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A growth of international activity in South Africa could prove a cash cow for corporate lawyers, writes Mike Yuille.
South Africa is set to become the next major emerging market for UK corporate lawyers if a long-fought deal to boost trade between the country and Europe is concluded this month.
The deal will create a Free Trade Agreement (FTA) covering markets as diverse as tinned tomatoes, steel, manufactured goods and platinum.
Crucially, the FTA will phase out import duties and other trade restrictions on South African goods, many of which stem from the apartheid era, as well as giving Europe greater access to South Africa's markets. It is estimated the FTA will be worth u12bn in new trade.
Europe is South Africa's largest export market, so the FTA should help to strengthen the country's economy and attract more inward investment.
For lawyers, the commercial attraction will be the growing international activity of South African companies.
"There will be scope for more legal work," says Andre Coetzee, managing partner of the London office of South African firm Mallinicks.
"If the FTA increases trade, it will have a beneficial spin-off for lawyers very soon, without doubt," he says
The FTA talks, which have rumbled on for four years, have often stalled because of the reluctance of the European Union to drop its protectionist measures, especially those relating to Europe's heavily-subsidised agricultural sector under the Common Agricultural Policy.
South Africa is the biggest supplier of canned fruit and vegetables to the EU, with more than half its exports destined for Europe.
However, South Africa has had to slash its agricultural subsidies under pressure from the World Trade Organisation, thereby increasing the disadvantages its exporters face, according to London-based campaign body Action Southern Africa.
Individual European states have also sought extra concessions from South Africa in return for agreement over core issues.
Spain, for example, wants to be allowed to fish in South Africa's territorial waters.
Despite the tough haggling, the FTA is an essential step for South Africa, helping it fulfil its longer-term ambition to boost industrial exports.
An FTA deal by the New Year would be well-timed for the country's businesses, when a growing number of its blue-chip corporations are seeking access to international capital markets by listing on the London Stock Exchange. A combination of both factors will help South African companies realise their ambitions to develop globally.
Mining companies Anglo American and Biliton have already moved their primary listings to London in search of funds to finance aggressive expansion. South African Breweries is set to follow soon.
Ed Southey, a partner in Johannesburg-based corporate firm Webber Wentzel & Bowens - which, with Linklaters, is advising mining giant Anglo American on its move to London - is heartened by developments.
"If there's substantially improved globalisation, it will also stimulate smaller companies here. For lawyers, there should be more work such as tax and corporate structuring advice, both here and in Europe," he says.
Some UK City firms have increased the amount of work they do for South African companies recently. But until now, few have regarded the country as a growth market.
No UK firm as yet has a branch office in South Africa. US firm White & Case is the only foreign firm to have established an office, but other international firms are expected to follow suit.
"It's likely that people will look more carefully at South Africa," says Tony Williams, managing partner at Clifford Chance.
"The FTA agreement is part of a general opening up of the South African economy, together with its companies investing outside the country and foreign companies looking to invest there."
He adds: "If that continues, then South Africa will become of greater interest to international firms."
But fears over growing social unrest and political uncertainty in the build-up to next year's presidential elections may have a negative impact on potential investment in the short term, in spite of the FTA.
However, some UK firms are already forming associations with South African lawyers to develop existing business links with Mandela's "Rainbow Nation".
Colin Fergusson of Stephenson Harwood - which recently hitched up with South African banking firm Routledge-Modise - is optimistic: "South Africa is an emerging market," he says.
"Hopefully, if the European markets open up, there will be increased export opportunities for South African companies. The more international the South Africans become, the more legal advice they will need in Europe."
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