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Frontier Africa: Golden opportunities for Australian lawyers

Frontier Africa: Golden opportunities for Australian lawyers

For Australian lawyers, it doesn't get more complex, contentious or dangerous than working in the African resources space. Those who do, however, are playing a significant role in the…

For Australian lawyers, it doesn't get more complex, contentious or dangerous than working in the African resources space. Those who do, however, are playing a significant role in the development of the world's most troubled continent. Claire Chaffey reports

Africa's golden age: Sunset at Savuti, Botswana/Photograph by Mark Roberts
When a light plane carrying six board members of Perth-based mining company Sundance Resources crashed in the Democratic Republic of Congo (DRC) in June last year, killing everybody on board, it was a stark reminder that the business of mining, especially on the world's least developed continent, can be a hazardous one.

For Western Australia's tight-knit resources community, it was an absolute tragedy - and for many, the notion that doing business in Africa is "an adventure" was suddenly crushed beneath a sad reality.

For Perth-based Clayton Utz partner and head of resources Gary Berson, the Sundance disaster was a wake-up call. "One of the biggest issues we face when working in Africa is the safety of air travel. It's not great," he says.

"We have to be really careful and make sure we send people as safely as possible. I have had a few really bad flights and you just think it is a bit of an adventure. But when the Sundance crash happened, it brought it home that Africa is a place where the age of the planes and the maintenance isn't fantastic. That's the reality of it."

But if there is one thing Australian mining companies - and their lawyers - are not known for, it's their aversion to risk-taking, and the tragedy has done nothing to curb their interest in undertaking new and groundbreaking projects throughout Africa.

Figures recently released by the Department of Foreign Affairs and Trade indicate that Australia's commercial interests in Africa's resources sector have tripled since 2005, and Australia's mineral and resources companies now have more projects in Africa than anywhere else in the world.

Current estimates put the total value of Australian investment at $20 billion, with 143 new projects commenced in 2010 alone. The total number of projects is 595, spread across 42 of Africa's 53 countries.

"I don't think we should underestimate the entrepreneurial spirit of Australian miners," says Paul Schroder, a senior associate at Mallesons Stephen Jaques and former partner of South African firm Bowman Gilfillan. "Fortune favours the brave, and Aussies are certainly brave."

Lighting up the dark continent

Africa's resources boom has propelled the continent - historically plagued by poverty, corruption, underdevelopment and conflict - into a new and exciting era.

A 2010 McKinsey Global Institute report shows that three of the world's 10 fastest-growing economies over the past five years were in Sub-Saharan Africa, and the International Monetary Fund has predicted that four African nations will be among the top 10 fastest-growing economies over the next 10 years.

The past decade has seen the end of civil wars in Liberia, Angola, Burundi, Rwanda, Sierra Leone and Mozambique, and democracy has slowly been replacing violent coups and dictatorships.

At February's Mining Indaba held in Cape Town, South Africa, Australia's High Commissioner to South Africa, Ann Harrap, said: "The environment has never been better to realise Africa's potential ... Africa is on a growth trajectory and now is the time to have confidence in Africa's future."

In short, things are looking up for Africa, and Australia's junior and mid-cap explorers have certainly heeded this message.

"I don't think we should underestimate the entrepreneurial spirit of Australian miners. Fortune favours the brave, and Aussies are certainly brave"

Paul Schroder, senior associate, Mallesons Stephen Jaques

To them, Africa holds an obvious allure: commodities are in high demand; Australia's mature mining market means there is a rare depth of talent but limited opportunities for junior explorers to make their mark; and many African nations house huge mineral reserves but have limited capacity to extract them.

Put simply, Australian mining and resources expertise is needed and there is potential for good commercial outcomes for both Africa and Australia.

A golden opportunity

Behind every mining company is a very committed lawyer, and there is a growing pool of legal advisors willing to take the same risks as their clients.

While firms such as Clayton Utz and Perth-based boutique Blakiston & Crabb have been involved in African projects for decades, the likes of Mallesons Stephen Jaques and Blake Dawson are also responding to client demand for services in Africa.

"There has been a significant demand for services in relation to African investment, and we are helping our clients do transactions either in Africa or with a strong African flavor," says Shroder.

"As a firm, we have seen this opportunity and we are taking it seriously. We are putting our money and our people behind our mouths on this one."

The roles taken by legal advisers vary, with some acting as international counsel and advising African lawyers on how to deal with multinational giants and others, like Michael Blakiston, managing partner of Blakiston & Crabb, taking a more hands-on approach and spending around three months every year on the ground in places from the DRC to Guinea, Ghana, Equatorial Guinea, Malawi and Namibia.

"Australians are risk-takers. I am forever running into Australians travelling into various parts of Africa," he says. "I suppose I am an example of that. I'm a lawyer, so why aren't I just wearing a dark suit and staying in the city in Australia? I am happy to get out and use the skills that I have developed, like many contemporaries, and go into Africa and develop [a project] for the sake of that country, and also for the sake of Australia."

Deciphering the law

Often, lawyers looking after their clients' African interests are venturing into legal territory never before explored. One of the most challenging aspects, says Blakiston, is working within legal frameworks that are insufficient for what is required.

"In an African environment, it's not uncommon to be doing something that has never been done before," he says. "Often you are working with laws that have not been designed to do what is required. That creates some real challenges."

Schroder has had similar experiences. "Sometimes there are provisions in the laws that have never been used before. If you want to do a capital raising or a scheme of arrangement, many countries use the legislation from their former colonial masters," he says.

"The provisions are there, but the local lawyers have no experience of implementing them. We walk them through it by saying that in our jurisdiction, which is also based on English law, our experience of this problem is as follows. We work with the local lawyers. It's all about relationships."

