It is surprising that a year after US firm White & Case set up an office in Johannesburg, no US or UK law firm has followed suit.
Peter Finlay, partner with overall responsibility for South Africa in White & Case's London office, says: “Every firm has different aspirations. We have a track record of commitment to emerging markets and we prefer having people on the ground. It's a question of culture. We are not in Spain, but Clifford Chance has 30 people there. We are in Helsinki when no one else is.”
The US firm is specialising in infrastructure projects and capital markets work. It has four lawyers in situ: two partners and two assistants.
Finlay says: “It is a restricted practice and there are many things we can't do, such as employment, partnership, and litigation. We are not pretending to offer a full service operation.”
Competitors believe White & Case has gone in early to find privatisation work. Finlay is enthusiastic but says: “We won't be seeking to buy our way in.”
The received wisdom is that other firms will follow White & Case, but there is a wait-and-see attitude. South African firms report parades of English firms through their doors, seeking to develop contacts.
The roll-call of UK firms doing business in South Africa is as would be expected: Clifford Chance, Linklaters & Paines, Slaughter and May, Allen & Overy, Ashurst Morris Crisp, Macfarlanes, Norton Rose and SJ Berwin are the names most frequently mentioned. Berwins have picked up work as the result of a sustained marketing push, whereas Linklaters and Clifford Chance have long-standing links with South African firms.
And smaller firms, often as a result of membership of an international network, have associate offices in South Africa. For instance, Mackrell Turner Garrett has two assoc iate offices there. Mackrells partner Martin John says: “Work passes between us but it tends to be us acting for their clients rather than the other way around. We do some litigation, some company/commercial and some probate, but there's not a great deal of it.”
Ashurst Morris Crisp is one City firm that has taken an active interest in South Africa. Ashurst's head of tax, Steven Machin (who also has responsibility for South Africa), says: “We have been working on South African business since 1992. We did all the non-South African aspects of the GenCorp unbundling. We have been buying for UK clients in South Africa and acting for South African companies investing outside South Africa.”
But the question of why no English firms have opened in South Africa remains.
John Herholdt of South African attorneys Maitland & Co in London, says: “My understanding is that UK and US firms tend to open offices in countries where the level of sophistication is not capable of dealing with international work. South Africa is already a sophisticated legal system, so the opportunities for competing profitably are substantially fewer. You don't need an office to do privatisation work as a local firm has to be involved.”
South Africa is certainly not a typical emerging market. As it is a Commonwealth country, there are ties between UK and South African firms which stretch back many decades. For instance, partners in Bowman Gilfillan have also been partners in Linklaters & Paines.
South Africa is often seen as a gateway to the rest of Southern Africa, but opportunities for lawyers are limited. David Anderson, a partner at Bowman Gilfillan Hayman Godfrey in London, says: “We do do work in Zimbabwe, Namibia, Tanzania and Kenya, but it is not easy.”
Crime and instability are still causes for concern. Apart from anything else, they are dampening investment which would otherwise provide work for UK lawyers. And firms do not want to send their people out to potential trouble spots.
There are other reasons why firms may be holding off. Herholdt says: “With the rand weakening, it is inexpensive to set up shop in South Africa at the moment, but the other side of the coin is that you are taking out your profits at seven rand to the pound. And UK lawyers will not want their incomes to be generated entirely in rand, with the currency continuing to weaken.”
Another worry is that if a number of firms go in, there will not be enough work to support them. However, most South African lawyers believe it is only a matter of time before the UK and US presence is stepped up. And the potential invaders' motives are already being questioned.
Herholdt sees a likelihood of UK firms making mischief: “Of course they're a threat. When there is insufficient international work around they will start looking at means by which they can attract local work. But then in London, UK firms have always had to live with firms descending on them.”