the rules set out under the Protocol and the rules found in the WTO, with a number of rules on different disciplines having been adopted directly from the WTO. This harmonisation with the WTO is beneficial to facilitating international business relations in Africa.

Trade facilitation SADC member states implement measures to facilitate the simplification and harmonisation of trade documentation and procedures. These measures include reducing the cost of all trade documentation and procedures by aligning intra-SADC and international documentation of the United Nations Layout Key, and reducing the number of documents required to a minimum. Member states are also required to standardise the documents by using internationally accepted standards, practices and guidelines as a basis for designing their documents and the information required to be in them. Despite not being obliged to conduct negotiations as a unit, members are exhorted to coordinate their trade policies and negotiating positions in respect of relations with third countries

The Regional Infrastructure Development Master Plan, to be implemented over a 15-year period, is set to provide an important strategic framework within which infrastructure projects, in areas such as energy, water, ICT and transport, would be identified and regulated under a single system

The UK and South Africa’s trading partnership is worth over £10 billion a year (Source: Dept for Business, Innovation and Skill)

or groups of third countries and international organisations. This appeal can be seen in the negotiations with the EU regarding Economic Partnership Agreements (EPAs), where a group of SADC countries – Angola, Botswana, Lesotho, Mozambique, Namibia, South Africa and Swaziland – negotiated as a group.

Infrastructure development The transport corridors are among one of the main infrastructural focuses for the SADC region. In this regard, the SADC Secretariat, supported by TradeMark Southern Africa and the Development Bank of Southern Africa, has begun the implementation of a Regional Infrastructure Development Master Plan (RIDMP). The RIDMP, to be implemented over a 15-year period, is set to provide an important strategic framework within which infrastructure projects, in areas such as energy, water, ICT and transport, would be identified and regulated under a single system. According to the SADC Secretariat regional integration deputy executive secretary, Joao Caholo: “there is broad consensus that unless, and until, the region has fully managed the issue of access to enabling infrastructure, no significant development will be realised, despite immense investments.” There have already been significant infrastructural developments across the SADC region. One of these is in respect of member states’ ports: In South Africa, the Port of Ngquara in Port Elizabeth was opened in March 2012. The port is the deepest container terminal in sub-Saharan Africa, and will accommodate the new generation of giant container ships traversing Africa’s southern tip. Port Maputo in Mozambique is of critical importance for SADC trade, owing to its position as southern Africa’s nearest port entrance for the rapidly developing Asian markets. Situated on the east coast of southern Africa, this historic port has received substantial investment under Mozambique’s economic recovery plan. The Maputo Port Development Company (MPDC) was established in 2003 in an effort to restore the port to the appropriate condition of a world-class commercial port. Walvis Bay is the biggest commercial port in Namibia and is also subject to expansion in the near future. The Namibia Port Authority (NAMPORT) has unveiled plans to spend more than N$3 billion on the expansion of a new container terminal at the bay. Africa will continue to profit from rising global demand for oil, natural gas, minerals, food and arable land. In short, a strategy that includes Africa must be a priority for any business entity intending to expand internationally, taking advantage of the programmes developed to facilitate foreign participation.

AFRICAN STANDARD The standardisation of business law and the presence of standardised monetary communities help to make foreign investment in many African nations a real opportunity, say Eversheds’ partner and senior associate Boris Martor and Senior Associate Jawad Fassi-Fehri.

Boris Martor Partner, Africa Group Head +33 1 55 73 41 53 borismartor@eversheds.com

Jawad Fassi-Fehri Senior Associate +33 1 55 73 40 00 jawadfassi-fehri@eversheds.com

n these times of crisis, Africa is perceived as the continent that, together with Asia, will experience the best growth rates in the coming years. Many operators are interested in the continent and opportunities to invest there. It is true that the demand for goods, services and infrastructure is increasingly important. We can divide the continent into four categories of countries. First of all, there are the countries of North Africa, from Egypt to Mauritania. The second group covers all francophone African countries. The third group includes English-speaking countries. There are also some Portuguese-speaking countries (including Angola and Mozambique) and South Africa. The continent includes 50 very diverse states, which do not differ that much in terms of legal systems. Indeed, efforts made in terms of legal standardisation are well advanced, simplifying the task for operators who invest there. Legal standardisation efforts in francophone African countries have been extremely significant: 17 countries in the area, representing more than 270 million people and a third of the continent’s land

