Rich with mineral wealth and with a flourishing renewable energy market, South Africa is providing law firms with an increasingly valuable gateway into the thriving Sub-Saharan region. Briana Everett talks to Australian lawyers working in the Rainbow Nation. 

With 25 per cent unemployment and a polygamist president who has fought off a rape charge and a US$4.8 billion arms deal allegation, you’d be forgiven for assuming that South Africa is just a struggling middle-income economy, plagued by an unstable political climate.

But despite its ongoing political issues and continued struggle to recover from the global financial crisis, the world’s largest producer and exporter of platinum remains a hotspot for lawyers working in mining, commodities, infrastructure and, more recently, renewable energy.

Chinese whispers

While the majority of the global legal profession has kept its focus fixed on Asia, countries such as China are quietly keeping their eyes – and hands – on South Africa and the greater Sub-Saharan region.

Chinese interest in South Africa is continuing to increase rapidly, with trade between them increasing by 77 per cent in 12 months, from $125 billion in 2010 to $155 billion in 2011.

And China’s close relationship with South Africa, evidenced by its 20 per cent ownership of South Africa’s largest bank, Standard Bank, is set to grow even stronger, with President Zuma recently making a number of state visits to China. He met with Chinese President Hu Jintao in March and encouraged China’s investment in South Africa’s billion-dollar infrastructure revamp.

“I call it the ‘triangle of investment’ between North Asia, Sub-Sahara and South Africa, and Australia,” says Melbourne-based DLA Piper partner Damian McNair, who heads the firm’s Asia-Pacific finance and projects group and is currently advising on a series of renewable energy projects in South Africa.

“There is huge Chinese interest in the Sub-Sahara and South Africa … North Asia is investing in Australia; Australia has got reference projects and they’re investing in South Africa. The triangle just goes round and round.”

While Asia still attracts most of the attention, McNair says South Africa has a burgeoning energy market with plenty of opportunity for lawyers, minus the competition.

“Asia is a hard market; it’s so competitive. But South Africa at the moment is a market that is just opening up. It’s a well-serviced market but they’re looking for that international expertise,” he says. “I think [South Africa] is an easier source of revenue than Asia at the moment, for our group, because Asia is so competitive and so over-serviced. For me, it’s a great opportunity.”

Travelling to South Africa almost every fortnight, McNair has observed an internationalisation of the South African legal market, similar to that seen recently in Australia. He says South Africa is increasingly looking beyond Africa for international expertise, while the big global firms are starting to realise the opportunities on offer.

“I think South Africa is a market that is going to end up the way that Australia is going … There has been a generational change in the legal services market in Australia and we’ve seen what’s happened with us [DLA Piper], Norton Rose, Clifford Chance, Allen & Overy, and now all the recent stuff in the last few weeks. That is going to happen in South Africa. It’s starting to happen.”

Reaching out

As South Africa’s legal market increasingly becomes more international in its approach, it is also providing a launch pad for firms looking to take advantage of the growing opportunities across the greater Sub-Saharan region.  

Regardless of the type of energy and resources work, Gilbert + Tobin partner Michael Blakiston, who spends 100 days of the year in Africa, says South Africa is important for firms and clients looking to establish themselves throughout the rest of Africa.

“South Africa is an interesting one in that it’s a springboard to Sub-Saharan Africa. Number one, its location and its industry, and now it has a very sophisticated financing industry,” says Blakiston, whose firm predominantly acts for Australians doing business in South Africa with respect to gold, platinum, diamonds and manganese.

“So, although you might be doing projects in another part of Africa, the South African financing component is very much part of that, so it has an extra-territorial reach.”

    Michael Blakiston, partner, Gilbert + Tobin

Highlighting the $300 billion pledged by the South African government to the country’s infrastructure industry over the next five to 10 years, Rob Otty, the managing director of Norton Rose South Africa, predicts a “huge spike” in activity as clients establish projects across the Sub-Saharan region.

“Mining and resources generally speaking is a big play for us, bearing in mind that, from South Africa, we don’t see it just as South Africa but as Sub-Saharan Africa, so we’re involved in that entire region and wider parts of Africa,” says Otty.

Similarly, Melbourne-based Baker & McKenzie partner John Mollard, who heads the firm’s Australian China Group and travels to Africa regularly, has observed the increasing importance of South Africa in terms of its links to the rest of Africa.

