As the mood among players in the African energy and resources sector lifts, Australian lawyers have more opportunities to help get deals done.
Perth lawyer Meredith Campion has spent a number of years advising investors and mining and resources operators in Africa. In the course of her work, the Allen & Overy partner has worked closely with the firm’s sister office in Johannesburg advising on key deals in the region which she describes as both politically and economically sensitive.
Lawyers Weekly spoke with Ms Campion after her return from a conference with stakeholders in the energy and resources sector in South Africa. She noted that slow M&A activity in Africa has started to pick up again, with commodity prices showing signs of gradual recovery.
“The sector has definitely risen, and fallen, in the last five to 10 years,” Ms Campion said.
She said that a combination of factors had hit M&A in the region’s energy and resources sector in recent times, with the industry enduring a period saddled with high levels of debt. The lawyer added that as key economies such as China encountered slow growth, the market was flushed with chronic oversupply and rock-bottom commodity prices.
“There was a real mining boom and then because of commodity prices and supply, there were a number of very difficult, quite stagnant years for many mining companies,” Ms Campion said.
“However, these factors have begun to turn more positive. For example, we have seen prices gradually recovering for both bulk and speciality commodities. Iron ore may still be a long way off its peak of around US$140, but it is well above its low US$30,” she said.
Ms Campion predicts that investors can expect to profit by acquiring African companies with stalled, forgotten or uncertain projects. Lawyers advising the sector are now considering what opportunities exist to help such deals along, she said.
“It is likely that innovative deal structures may be required in light of the challenging market conditions," Ms Campion said.
“[The structures] will often involve a minimum upfront cash spend and other mechanisms that will bridge the value gap that has prevented numerous deals over the last few years,” she said.
According to the commercial lawyer, Allen & Overy invests serious time and energy in its relationships with local African firms to enhance its local market insights. The firm’s main hubs in the region include an office in Johannesburg, South Africa and Casablanca, Morocco.
Ms Campion travelled to Cape Town, South Africa, for the Indaba Conference last month, where she met with a range of clients and industry actors. She said that feedback from attendees about the state of Africa’s energy and resources sector was positive overall.
She indicated that South African clients in particular are currently interested in a new mining charter that is due out shortly and changes to the country’s black economic empowerment regime.
“Traditionally, we have done a lot of work with mining companies in Africa and in different African regions. And some of that has been because of Perth-based or Australian-based mining companies expanding into Africa and developing projects there, and will continue to do their work there,” Ms Campion said.
“But we also provide mining expertise on international transactions that have no link to Australia at all,” she said of the A&O Perth office.
“Traditionally there are a lot of synergies between Western Australia, South Africa and Africa in general,” she added.