The African Development Bank’s Annual Meeting: The Importance of Agribusiness in Africa

Posted in African Agriculture, African Development Bank

The African Development Bank (ADB) held its Annual Meeting in India this month, the first time ADB has held this meeting outside of the African continent.  During his keynote address, ADB President Akinwunmi Adesina highlighted the importance of agribusiness to the continued transformation of economies across the continent.  To those who know him and those who are following Africa’s recent economic trends, it should not be a surprise that President Adesina focused his remarks on the importance of further commercializing agriculture.  This former Minister of Agriculture and Rural Development in Nigeria and Vice President of Policy and Partnerships for the Alliance for a Green Revolution in Africa (AGRA) has a passion for rural development and proven track record of reforms that have benefitted many across the continent.  He was even recognized by Forbes African Man of the Year for his reform efforts in the Nigerian agriculture sector to help make as many “millionaires, maybe even billionaires, from agriculture as possible.”  Moreover, recent turbulence in petroleum prices has resulted in greater focus by African officials and economists on agribusiness as a way to reduce Africa’s dependence on the fortunes of the petroleum markets.

During his address at the ADB this week, Adesina made the point that “[a]griculture is not a development activity or a social sector: it’s the biggest money-making business in the world.” In order to further industrialize the sector to the benefit of stakeholders ranging from the smallest of subsistence farmers to conglomerates leasing land from governments, technological investments, and infrastructure development will be prioritized. According to Adesina, unlocking the full potential of the agribusiness sector requires access to electricity.  The two – universal access to electricity and agricultural transformation – are inextricably linked.  President Adesina previously announced during his inaugural address at the ADB that the bank will focus on efforts to unlock investment in both areas as part of the High 5s initiative which is designed to: Light up and Power Africa; Feed Africa; Industrialize Africa; Integrate Africa; and Improve the Quality of Life for the People of Africa.  Focusing on these areas as the core of its investment strategies will support the bank’s ambitious 10-year development goals.

It seems clear from emerging data and substantive commentary that there are many opportunities for international companies to get involved with and invest in the High 5 areas. Investments are required in, among other sectors, clean renewable energy, sustainable water resource management, supply of farming equipment and cold storage containers, processing plants and even physical infrastructure such as roads, rails and ports to move goods across the continent are integral.  The ADB makes it clear that it is open to business to help fund these initiatives by leveraging its funds to support these types of transformative projects.

U.S. State Department Seeking Comments on Conflict Minerals as Administration Considers Effectiveness of Conflict Minerals Rule

Posted in Minerals Rule, SEC

The U.S. State Department announced on March 27, 2017 that it is seeking input from stakeholders on recommendations on how to best support responsible sourcing of tin, tantalum, tungsten and gold from the Democratic Republic of Congo and other countries in the Great Lakes Region of Africa.  This latest development highlights the administration’s current review of the Securities and Exchange Commission (“SEC”) conflict minerals rule, which the administration feels may have had unintended negative effects on these African countries.

Section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Conflict Minerals Provision”) and Section 13(p) of the Securities Exchange Act of 1934 (the “Exchange Act”) set forth reporting requirements for entities using minerals known as “Conflict Minerals” in their manufacturing activities. Conflict Minerals are defined as cassiterite, columbite-tantalite, gold, wolframite, and their derivatives, which are limited to tantalum, tin, and tungsten, as well as any other derivative and/or mineral that the U.S. Secretary of State determines to be financing conflict in the “Covered Countries”. These Covered Countries include the Democratic Republic of the Congo (“DRC”) or an adjoining country (which currently includes Angola, Burundi, Central African Republic, the Republic of the Congo, Rwanda, South Sudan, Tanzania, Uganda, and Zambia). The SEC has indicated that Congress enacted the Conflict Minerals Provision because of concerns that the trade of Conflict Minerals by armed groups is helping to finance conflict in the DRC region. By requiring such disclosures, the intent is that companies utilizing such Conflict Minerals will be more accountable to their shareholders for their impact on social policy.

Pursuant to the Conflict Minerals Provision and Section 13(p) of the Exchange Act, a company is required to file an annual conflict minerals report with the SEC (i) if such company is required to file reports with the SEC pursuant to the Exchange Act and (ii) if such company uses Conflict Minerals which are necessary to the functionality or production of an item manufactured or contracted to be manufactured by such company.