mass, have pooled their efforts to standardise their business law and their economic and monetary system, creating a large area with the same rules. Eight of these countries belong to the West African Economic and Monetary Union (WAEMU) with a single central bank, BCEAO, a single currency and a single banking system; six states belong to the Central African Economic and Monetary Community (CEMAC), also with a single central bank, BEAC, a single currency and a single banking system. There are three member states of the OHADA (the organisation for harmonisation of business law in Africa) that do not belong to any of these monetary and financial systems: Democratic Republic of the Congo, Comoros and Guinea. This standardisation has many advantages not only for local economic operators but also for foreign investors who wish to invest there.

Modern and uniform corporate law One of the undeniable benefits of this standardisation is that, in these countries, investors may set up subsidiaries that operate in accordance with international standards. Thus, the OHADA business laws now, for instance, offer two legal forms of companies in which investors’ potential losses are limited to their contributions. This is the Société à Responsabilité Limité (SARL) - the Limited Liability Company (LLC) - and the Société Anonyme (SA) – joint stock company (SA). Their operation is very similar to the one we know, for example, in France. In addition, Simplified Joint Stock Companies (SAS), with their characteristic of freedom of shareholders to organise the terms of corporate governance, will be soon introduced. With the choice of available corporate form, an investor may create a company and be its sole shareholder. In most countries, there is no requirement for a foreign investor to go into

africa SUPPLEMENT 2012 AFRICAN STANDARD

partnership with a local partner, and corporate executives do not have to be of the nationality of the state where the company is located. Moreover, it is possible to create a company with a relatively small cash advance. Indeed, the capital requirement for an LLC is 1,000,000 CFA francs, or â&#x201A;Ź1,500. In addition, one of the advantages of this standardisation is that, once a subsidiary is incorporated in one of the states, the establishment of this subsidiary or branches in other states is recognised mutually and simplified, as if this branch or parent company was formed in the same state as the subsidiary. Additionally, under the OHADA business law, any SA or SARL that cross certain thresholds of capital, annual turnover or level of employment shall appoint an auditor. This requirement is likely to improve control, transparency and reliability of the accounts of local subsidiaries, given that all major international audit firms are present in these countries. Similarly, the accounting rules applicable to companies are standardised in 17 member countries. Finally, all procedures of the Clerkâ&#x20AC;&#x2122;s Office are standardised and made uniform across the 17 member countries, which is a significant simplification of the administrative life of companies. Similarly, the process of incorporation of companies is standardised in 17 countries.

How to enter the market of the OHADA member countries Foreign investors can enter the market of the OHADA member countries gradually. First of all, they can enter it without the necessity of formally being there, either through concluding a simple commercial agency agreement with a local operator who will be responsible for seeking its clients or a distribution contract (franchise or supply) with a local operator. Such agreements are also standardised. To explore the local market, a foreign investor may establish locally one or more representative offices. Although this type of installation is not yet legally framed, it seems that the ongoing reform of the OHADA business law plans to formally recognise the existence of this type of establishment whose purpose is only to explore the local market, such as an office with no commercial activity. Finally, for an investor who wishes to settle permanently in one of these countries for exercising a sustainable economic activity, the investor can set up either a branch

or a corporation in one of the forms mentioned above or envisage joint ventures with no restrictions in terms of foreign ownership except very strategic specific sectors where rules may differ.

Financing an activity developed locally and guaranteeing repatriation of investments A foreign investor may provide funds to its local subsidiary either through capital or through contributions made into the current account of the partners. The local subsidiary may also resort to financing from local banks. In addition, the issue of free repatriation of the selling price of investment and the corresponding

One of the advantages of this standardisation is that, once a subsidiary is incorporated in one of the states, the establishment of this subsidiary or branches in other states is recognised mutually and simplified capital gains, as well as the issue of dividends rising, vary according to the banking system to which the state belongs and in which the investment is made. This repatriation is free on the condition that the investor will justify the link between the initial financial flows from abroad to the country in question and the investment itself.