“In terms of investment into the rest of continental Africa, South Africa has become an important launching base. We have many clients, including mining companies, financiers, trading houses and equipment and services suppliers who have established offices in South Africa for the purpose of penetrating the greater African opportunities,” he says.

“South Africa will continue to be a strong market for law firms. We have seen a couple of English firms and US firms enter the local market through merger and we expect this will continue. The recent changes with respect to the Australian legal industry are likely to be repeated there.”

According to McNair, more and more projects in South Africa and the Sub-Sahara are done under English law, rather than South African law, particularly in the renewable energy industry, thereby creating more opportunities for English-qualified lawyers, like him, who work for global firms operating in the region.

McNair and his DLA Piper colleagues, including Brisbane-based partner Stephen Webb and Kieren Whyte, the director of projects and infrastructure at DLA Piper’s alliance firm DLA Cliffe Dekker Hofmeyr, have been working together to take advantage of the energy-related opportunities in South Africa, with McNair and Whyte pitching for work on a joint venture basis.

“Clients [in South Africa] are not necessarily looking at London,” he says. “They want a differentiator, not the London city firms.”

Feeding South Africa’s increasingly global outlook is its growing reliance on the expertise of Australian energy and resources lawyers in relation to much of the mining and infrastructure work going on in the area, especially with respect to the number of pit-to-port projects underway. And as McNair points out, Australia and South Africa share many similarities, both economically and culturally.

“There is a significant amount of work [in South Africa] on the energy and natural resources side. Australia has a very comparable economy in so many respects,” he says.

              
                             Damian McNair, partner, DLA Piper

“There are no cultural issues there. I think South Africans and Australians and their personalities are very, very similar … The economies are so inextricably linked. We’ve done some research and there are more than 200 ASX-listed companies that have invested $20 billion over the last 10 years.”

Renewed energy

Although South Africa is looking to Australia for its mining and natural resources expertise, McNair and Webb highlight the lack of Australian lawyers present in South Africa’s thriving renewable energy market.

“We’re working on 51 different renewable projects and we’re across all of those from Australia with our colleagues in South Africa,” says Webb. “It’s all happening. Everybody is down there but I’m not aware of any other Australian law firm that is working there at the moment, so the only other firms we’re coming across are South African and English firms.”

Like DLA Piper, McNair suggests other global firms like Norton Rose should also be sending their Australian resources to South Africa.

“I think it’s hard [for Australian lawyers to do work in South Africa] if they don’t have a global firm … I’ve told the Norton Rose guy over there that he should get in contact with [Australia-based Norton Rose lawyers]. I think the Melbourne office of Norton Rose have got a good pedigree. They should be going over there,” he says.

As the managing director of Norton Rose’s South African branch, Otty is well aware of the growing opportunities in the renewable energy space and says utilising the Australian expertise of the Norton Rose Group is a key priority for him and his team in 2012.

“At the moment, the activity levels in South Africa in renewable are absolutely incredible. I probably have about 50 to 70 lawyers at any given time working on renewable energy projects, including lawyers not just in South Africa, but we’re calling on resources from the entire Norton Rose Group,” he says.

“Obviously the benefit we have is we have got access to a huge pool of Australian talent, of guys that have actually done a lot of what we’re doing now … So we’re actually pulling on that resource, so we’re using a lot of Australian expertise.”

Fuelling South Africa’s renewable energy market is the Government’s recently launched Integrated Resource Plan (IRP), which is a 20-year national electricity plan, aimed at ensuring sustainable development through the identification of investments in the electricity sector. As a result, there is growing interest in the region from international developers.

Under the new renewable energy policy, a renewable energy feed-in tariff was introduced whereby the Government purchases output from qualifying renewable energy generators at predetermined prices. 

McNair and lawyers from DLA’s Australian practice are the only Australian lawyers advising on South Africa’s landmark project, the Independent Power Producers (IPP) Procurement Programme – a bid process aimed at generating 42 per cent of all new electricity from renewable energy sources, including onshore wind, concentrated solar thermal, solar photovoltaic, biomass solid, biogas, landfill gas and small hydro technologies. 

DLA Piper’s Australian team have advised more than half of the 28 successful bidders for Phase One of the program and will continue to advice bidders on Phases Two and Three of the program.

“The work that we’re doing now is just amazing … No other Australian firm is [working on] this renewable energy program,” says McNair.

“Because we’ve got so much work between Kieran and myself we’ve brought in a partner out of London and a partner out of Hong Kong and Dubai, but that work is still being driven by Kieran and myself; by Australia and South Africa.”