"There used to be a belief that you could hide things ... a bit like saying you can do things at a different level in Africa than you can in a developed country, such as your treatment of the environment and the people. That is dinosaur thinking now"

Michael Blakiston, managing partner, Blakiston & Crabb

The nuances of Africa

Those who have been to Africa say it is a continent like no other, and, according to Blakiston, acting for clients with interests in Africa requires a genuine appreciation of African culture and the nuances of the country in which you are working. This, he says, is not something you can pick up in a textbook.

"You can be a very good technical lawyer and, in a developed economy, you can do very well. The challenge for lawyers is, 'How do you operate in a less-developed environment?'" he says.

"Africans - and that is a very broad statement - communicate in a way that is different to how we do; their problem-solving is done differently. We can appreciate, when dealing with Chinese or Japanese or Koreans, how they react socially, how they negotiate and what their level of knowledge and competency is. But Africa is somewhat different. They do things differently and that has got to be respected."

Part of developing this understanding, adds Blakiston, is respecting that Africa's colonial past may affect peoples' perceptions about what mining companies want to achieve and what the outcomes will be for local communities.

"Depending on where you're operating, you've got a history where colonialism may have clouded peoples' views on what a company, which is not an African company, may be proposing to do. 'Is it another form of use and abuse of the local people?' There are elements of that which can come through," he says.

Blakiston admits that, in the past, there have been cases where the standards adopted by mining companies were less than ideal. "There used to be a belief that you could hide things, and that was almost an accepted practice; a bit like saying you can do things at a different level in Africa than you can in a developed country, such as your treatment of the environment and the people," he says.

"That is dinosaur thinking now. You've got to have the world's best practice. With the world the way it is now and communications the way they are, people with various interests will be analysing what you do. It's not just a case of the banks or the government of the country looking at it: there are shareholders and NGOs taking an interest.

"And for good cause, in some cases, because there have been some terrible examples of corporate failings where, if they had happened in a developed country, there would have been all sorts of ramifications. It helps keep everyone honest."

Getting serious about CSR

Today, keeping everyone honest is a task wrapped up in numerous international instruments designed to ensure that mineral wealth does not end up in the pockets of a corrupt few, and instead goes towards desperately needed development.

One such instrument is the Extractive Industries Transparency Initiative (EITI), which aims to strengthen governance by improving transparency and accountability in the mining sector and develops standards promoting revenue transparency at the local level.

Berson says he spends a lot of time ensuring that his clients meet the EITI standards and don't fall foul of foreign corrupt practices legislation. Most companies, he says, also adhere to the Voluntary Principles on Security and Human Rights (VPs), which were created in response to the concerns of governments, mining companies and civil society over operating environments that created challenges to security and human rights.

"You have to make sure that the company complies with all the environmental and employee issues that are within the international instruments, from board level down," says Berson.

"In my experience, our clients are very committed to corporate social responsibility [CSR]. They are often working in isolated communities and become very involved in trying to help and making sure they are leaving something behind. "From board level right down to employees at low levels, it is amazing how much people get tied up in the local communities. It's impressive once you see it."

Corruption, however, is still a very real problem in many African nations, especially those struggling under the weight of dictatorship. Blakiston cites the recent example of the commissioning of a $380 million boat by the son of Equatorial Guinea's dictator, Teodoro Obiang, who took power in a violent coup in 1979.

The tiny African nation has huge oil reserves and, while the son denies he has been siphoning oil money, the boat's value is three times the amount spent on education and health every year, and is a clear example of the excesses that can occur off the back of mineral wealth.

"That's where things go wrong. Clearly, money is being generated; money is being put into the country. What happens to it after that?" he says.

"It's just appalling. What the people may ask is, 'What benefits have we got from all this oil wealth? What level of social involvement do the oil companies have? What level of responsibility?'"

"Australian mining companies have developed fantastic expertise over the years and have spread to places where there are more opportunities, and it would be fair to say the Australian legal industry is beginning to do the same thing"

Gary Berson, partner, Clayton Utz

Broadening horizons

As long as Australian miners continue to invest in Africa, their lawyers will be right behind them. And, according to Schroder, there are no signs that Australia's reach into the continent will cease any time soon.

"We see the investment expanding in new and different ways," he says. "Given that we have a strong presence in China and Hong Kong, we are getting a lot of enquiries from Chinese clients looking to do business in Africa. The Chinese are often funding projects, whereas Australian companies are acquiring and running the mine. There seems to be no end to the growth."

However, it seems that Australian firms are reluctant to set up shop in Africa just yet.

"It is a new frontier, a growing frontier," says Berson. "Australian mining companies have developed fantastic expertise over the years and have spread to places where there are more opportunities, and it would be fair to say the Australian legal industry is beginning to do the same thing.

"But there are some really good South African firms and local firms in other African countries, so in the medium term it's more likely we will work in conjunction with those firms rather than open an office there."

But from wherever they are working, the difference Australian lawyers are making to both Australia's and Africa's economic future cannot be ignored.

"The reality is that our clients are employing thousands of people and putting millions of dollars into social development, and I think they are making a real difference in many African countries," says Berson. "Hopefully, we play a small part in that as one of the industries that services our clients."

Schroder agrees. "There is a desperate need for development in Africa, and this is a wonderful opportunity to fund that development. It's funding not as a handout, but on commercial terms. It's a great opportunity for Africa."

>> Related article: Crossing the continent for a cause: DibbsBarker's Steve Cartwright

Read our profile on the Sydney lawyer who journeyed 34,000 kilometre around Africa to raise much-needed funds for a children's charity ... read article

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