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Uniform rules for Africa – A single investment destination

October 2014

At the dawn of Africa's rise to economic prosperity, we must ask how we move from the "continent of potential and opportunity" to becoming a continent of meaningful and significant contribution to the global economy.  Africa, as it currently stands, enjoys the status of being a primary target for inbound investment.  Though within this general view it should be asked, can Africa be seen as a single investment destination?

In reality, the continent of Africa is an extremely diverse conglomeration of independent states, which have historically battled for independence, stability and now a place within the world economy.  Though given the relatively small population of the vast majority of African states, a growing economy is not likely to be sparked or sustained without the much needed cash injection that is anticipated from foreign investors. 

While it may seem a very general statement, many investors view Africa as a single investment destination, without necessarily giving due consideration to the diversity that exists on the continent.  Enter OHADA (Organisation pour I'Harmonisation du Troit des Affaires en Afrique) in October 1993, in an attempt to drive economic interest in its member states, striving to combat the damaging impact diversity poses to foreign investment into the continent.  OHADA is a system of business laws created by treaty, intended to promote business between the OHADA member states as well as providing a stable platform for foreign investment to member states.

The OHADA model is one that has been shown to be a step in the right direction insofar as enticing foreign investment into Africa is concerned. However, it is worth examining whether this model (or one similar in nature) could be adopted across the continent, in an attempt to create a single uniform business platform.  In order to take the discussion further, consideration should be given to the regional approach being adopted by the continent and an understanding of issues arising from the inherent diversity that exists within the continent.

Language
In order for there to be a meaningful uniform business regime an official, spoken and working language would have to be determined.  OHADA has French as its official language with 14 of the 16 OHADA member states being Francophone countries.  The English speaking provinces of Cameroon have been most vocal around necessary reforms required in OHADA, specifically owing to this issue of language.  Apart from the countless indigenous languages, Africa has English, French, Portuguese and, to a lesser extent Spanish, as prominent languages practised on the continent.  Expecting Francophone Africa to convert to an Anglophone regime or vice versa is not a likely result, so the issue of language is in itself of immediate concern.  While OHADA's Uniform Acts (the legislative regime comprising the OHADA law) are all published in French as well as English, the English texts are wholly inadequate and of no force and effect.  The issue of language is an existing impediment challenging OHADA.

Legal system
OHADA has borrowed the core of its laws from French civil code.  This is not a mere transplant of the French law, but it is heavily influenced thereby.  Many African countries have over time adopted civil law, mostly through their colonisation over the years by the British, French Portuguese or Spanish, but many remain heavily entrenched in either common law or customary/traditional laws.  The "codification" of laws would be an absolute necessity for any successful uniform regime to operate, though for those states that have not experienced codified laws, it would be a difficult line to cross.  There would also be the necessity of requiring a system of taxonomy, whereby the unified law would override the national law of any member state.  States surrendering legal independence, even if only on business law, would be an extremely challenging prospect, given that independence through Africa's history has been a precious right that has been hard fought for hundreds of years.  This argument would necessarily need to extend further to encompass the prevalence of customary and religious laws in vibrant practise on the continent.

Single membership
Following on from the issue of an overriding law, it would be necessary to ensure that there could only be a single regime to which the member states may be party.  This begs the question of what would happen to the existing relationships under development through the likes of COMESA (Common Market for Eastern and Southern African Region), ECOWAS (Economic Community of West African States), EAC (East African Community), SADC (Southern African Development Countries) and others.  Significant time and money has been spent on developing the visions of these groupings, though the decisive achievements envisioned by them have yet to be realised.  A consolidation of efforts is more likely to achieve the goals set by the individual member states of the above groupings, with the ability to focus time and spend on a single preferred regime.  However, risk of alienation from non-member states may be too strong a political rationale to exclusively commit to such a regime.

Sector-driven growth
In order to develop relevant, modern and sound business laws, a focus on the critical growth industries would play an important role.  For example, states in which on-shore natural resources are abundant may not necessarily require or benefit from rules or laws that are more focused on off-shore industry or economies whose growth lies in tourism or financial services/corporate expansion.  Other than the traditional natural mineral resources that Africa possesses, alternative growth industries in the form of retail commerce, transportation, telecommunications and manufacturing are increasing in importance and, if properly managed, could become the backbone of sustainable economy in Africa.  

A regional approach to business uniformity and meeting the economic objectives to which many African states aspire is the most realistic approach.  A common geographic regime would be aided by the comparable language, legal systems and growth sectors (though not in all cases).  The impact that the EAC and ECOWAS has had on the psyche of investors is undeniable, it is just a matter of common commitment that would launch these platforms to achieve their ultimate desired goals. 

Presently African states feature prominently in the global top 10 GDP growth statistics, though what is of interest to note for current purposes is that all the regions (South, West, East and Middle Africa), and not just those with strong regional clusters, are represented in this positive growth story.   There is no evidence of outstanding performance by OHADA member states, though the growth nonetheless enjoyed by them, may be in part attributable to OHADA.

In conclusion, a uniform rule of business law is theoretically the way forward for Africa as a whole to benefit from the investment boom that it is experiencing, however, the notion of a single business law regime for the entire continent is not a reality.  The closest that one may get to harmonisation would be on a regional basis, and should this indeed be the case, East and West African states are best placed to take first mover advantage (notwithstanding OHADA).   Nonetheless, with a common vision, political will and financial commitment, Africa would be well placed to take advantage of this golden era in its economic progress.

The team

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