Tax incentives, offshore zones and taxation of local business In all countries, investment codes are established and they grant tax incentives or special taxation in favour of investment. Similarly, in some states, offshore zones exist

with incentives more or less strong. Corporate taxation, however, has not yet been the subject of the standardisation. This issue, therefore, together with existing double taxation conventions, should be addressed by all states.

Single currency with fixed parity with euro The fact that eight countries on the one hand and six countries on the other hand belong to the single monetary zone substantially facilitates exchanges within each of the two areas where capital movements are free. In addition, all transfers abroad from the unified zone are subject to a unified procedure for each zone. Please note that the CFA francs used in CEMAC and WAEMU have fixed parity with the euro, which limits potential risks derived from currency exchanges.

Disputes and litigation In most of these countries, the litigation before the courts is in French and tribunals remain very busy with unpredictable results. It is recommended that an arbitration clause is included in contracts. The OHADA law standardises the arbitration law of the member countries and created a system very similar to the International Chamber of Commerce (ICC) system. There is thus provided an arbitration court common to all member states, the awards of which are enforceable in all member states, subject to obtaining the exequatur of the jurisdiction of the state in which the sentence should be performed. Finally, other aspects of business law are also standardised, such as bankruptcy law, debt collection methods, security interests and guarantees. In this context, and despite political instability in some countries, the standardisation of business law and these standardised monetary communities constitute a solid foundation for facilitating foreign investment in these countries.

NORTH AFRICA Doing business in

Jawad Fassi-Fehri Senior Associate +33 1 55 73 40 00 jawadfassi-fehri@eversheds.com

Access to local market by foreign investors In terms of legal and fiscal environment for foreign investors, these three countries are not equallyattractive and they do not offer the same incentive or fluidity. In Morocco, all investors can invest in almost any economic sector, regardless of their nationality or place of residency (even if outside Morocco). As a result, Morocco is more and more becoming a hub for North Africa and this has increased with the developments that followed the Arab spring. Prior authorisation is not required to invest in any economic sector. This incentive does, however, have a number of exceptions (banking, insurance, energy and transport sectors). Furthermore, a local partner is not required. In other words, a single foreign investor may hold 100% of the share capital and voting rights of its local subsidiary. Additionally, a foreign investor can repatriate 100% of its investment and profits resulting from said investment, so long as said investment is a foreign investment and is declared to the proper authorities that control foreign exchange. The repatriation of investments is authorised upon the verification by a local bank that the repatriation corresponds to an initial foreign investment.

ALGERIA

It should be noted that neither business nor corporate transactions are governed by Islamic law in any of the three countries addressed herein. Compared with other Muslim states in the Middle East, this is a difference that particularly affects funding within transactional work. In general, in all three countries, business laws are very much inspired by French laws whether matters concern corporate law, contract law, labour law (more flexible) distribution law or banking and finance law.

TUNISIA

General comments

MOROCCO

n the three North African countries of Morocco, Algeria and Tunisia, the legal environment/framework is more or less the same with a strong civil law background. Nonetheless, each country has a few particularities, says Evershedsâ&#x20AC;&#x2122; senior associate Jawad Fassi-Fehri and Mohamed Oulkhouir, partner at Chassany Watrelot & Associes.

Mohamed Oulkhouir Partner, CWA Morocco Casablanca & Tangiers, in cooperation with Eversheds LLP +33 (0) 1 44 34 84 84 Mohamed.oulkhouir@cwassocies.com