Implementation of the Conflicts Minerals reporting requirements has not been without controversy. On April 14, 2014, the D.C. Circuit upheld the majority of Section 13(p)(1) and Rule 13p-1, but found that the portion of the rule requiring regulated entities to report to the SEC and state on their website that products have “not been found to be DRC conflict free” compels speech in violation of the First Amendment.  Accordingly, on April 29, 2014 the SEC issued guidance modifying the Conflict Minerals reporting requirements and on May 2, 2014 the SEC issued an order staying the effect of the compliance date for those portions of the rule found to be unconstitutional while the case was subsequently remanded to the district court for further consideration.  On January 31, 2017 acting SEC Chairman Michael S. Piwowar noted in comments that such guidance and the stay remain in effect as such litigation is ongoing. Chairman Piwowar further noted that the temporary transition period provided for in the rule has expired and he has therefore directed his staff to consider whether the 2014 guidance is still appropriate.

Chairman Piwowar’s recent statements reflect the administration’s doubts concerning the effectiveness of the rule, as he noted that “The disclosure requirements have caused a de facto boycott of minerals from portions of Africa, with effects far beyond the Congo-adjacent region. Legitimate mining operators are facing such onerous costs to comply with the rule that they are being put out of business. It is also unclear that the rule has in fact resulted in any reduction in the power and control of armed gangs or eased the human suffering of many innocent men, women, and children in the Congo and surrounding areas. Moreover, the withdrawal from the region may undermine U.S. national security interests by creating a vacuum filled by those with less benign interests.”  This latest request for comments from the U.S. State Department signals a major shift in the approach to combat the underlying issues that led to the Conflict Minerals Provisions. However, there is no clear alternative policy put forward at this time.

August Trade Mission to Ethiopia and Kenya

Posted in Africa, African Agriculture, African Government, African Infrastructure, East Africa, East African Community (EAC), Kenya

Greenberg Traurig participated in the Corporate Council on Africa’s Trade Mission to Ethiopia and Kenya during the week of August 15. While a primary focus of the trip was the agribusiness sector, private investment in manufacturing and infrastructure (including power) were also identified as vital to each economy. Vicky McPherson, a shareholder based in Washington, D.C. and a key member of the Firm’s Africa Practice, participated alongside other private sector companies in the trade mission. Participating at the ground level in this mission and missions like it allows Greenberg Traurig to identify opportunities and make important connections in the area. This can be particularly valuable in key markets such as Ethiopia and Kenya.

During the trade mission, Ms. McPherson met with key Ethiopian and Kenyan ministerial officials, U.S. Embassy officials and representatives from the USDA Food and Agriculture Foreign Service, the USAID, and the East Africa Trade and Investment Hub. Briefings from the U.S. Ambassador to Kenya, Robert F. Godec, the U.S. Ambassador to Ethiopia, Patricia M. Haslach, and their staffs provided excellent background about the climate for foreign direct investment. While some in the private sector are reluctant to seek out government involvement in their private ventures, the resources available from the U.S. Embassy in Kenya and Ethiopia, (the largest on the African continent), are invaluable to new entrants or those facing roadblocks. To learn more about the support available please visit the East Africa Trade and Investment Hub website.

Those U.S. companies seeking to learn about the investment climate and opportunities in Kenya or Ethiopia should also consider familiarizing themselves with the services of KenInvest or the Ethiopian Investment Commission. The delegation also received an overview of the economic outlook and structure for investment within the East Africa Community. The trade mission was rounded out by B-2-B meetings with local companies seeking connections to investors and access to the U.S. market.

Capitalizing on investment opportunities in Kenya and Ethiopia will take patience and commitment for those new to these countries, but the rewards can be substantial for those who are willing to take on the real and perceived challenges. Greenberg Traurig professionals bring many years of intimate familiarity with optimizing business opportunities in Africa, particularly in Kenya and Ethiopia, and is uniquely situated to help private sector companies navigate this terrain.

For the trade mission participants, the process of turning the connections made into realized business ventures begins now.

African Economies Looking Beyond Oil and Gas in Response to the Collapse of the Commodities Market

Posted in African Agriculture, Oil & Gas

The first quarter of 2016 has proven to be difficult with few bright spots across Sub-Saharan Africa economies. According to Africa’s Pulse, the World Bank’s twice-yearly analysis of economic trends and the latest data for the region, economic activity in Sub-Saharan Africa slowed in 2015 to its lowest rates since 2009 with GDP growth averaging only 3.0%, down from 4.5% in 2014. The plunge in oil prices and other commodities is the primary reason for the economic downturn. Compounding this reduction in revenue into the national treasuries is the fact that a number of countries lack the policies which would allow them to address the shortfalls and to successfully pivot the economy to other productive activity. To correct this, many countries are now creating enabling environments for other industries and sectors in an earnest way. While the immediate impact of these policies may not be evident yet, it is clear that the long-term strategy for diversification is crucial to stabilizing the economics and encouraging growth across multiple sectors and population segments.

