By Natasha Doris
A report by Clifford Chance has signalled the continent’s ripe opportunities for investment in the sector, if some significant regulatory hurdles can be overcome.
Africa’s transport and logistics sector has become a potential goldmine for global investment, as countries across the continent look to modernise their competition law regimes in line with global trends in a move to attract business opportunities.
According to a report published on 18 April by international law firm Clifford Chance, the transport and logistics sector has seen a boom in the aftermath of the Covid-19 pandemic, with the sector accounting for approximately 50% of global mergers and acquisition activity in the first half of 2022.
Within Africa, the opportunity lies in overcoming existing challenges. The report noted that the expense of transporting goods around the continent was five times higher than other regions due to factors including a lack of infrastructure support and tariffs. In response, the continent has seen an effort to modernise merger control regimes and make African territories more attractive investment prospects.
The report noted five key hurdles to remain mindful of when weighing up African transport and logistics investment opportunities: a rising number of competition law regimes, overlapping national and supranational jurisdictions, unclear timetables for merger reviews, high and unpredictable filing expenses, and public interest concerns.
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Currently, 29 of Africa’s 54 countries have an active merger control regime, while other territories come under the reach of a supranatural regime, including the Central African Economic and Monetary Community (CEMAC) and the Common Market for Eastern and Southern Africa (COMESA). New regimes can be unstable and therefore leave room for uncertainty and ambiguity for parties eyeing investment opportunities.
Meanwhile, established regimes have been modernising recently, hopping on the bandwagon of global trends, with , Zambia, Zimbabwe and Mozambique. Across the board, merger control regimes lack a great deal of commonality or consensus, raising additional problems for cross-border deals and business opportunities.
The report warned investors to take into account the dual requirements where a region requires adherence to both a national system, and a supranational one. In addition, supranational regimes may also overlap with each other, adding yet another layer of complexity.
Some regions have unclear merger review timetables, with gaps in the local law in territories such as Tanzania allowing third parties to object to a transaction late in the deal review, while a lack of resources may also prolong review timetables. Furthermore, it is common for regimes to lack clarity on when the clock starts on a review.
High or unpredictable filing fees are another obstacle, with African jurisdictions, as the report pointed out, having some of the highest filing fees in the world, amounting to a percentage of the deal parties’ turnover or assets. However, several countries have adapted to complaints of excessive fees in recent years. Nigeria, for example, has lowered its highest fee level from 0.75% of the deal value or annual transaction parties’ turnover, depending on which is higher, to 0.35%.
Public interest considerations add another layer of complexity. Jurisdictions such as South Africa, Botswana and Namibia have placed factors including employment, price regulation and proper representation of historically disadvantaged persons onto deals, which can add more layers to merger control than the simple question of the transaction on its own. Some countries have modernised their regimes to increase transparency in recent times, including Botswana and Kenya, which are in the process of drafting guidelines for the evaluation of public interest assessments.
The ability to navigate these regulatory issues will be the key to unlocking the further potential for investment within Africa’s transport and logistics sector.
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