africa SUPPLEMENT 2012 DOING BUSINESS IN NORTH AFRICA

In Algeria, there are more constraints on foreign investment than in Morocco. A nonresident foreign investor can freely invest in Algeria, but faces a number of restrictions. Depending on whether or not the activity carried out in Algeria is considered as the importing of goods or services for resale, an investor cannot own more than 49%, in the first place, or 70%, in the second, of the Algerian company that carries out such activity. In both cases, it must necessarily be associated with one or more Algerian operator(s). Furthermore, the Algerian state has a right of first refusal over any cession of a foreign operatorâ&#x20AC;&#x2122;s interests in an Algerian company in favour of another foreign operator. In addition, in several areas, it is not possible to operate without first obtaining prior approval from the proper authorities. Finally, the texts governing foreign exchange controls provide that a foreign investor can repatriate profits and capital gains made in Algeria as long as the currency balance remains favourable to Algerian currency. In practice, for companies that do not have export activities, this means that only originally invested amounts of money can be repatriated but not the profits earned during the investment nor the capital gains at the time of the liquidation of the investment. Nevertheless, the Central Bank of Algeria appears to apply this rule with some flexibility on a case-by-case basis. Tunisiaâ&#x20AC;&#x2122;s legal and fiscal environment, can be placed somewhere in between those of Morocco and Algeria. As a rule, a foreign investor may invest freely in Tunisia and can hold 100% of the share capital and voting rights of a Tunisian company. As a principle, an economic activity can be exercised without cost and does not require prior authorisation. However, the scope of the exceptions is large, in various sectors prior authorisation is required to perform an activity and, in many cases, a foreign investor cannot hold more than 49.9% of the share capital and voting rights of a Tunisian company (except with derogatory authorisation). Lastly, the repatriation of profits and investments can generally be done freely, like in Morocco, provided it is a result of a foreign investment. Each country has concluded double taxation agreements with the main European countries, North America, Middle East and China. All of these agreements are based on the model proposed by the OECD (Organisation for Economic Co-operation and Development).

Financing an activity developed locally In this respect, the Moroccan system also appears to be more liberal. Any investor can finance its local investment, either through equity provided by shareholder contributions

Foreign ministers of Poland and Algeria signing the bilateral agreement on air transport - photo courtesy of Poland MFA

(capital, current account, loan) in its local subsidiary or through loans entered into between local financial providers and the local subsidiary (banks, investment funds). In Algeria, an investor can fund its investments only by way of equity from shareholder contributions in its local subsidiary. In turn, the latter may only further develop its business with loans from local financial providers, such as a bank. In Tunisia, investors have the same financing freedom as they do in Morocco.

Tax incentives and offshore zones, offshoring

1.42m barrels per day Algeria is the 4th largest crude oil producer in Africa (1.42m barrels per day) and the 6th largest gas producer in the world (3.03 trillion cubic feet of natural gas). (Source: UKTI)

Each of these countries offer, at varying degrees, subsidies or tax exemptions, whether total or partial, permanent or temporary, encouraging investments by national and foreign operators. In terms of offshore zones and offshoring areas, Morocco is the country that has the most developed incentives with three kinds of zone. The industrial offshore zone in Tangier, connected to the Tanger Med Port, which aims at becoming one of the major industrial ports of the Mediterranean, is the most advanced in Morocco. This offshore zone is intended to offshore industrial production for export. Moroccoâ&#x20AC;&#x2122;s Casablanca and Rabat offshoring zones offer advantages mainly to those who set up there to carry out administrative and IT services.

Finally, Casablanca City Finance (still under development) is emerging as a kind of ‘offshore area’, which aims to attract financial, insurance and investment capital firms to operate on the African continent, and as an international holding that manages subsidiaries in Africa. Algeria has otherwise (curiously) not created any offshore or offshoring zones. Finally, Tunisia has created offshore areas (also known as ‘business parks’) that offer more or less the same tax incentives and exemptions as those offered by the offshore zone of Tangier.

How to be present locally In terms of corporate structure, almost the same opportunities can be found in all three countries, with a corporate law being very similar to French laws. In general, there are two types of companies where shareholder losses are limited to their capital contribution. In all three countries, there are company structures that permit an investor to be the sole shareholder. However, considering the constraints and restrictions mentioned above, the sole shareholder of a Tunisian or Algerian company is, in fact, limited to domestic investors only. In Morocco and Algeria, foreigners – non-residents of the country – can manage the local subsidiaries. In Tunisia, the manager must be Tunisian. In all three countries, the formalities of incorporation, although less severe today, remain fairly ‘administrative’. Prior to establishing a local subsidiary or branch, a foreign investor could first establish a simple representative office. It should also be noted that it is possible to conclude commercial agency agreements or distribution agreements with local operators without having a local entity. This allows investors to discover these markets, or measure local perspectives, gradually.

