Black charter spells boom for South Africa’s law firms

A black ownership push in the finance sector is welcomed by international firms.

On 17 October, the South African financial services industry released what has been described by the Black Business Council as “the mother of all charters”. The financial services charter, like the mining industry charter that was released in March, will see a radical overhaul of the way the industry is run. And it will bring a host of work for law firms – both local and international.
The charter was drafted by the industry and applies to all South Africa’s banks, insurers, reinsurers, fund managers and brokerage units. It envisages that the sector, which accounts for nearly one-fifth of South Africa’s GDP, will be 25 per cent black-owned by 2010. It also states that by 2008, 33 per cent of board directors and 25 per cent of executives should be black.
But it’s not just ownership and staffing that will be affected – companies and institutions will be able to gain points towards the black empowerment scorecards by using black-owned companies when procuring services, or by outsourcing work to black-owned businesses.
Ratings agency Empow-erdex reports that, based on preliminary studies, the charter could pump up to R217bn (£18.4bn) into the economy.
Like the mining charter, the financial services charter also affects international companies and institutions – although certain exemptions may apply to the ownership and governance rules. Accordingly, this means work for international as well as local law firms.
“We see a number of foreign firms, mainly UK-based, pitching for work here,” says White & Case partner Steve Raney – although he notes this is not only as a result of the recent charters.
Linklaters has already got in on the act. Working with local firm Jowell Glyn Marais, it advised South African bank Investec on the sale of 25 per cent of its Johannesburg-listed stock to several black investors. Linklaters has also advised a number of its clients in relation to the black empowerment of the mining industry.
Investec has been the first big financial institution in South Africa to take steps towards black empowerment, with the other big banks still to follow suit.
But it will also affect the international banks that have been coming back into the market. Barclays, for example, has recently re-entered the South African market and is currently holding a tender for local firms to join its panel. Standard Chartered is also understood to be making a push in South Africa.
But while there has been considerable activity in the South African market, there is still hesitation on the part of international law firms to launch there.
“The discrepancy between the rand and the dollar or pound makes it uneconomic to staff offices with New York or London lawyers,” says Raney, who is based in the firm’s two-partner Johannes-burg office.
That aside, Canadian mining firm Fasken Martineau announced it would launch in the region early next year, and Brazilian firm Marcondes Advogados, which has offices in South America and the US, took over a small Cape Town practice in January.
Meanwhile, White & Case, LeBoeuf Lamb Greene & MacRae and Masons all maintain a small presence in the region.
White & Case has had a base there for the longest time – since 1995 – but the office has never expanded significantly. “The rush into privatisation has not materialised at the speed at which the firm anticipated,” Raney said. However, Raney added that the firm was now looking to increase the amount of its African work.
The introduction of black empowerment will not only affect lawyers’ clients – it will affect law firms themselves.
“South African law firms will probably be subject to a charter by 2008,” says Cliffe Dekker partner Kevin Lester. It is understood that already industry bodies are looking at ways in which the industry can self-regulate.
And there is another impetus for law firms to increase black ownership and staffing levels: procurement. Both charters state that companies can gain credits for black empowerment targets by procuring services from black-owned or black-empowered companies or service providers.
The financial services charter, for example, outlines a target of 50 per cent procurement from ‘black companies’ (BC), ‘black empowered companies’ (BEC) and ‘black influenced companies’ (BIC) by 2008, and 70 per cent by 2014.
The charter defines BC as a company which is 50 per cent black-owned, BEC is 25 per cent black-owned and BIC is five to 25 per cent black-owned.
As a consequence law firms with a higher percentage of black directors (or partners) are more beneficial to clients trying to meet their black empowerment needs.
“We’ve doubled our number of black directors in the past three years,” says Lester. Most of the larger firms now fall into the BIC category – but all firms recognise a need to improve.
Werskmans partner Gareth Driver shares the views of many when he says: “For all law firms it’s a fairly slow process. We can’t just hire black staff and solve the problem that way – we need to develop their skills. It’s something that we are working on and to which we are devoting resources.”
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the company famous for managing high-profile sporting personalities. Since last Wednesday (22 October), Shear has also been acting for sprinter Dwain Chambers on his doping allegations.
Shear acts for Newcastle United FC and Watford FC, but his main sporting practice is for individual sportspeople, including tennis players and athletes, along with the footballers. Alongside 5 Raymond Buildings libel barrister David Sherborne, he is also advising Manchester United FC player Rio Ferdinand on his travails with the Football Association following his missed drugs test.
Shear, however, insists that he is not a sports or media lawyer, but rather a commercial litigator with an interesting and high-profile sideline. His comprehensive client list includes property investors, telecommunications companies and major corporates in the Cuban music industry.
“My commercial clients are very demanding and I give them the time that they need. What I love about this job is that I can be working on a major administration or a telecommunications case one minute, and then I’m back working with sportspeople or television personalities. Sport and media is about 30-40 per cent of my work,” he explains.
Whatever Shear calls himself, most media lawyers would give their eyeteeth to be on the Grosvenor House case, which is turning out to be groundbreaking.
It was Shear, again instructing Sherborne, who persuaded the Attorney-General to intervene in the case to tell newspapers not to name the two footballing clients who were interviewed by the police. This unprecedented step is likely to influence the new Sexual Offences Bill, currently winding its way through the House of Commons. It could end up demanding anonymity for anyone interviewed in connection with a rape.
Shear and Sherborne also took the unprecedented step of contacting companies with servers carrying email traffic that circulated the names of players suspected to be involved in the rape and shutting those servers down.
This was an exciting and novel step, but you have to question its logic. Excuse the amateur sociology, but what is an email anyway? An extension of innocent social chitchat, or a published communication equivalent to a letter, a newspaper article or a book? The average call centre worker gossiping about football with his mates on the work email would hardly call himself an author, but Shear disagrees.
“This [email] is not a conversation that’s only capable of being heard by one or two people. It’s not speech, it’s writing that’s capable of being viewed by millions,” he argues. “You can’t stop water cooler chat, but at least you know there’s a limit on who people are speaking to. If one email is sent to another eight to nine people, then the thing grows exponentially, and that’s when you get into the area of defamation and people’s reputations being damaged.”
Whatever the arguments, this is an emerging area of law and Shear is likely to find himself thrust on to the media lawyers’ seminar circuit to talk about it quite soon. This may not be ideal for a lawyer who likes to keep an incredibly low profile. Several well-known media lawyers quizzed in preparation for this interview say they do not know who he is. On being told of his track record, though, one managing partner of a mid-sized entertainment firm said he would be keen to offer Shear a job. But the man himself is loyal to Teacher Stern.
Shear is only 40 but is one of the most senior lawyers at his firm. He is one of the firm’s three-strong management team and chairs partnership meetings, although he has no official title. He also likes the variety of work, from property and insolvency to footballers, which he believes another firm could not give him.
“How many partners in other firms would allow me to work in this variety of areas?” he asks. “That freedom is incredibly important if you like being stimulated by different challenges. The people here are a great bunch. It’s a young practice and one that I’ve helped build up.”
So, this low-profile lawyer who works out of a tiny Holborn firm, where he is considered a general commercial litigator, is happy to stay put. Lucky Teacher Stern. But I suspect there are going to be more than a few offers on the table. Should he change his mind, he could at least end up somewhere with in-house catering.