As Africa nears economic take-off, there are plenty of opportunities for law firms to enter the market
Emerging markets, particularly in Asia, have been the main focus of international law firms over the past several years, and for good reason. With slow growth in Europe and a tepid recovery in the US, emerging markets offer what law firm leaders seek most: above average growth.
In no place is this truer than in Asia. The combination of strong economic growth, an inflow of Western multinationals and the rise of strong domestic corporations has resulted in a decade of expansion by Western law firms into Hong Kong, Singapore and mainland China. While the attention paid to Asia is justified, law firm leaders should recognise that equally large, albeit longer term, opportunities exist elsewhere, perhaps nowhere more so than in Africa.
There is growing agreement among economists that Africa is on the brink of an economic take-off. Similarly to China in the late 1970s, before its three-decade boom, Africa is undergoing a transition from ‘strong man’ leaders to market-orientated technocrats. This has led to increasing political stability and more prudent macro-economic management. These changes have accelerated GDP growth throughout the continent, with countries averaging 6 per cent over the past half-decade.
Africa must not be treated as a single country and commodities, which are often the focus, are only part of Africa’s economic success story. An intense need to develop infrastructure and growing urbanisation are both significant opportunities. A number of Western multinationals, such as Vodafone and Unilever, are investing due to strong growth in telecoms and retail.
The depth of Africa’s economic growth has created several ways in which law firms can enter the market. In the transactions area, there are opportunities flowing out of the continent’s natural resources and infrastructure sectors. Another approach is through the need of governments for assistance creating legal frameworks, regulatory structures, and negotiating public-private partnerships. There is also a growing need for commercial services due to the increasing presence of foreign multinationals and the expansion of domestic corporations.
International law firms can learn valuable lessons from their experiences in Asia. An analysis of the Asian legal market reveals that the most successful firms in Asia have had an on-the-ground presence for more than two decades. The success of Baker & McKenzie is particularly illustrative. The firm has had a physical presence in Asia for over three decades, allowing it to build local knowledge and a strong reputation with clients and local law firms. The firm’s strategy of early entry and consistent investment has allowed it to build a formidable presence in Asia, with over 1,000 lawyers, 14 offices and top-tier rankings in the region’s key legal markets.
Despite the wealth of opportunities, risks remain. In some African markets political risk and economic volatility remain a concern. For this reason, firms must choose their market carefully and enter with clear strategies for short-term profitably and long-term growth.
Firm leaders should not be afraid to be bold with their Africa strategies. In the 1970s and early 1980s several firms decided to write Asia into their strategic plans. Many legal market analysts believed these firms were jumping the gun on a continent that was just beginning to develop. In retrospect, these firms saw what others didn’t and have been justly rewarded.
The same opportunity is currently available in Africa – the question is, which firms will take it?
John Cussons, director, Huron UK