Tunisia’s legal and fiscal environment, can be placed somewhere in between those of Morocco and Algeria - photo courtesy of Dag Endresen

153m Total UK exports (£) to Tunisia -30% compared to 2008 (£218 million) (Source: UKTI)

In many cases, a foreign investor cannot hold more than 49.9% of the share capital and voting rights of a Tunisian company

Taxation of local businesses Corporate taxation varies from one country to another. In Morocco and Tunisia, the standard corporate income tax rate is 30%. In Algeria, it is 25%. It should be noted that each country provides reduced rates for certain business sectors.

Dispute resolution and litigation In all three countries, litigation before the courts is in Arabic. It is recommended that an arbitration clause is included in commercial contracts. Each of these three countries allows arbitration, and each country is a signatory to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards.

Employment laws Finally, as far as employment law is concerned, there are several differences between these three countries. The legal working week is 44 hours in Morocco, 40 hours in Algeria and 48 hours (or 40 hours, depending on the regulation) in Tunisia. Paid leave is three weeks in Morocco, four weeks in Algeria and four weeks in Tunisia. The monthly minimum wage for legal working time is 2.333 dirhams in Morocco (€210), 15,000 dinars in Algeria (€146) and 320 (or 246) Tunisia Dinars (€157/€120). In all three countries, employees must be affiliated with the social security agency. In all three countries, social security contributions are levied on employee wages. One share of the contributions is paid by the employer, and the other by the employee.

africa SUPPLEMENT 2012 IN THE FIELD

In the field International arbitration partner Stuart Dutson recently spent seven months working in the Middle East and Africa. Here he shares his experience of doing business in the African continent.

Stuart Dutson Partner +44 207 919 0813 stuartdutson@eversheds.com

Eskom Generation’s pilot wind farm facility at Klipheuwel in the Western Cape, South Africa - photo courtesy of warrenski

versheds’ vision is to be a global law firm that sets the standards, so being able to work as one team across operations and jurisdictions to meet the increasingly multinational needs of clients is a key area of focus for us. The better we understand the needs of our clients, and the markets and sectors in which they operate, the better placed we will be to build strong, long-standing relationships that really deliver value by offering the right legal expertise, in the right way, at the right time, and in the right place. A key takeaway point from my time on the ground was gaining first-hand experience of the scale of opportunity available in the Middle East and Africa. Africa is truly a land of endless opportunity at the moment. The continent’s GDP and growth is racing ahead while older markets stagnate. Construction, oil and gas, agribusiness, TMT [technology, media and telecommunications] and finance are booming while new roads, bridges, buildings, dams, power stations, factories, ports, and oil and gas fields appear on an almost daily basis. These projects are often backed by Chinese, Indian and Middle Eastern money, with African lawyers working on the deals with colleagues from the Middle East and Europe.

With years of experience across the continent, Eversheds is in a very strong position to help clients who are looking to do business in Africa. We can provide a consistent, tailored, high-level service wherever and whenever they need to do business in Africa through our presence on the ground in our South Africa office, and long-standing relationships with a network of local law firms in over 50 African countries. Our sector strength across infrastructure and energy (oil and gas, mining and natural resources, clean energy, nuclear and water), including project finance, cross-border M&A [mergers and acquisitions], strategic litigation advice, and services to governments such as dispute resolution, provides us with great coverage of the industries that are really driving growth in this region. With partners like Boris Martor in Paris and Howard Barrie in London – both recognised leaders in their fields – and Eversheds’ reach across North and South Africa, we are ideally placed to help clients to develop existing opportunities and build new ones for the next century – “Africa’s century”. Our continued commitment to building strong client relationships coupled with thinking beyond our boundaries will help us to support our clients to unlock their global ambitions.

The Eversheds global diversified industrials sector group

Precision engineered legal advice Eversheds is a law firm that gives you more than legal expertise. You receive expert advice combined with an in-depth knowledge of the diversified industrials sector. Our seamless worldwide service covers organisations in areas such as: automation, hydraulics, connectors, seals, advanced engineering, process, motion and flow control and diversified industrials. We understand your issues and look out for your interests, wherever you are based. The comprehensive range of products and services we offer is designed to tackle the challenges you face on any project of any size. With clear costs and real added value, this is a service engineered precisely to your needs. Robin Johnson +44 20 7919 4754 robinjohnson@eversheds.com

www.eversheds.com ÂŠEversheds LLP 2012. Eversheds LLP is a limited liability partnership.