Law firms across Africa are bullish about the prospect of increased workflows in 2021, which they believe could be boosted by the positive impact of Brexit, which completed on 31 December 2020.
They are confident that Brexit will lead to greater U.K. trade and investment than was forthcoming from indirect trade through their EU agreements, and that it will therefore generate more legal work.
The U.K. has already struck new direct trade deals with a number of African countries that were high on its priority list, one of the most recent being Kenya.
And as evidence that it values Africa as a trading partner, the U.K. Department for International Trade (DIT) is scheduled to host its virtual Africa Investment Conference on January 20.
Brexit will bring more positives than negatives to Africa, says Daniel Ngumy, partner at Anjarwalla & Khanna, in Kenya, and a member of the African Legal Network (ALN).
“Previously, trading with the U.K. through the EU was a lengthy process,” he said.
Kenya signed a direct trade agreement with the U.K. last month, which, unlike the terms of its existing EU agreement is not attached to quotas.
“Direct trading will create more opportunities for law firms in the U.K. and Kenya to collaborate.”
This will attract greater capital investment and provide more opportunities for exporting products and services, while opening up more sectors, said Ngumy.
A trade boom?
The absence of quotas will encourage U.K. investors to become more involved in the production of the goods they are importing from Africa, he said.
For example, a U.K. tea importer is more likely to set up a plantation in Kenya to gain more control over the supply of the product in the knowledge that there are no quotas.
“This in turn will mean more jobs for Kenyans, and greater investment in supply chain processes and technologies and skills transfer. Direct trading will also create more opportunities for law firms in the U.K. and Kenya to collaborate, in areas like rule of law, rules of origin, quality control, anti-bribery, and governance.”
He said, in essence the U.K. agreement with Kenya includes the trading of goods and professional services as well as technology and digital services, and the use of digital platforms to facilitate trading.
Although the agreement was signed with Kenya it also allows for other countries in the East Africa Community (EAC) to “latch onto the agreement,” said Ngumy.
“With Brexit, we will see a come back to the U.K. being a primary trading partner.”
“So, it will become an omnibus agreement to which these countries will sign an addendum, instead of having to go through the whole negotiation process.”
Nikhil Hira, director of Bowmans Kenya, pointed out that a large number of African countries were British colonies at one time and had a history of trading with the U.K. long before the existence of the EU.
“With Brexit, we will see a come back to the U.K. being a primary trading partner.”
In the past, the East Africa Community (EAC), which is made up of Kenya, Uganda, Tanzania, Rwanda, Burundi and South Sudan, had a blanket trading agreement with the EU.
“That agreement will remain, but the U.K. is now doing direct deals with individual countries like us, which should not affect their existing EU quotas.”
He says there is a sense of euphoria in Kenya about the new U.K. trade deal.
South Africa is also all set to trade directly with the U.K., thanks to an agreement signed with the Southern African Customs Union (SACU), which also covers neighbouring Lesotho, Botswana, Eswatini (formerly Swaziland), and Namibia.
“This is a shadow agreement that pretty much replicates the current benefits within the existing EU agreement,” said Daryl Dingley, partner at Webber Wentzel.
He said some African countries are ahead with signing or negotiating direct U.K. trade deals, probably driven by the level of their export trade.
“But a lot of them are not, and they could be left high and dry, especially if they are not preferential markets.”
Many of these countries are dependent on exporting similar agricultural products and minerals, and are unlikely to be high on the U.K.’s list as trading partners.
There is also the question of how the bilateral and regional U.K. trade agreements will impact the African Continental Free Trade Agreement (AfCFTA).
“In my mind the fact that the direct U.K. agreements are happening at a bilateral and regional level and not at an AfCFTA level undermines the African Union’s (AU’s) vision.
“What you really want is the bloc of 54 countries to be collectively engaging with the U.K.”
Africa has had four years to strategise about the potential impact of Brexit since it was first announced in 2016, and the African Union could have driven this, said Dingley
This would have provided a fantastic opportunity for the AU to push agendas such as economic diversification and establishing infant industries to beneficiate products as part of a broader agreement with the trading bloc.
Transitional mechanisms could have been implemented to ensure a smooth transition and identify where diversification is needed and encourage the U.K. to invest in certain countries to achieve that.
“But instead individual countries and regions are looking after their own interests, with none of these ideas incorporated.”
A win for law firms
What this all means for lawyers, of course, is a boom in work, as increased investment will create more need for legal services.
Dingley reckons that African law firms will benefit from increased workflows from advising clients on the new U.K. trading requirements, handling investment transactions and helping British companies to invest in the region.
“We might also be able to advise on the structuring of the trade agreements,”
Nigeria will be looking to sign an agreement with the U.K. in the coming months, according to Tayo Adetuyi, senior consultant at Brooks and Knights Legal Consultants in Lagos.
“Our country has had a relationship with the U.K. since colonial times in the 1960s.
“Nigeria has an advantage as Africa’s biggest economy, and I am confident that the U.K. will further its trade relationship with us. And I believe the U.K. will prioritse trade with Nigeria over other African countries.”
In 2019, total trade and investment between Nigeria and the UK was $6.9 billion, said Adetuyi.
Cocoa is Nigeria’s major export to the U.K., although it exports other agricultural products such as palm oil, rubber and cotton.
“And we import farm and factory machinery, electronics and medical equipment from the U.K.”
When Brexit was first announced in 2016, there was uncertainty over what it would mean to the African economy, said Adetuyi.
But it has been a few years in the making and there has been time for a proper assessment. Adetuyi said the general attitude towards Brexit is that the implications are not as apparent as those that revolve around AfCFTA.
“We do not see a blanket agreement happening between the U.K. and Africa as a whole through AfCFTA, which is focused on trade within the continent as opposed to international trade.”
Direct trade will make Africa more visible to potential U.K. investors than when trading with the country via EU agreements.
“We are very bullish about 2021,” says Adetuyi.
Louis Gitinywa, senior partner at Kigali Attorneys Chamber said Rwanda has no clear framework for a future direct agreement with the U.K.
“But my take on it is that Rwandan goods will still be allowed into the U.K. on preferential terms pending trade negotiations between the two countries.”
He said local lawyers can play a role in sensitising government policymakers on the need to enact at least a short-term agreement, to protect the interests of the country’s growing private sector.
“But first we will need to have a clear road map and strategy as to what Rwanda needs out of such an agreement.”
Right now the focus in the country is on more on gearing up for intercontinental trade through AfCFTA than on Brexit, said Gitinywa.
He added that the volume of trade between Rwanda and the U.K. is small compared with countries like Kenya or Nigeria or South Africa.
“So it will not be high on the U.K.’s priority list as a trading partner.”
However trade with the U.K. transpires over the coming years across the different African nations, what is crucial is that, to take advantage of these opportunities, lawyers upskill themselves, especially in areas like technological knowhow, and cross-border trade laws.
Though Adetuyi says “midsize and small law firms tend to be lacking in these areas,” clear winners will start to emerge over the next few years, with those well-prepared enough leading the way.