More and more African governments have begun to about the opportunity to diversify their economies through agribusiness. However, in most instances the enabling environment has not yet been put in place to support this sector as a source of real national economic growth. So far, real progress in agribusiness has only been made in a handful of countries. In Nigeria, for example, where the “oil bust is beginning to hit the streets”, according to a Wall Street Journal article this week, President Buhari and many State governors are showing unprecedented commitment to the agribusiness sector. The Minister of Agriculture and Rural Development, Chief Adu Ogbeh, recently explained that the “the goal of the present administration was to build an agribusiness economy capable of meeting Nigeria’s domestic food security requirements and generating exports to broaden the national revenue base”. In Zambia, the United Bank of Africa (UBA) recently invested over US$25 million in the agriculture sector in order to support diversification programs and economic growth.

As urbanization continues to expand in many African countries, the challenge will be figuring out how to continue to support economic diversification. The report Africa’s Pulse makes the case for Africa to “harness the power of cities as engines of economic growth” and for supporting “Africa’s agricultural and rural transformation” by creating a destination for the labor released by the agribusiness sector as it becomes more mechanized and a market for domestically grown produce. Time will tell if the strategy begins to show dividends.


Greenberg Traurig Hosts Event on International Arbitration in Africa

Posted in Africa, International Arbitration
From left to right: Tom Snider (GreenbergTraurig, LLP), Amaka Megwalu Anku (Dilikam Advisors, LLC); Jackson Kern (Addis Law Group); Aurélie Huet (Huet Law International); and Tolu Obamuroh (Lagos Court of Arbitration).

From left to right: Tom Snider (GreenbergTraurig, LLP), Amaka Megwalu Anku (Dilikam Advisors, LLC); Jackson Kern (Addis Law Group); Aurélie Huet (Huet Law International); and Tolu Obamuroh (Lagos Court of Arbitration).

Greenberg Traurig hosted the Third Annual Penn State International Arbitration Day at its Washington, D.C. office on March 11, 2016.  This event was a day-long conference entitled “The Future of International Arbitration in Africa” and was co-sponsored by Penn State Law School, Penn State School of International Affairs, the American Society of International Law, and media sponsor Transnational Dispute Management.

The conference reflected on the role of arbitration in Africa in light of the accelerating growth of cross-border commerce, trade, and investment on the continent and bilateral relations between African countries.  These issues and others were the topics of the following panel discussions:

  • The Legacy of the Eritrea-Ethiopia Claims Commission;
  • The Institutions and Practice of International Commercial Arbitration in Africa;
  • Structural Challenges for Dispute Resolution in Africa:  Culture, Diversity and Development; and
  • Foreign Investment and Investment Arbitration in Africa.
Keynote Edward W. Fasholé-Luke II of Luke and Associates (Gaborone, Botswana) addresses the audience on “A View of International Arbitration from an African-Based Arbitrator”

Keynote Edward W. Fasholé-Luke II of Luke and Associates (Gaborone, Botswana) addresses the audience on “A View of International Arbitration from an African-Based Arbitrator”

The conference’s keynote address by Edward W. Fasholé-Luke II, an international arbitrator from Botswana.  Mr. Luke, an attorney with Luke and Associates in Gaborone, Botswana, provided an overview of international arbitration from the perspective of an Africa-based arbitrator.

In addition to Mr. Luke, the speakers included a distinguished list of academics and practitioners from Penn State and the academic and international arbitration communities in the Washington, DC area and beyond.  These speakers included a reporter for the American Law Institute’s Restatement of the U.S. Law of International Commercial Arbitration, a representative from the Lagos Court of Arbitration, and a member of the UN International Law Commission.

The conference drew nearly 100 participants, including diplomats, practitioners, in-house lawyers, academics, and students, among others.

Greenberg Traurig was very pleased to host this important and successful conference.


African Technology Startups Gaining Attention

Posted in Africa, Technology

The increasingly noticeable discussions of the tech boom taking shape across Africa were recently further bolstered by news about startup financings on the continent. A 2015 survey revealed that African tech startups raised at least $185 million for the year. A total amount that includes undisclosed financings would likely be much higher. This year already shows promise of keeping the trend alive. Africa Internet Group, which holds interests in a number of tech businesses, recently raised $83 million from French insurer AXA Group.

Netflix plans to offer service throughout Africa, seemingly well in advance of most Africans gaining access to the widespread, fast, and reliable internet connections that many would consider prerequisite to selling streaming video. Such moves by foreign venture funds and internet companies most likely signal a common belief that connection speeds and connected people will continue increasing. If this prediction holds true, and the results of greater connectivity begin showing soon, then the value of securing market share early could significantly outweigh the challenges of entering these nascent markets before they fully mature.

