A tough nut to crack
9 February 1997
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South Africa's long exile from the global stage does not mean its legal market is a pushover, says Ravinder Chahal. Ravinder Chahal is a freelance journalist.
The abolition of apartheid saw South Africa reopen its doors for business with the world once more. After years of being sidelined, its lawyers are now playing in the global league, while at home the profession is experiencing a mini-revolution of its own.
Justin Hardcastle, managing partner of Cape Town firm Mallinick Ress Richman & Closenburg's London office, says the legal scene in South Africa is maturing in a way that will seem familiar to UK practices. An elite top tier of four or five South African firms has developed, he says, with some firms becoming national concerns, and others focusing on niche practices. In addition, since the republic's first multi-party elections in 1994 there has been an increased overseas emphasis.
There are about 5,000 firms in South Africa, the vast majority of which have fewer than 10 partners. Most practices confine their interests to one city with the top commercial firms being based in Johannesburg, South Africa's hub of commerce.
Pretoria, where the Patent and Company Register is based, and Durban, a centre for shipping, are legal centres in their own right. However, Cape Town is where there has been the biggest growth in firms in recent years. The merger of Johannesburg practice Hofmeyr and Cape Town firm Herbsteins in March this year to form Hofmeyr Herbsteins, reflects what some analysts have described as a step towards a more national emphasis. Others see it as part of the more specific phenomenon of "semi-gration" - the shift of businesses and people from Johannesburg to Cape Town.
Hardcastle says that link-ups - usually through the formation of associations - between Johannesburg and Cape Town firms are a part of the process of firms' developing national practices. Mallinicks itself is linked by association to Johannesburg firm Rabin van den Berg & Pelkowitz.
Patrick Bracher, Johannesburg-based partner at Deneys Reitz, one of the two largest firms in South Africa with about 130 fee earners, says the major phenomenon since the election has been "boutiquing" where lawyers have left major firms to go it alone.
"People in their 40s find they are generating more fees for a firm than they are drawing out," says Bracher. "They have established a strong client-base and think they can make more profit by setting up on their own," he says.
The decision to go solo is made easier by the high demand for legal services and a shortage of lawyers. Bracher says: "Commercial departments have suffered attrition as lawyers have emigrated due to the political instability in the past and there is now a shortage of good commercial lawyers."
The historical situation has not helped either, with blacks finding access to the profession difficult. But affirmative action programmes, coupled with constitutional changes which enshrine a bill of rights, are a major source of work and a catalyst for change. For example, all government work now comes with the stipulation that firms should be committed to taking on black lawyers.
Bracher says that although it will take a few years for these new lawyers to qualify, there is a "good fast track for black lawyers which will also alleviate the current shortfall".
The only foreign firm practising in South Africa is US firm White & Case. Uk firms have well-established links with the country and a number, including Clifford Chance, Allen & Overy and SJ Berwin & Co, have been tipped to open offices in the republic. Jonathan Metliss, a partner at SJ Berwin & Co, thinks others will follow White & Case's lead in due course. This may, however, take some time.
Hardcastle predicts White & Case will be the sole foreign firm in south Africa for some time despite the interest others have shown.
"Firms may have over-estimated the amount of potential work in South Africa and under-estimated the level of local skills. In terms of the legal marketplace, South Africa is a tough nut to crack," he says.
He says some firms welcome White & Case's arrival: "After years of isolation we want to be part of the world again."
South Africa is still seen as a gateway for the rest of Africa because of its superior infrastructure and legal services. More multinationals are expected to set up in the region and Bracher points out that large firms with multinational clients to serve tend to follow their clients. He thinks South African lawyers do not need to fear the competition because multinational law firms with multinational clients will help put "SA back on the map again".