These unique challenges found in many African countries sometimes require tech startups to creatively adapt their services. Online retailer Jumia, an investment of Africa Internet Group, for example, permits its customers to pay cash on delivery for their purchases because most do not yet enjoy access to mobile banking or other methods of online payment. Of course, a number of other tech startups, such as South Africa’s MFS Africa, are working to fill that gap across the continent. MFS Africa has collaborated with Vodafone’s startup M-Pesa to expand Africa’s “mobile money revolution”, further evidence that technology is booming in Africa.


Funding Opportunities in Clean Energy from USTDA

Posted in Africa, Power Africa, Trade, USTDA

The U.S. Trade and Development Agency (USTDA) is accepting proposals for sustainable energy projects in sub-Saharan Africa in support of the implementation of President Obama’s Power Africa initiative. Power Africa’s goals include expanding clean energy on the continent to increase power generation capacity and create new electricity connections for millions of people who lack reliable access to power. USDTA established its U.S. Africa Clean Energy Finance initiative to support Power Africa, and provides funding and project planning support to American firms undertaking clean energy projects. American firms can compete for projects by responding to the requests for proposals posted by the U.S. government on, or submit proposals to USTDA itself if selected directly by overseas project sponsors. USTDA’s proposal period will remain open through February 19, 2016.

Power Africa is the White House’s signature program focused on supporting power generation in sub-Saharan Africa. Access to electricity remains inconsistent in even some of the largest cities on the continent. And yet the problem presents the opportunity that African countries could “leap frog” traditional, dirty power generation methods (such as oil and coal) when developing the much-needed new capacity in favor of clean renewable energy sources. The increased productivity of individuals and businesses along with the potential savings in per-person energy costs resulting from increased renewable power could contribute to many African countries’ already strong economic growth rates.


Hitachi settlements highlight importance of anticorruption compliance programs and cooperation with regulators

Posted in Africa, African Development Bank, FCPA

On December 4, 2015, the African Development Bank Group (AfDB) announced that it reached an agreement with Hitachi, Ltd. (Hitachi) that debars the company from participating in AfDB projects for twelve months with conditional release. The debarment was the result of an investigation by AfDB’s Integrity and Anti-Corruption Department (IACD) concerning bribery allegations against Hitachi on the Medupi project in South Africa. The AfDB debarment follows a $19 million settlement Hitachi reached with the U.S. Securities and Exchange Commission (SEC) on September 28, 2015 to resolve civil bribery charges under the Foreign Corrupt Practices Act (FCPA) relating to the same project.

The Hitachi settlements are noteworthy because this is the first time AfDB’s IACD worked together with the SEC to investigate alleged bribery in AfDB-funded projects. Companies under investigation for suspected anti-bribery law violations have come to expect close collaboration between the SEC and the U.S. Department of Justice (DOJ), which investigates criminal bribery violations under the Foreign Corrupt Practices Act (FCPA), and increasingly with regulators in other countries. Hitachi’s settlements, however, further underscore that U.S. regulators may also collaborate with international financial institutions like AfDB who may be investigating similar alleged misconduct. Therefore, companies embroiled in any international anti-bribery law related investigation need to be mindful about the risk of parallel investigations and the need for global resolutions.

Hitachi’s debarment will be terminated after twelve months, assuming Hitachi improves its integrity compliance program to meet AfDB’s Integrity Compliance Guidelines. In particular, based on the allegations, one could anticipate Hitachi should undertake improvements to, among other things, its due diligence processes for third-party agents and transaction recording procedures to prevent and detect improper transactions.

The AfDB “acknowledge[d] that Hitachi and its affiliates co-operated fully and openly with the IACD investigation, and that Hitachi was determined throughout to maintain its good relations with the AfDB and to protect the integrity of the Medupi project.” The Medupi project refers to construction at the Medupi Power Station, one of two South African power stations where Hitachi was accused of manipulating the tender process to secure contract awards. In a press release issued after filing charges against Hitachi on September 28, 2015, the SEC summarized its allegations against Hitachi by stating that the company

  • sold a 25-percent stake in a South African subsidiary to a company serving as a front for the African National Congress (ANC). This arrangement gave the front company and the ANC the ability to share in the profits from any power station contracts that Hitachi secured. Hitachi was ultimately awarded two contracts to build power stations in South Africa and paid the ANC’s front company approximately $5 million in “dividends” based on profits derived from the contracts. Through a separate, undisclosed arrangement, Hitachi paid the front company an additional $1 million in “success fees” that were inaccurately booked as consulting fees without appropriate documentation.

The SEC complaint further alleged that as a result of these actions, Hitachi’s subsidiaries were awarded power station contracts worth approximately $5.6 billion. According to the SEC, Hitachi’s actions violated the books and records and internal accounting controls provisions of the Foreign Corrupt Practices Act, which are in turn violations of Sections 13(b)(2)(A) and 13(b)(2)(B) of the Securities Exchange Act of 1934 (15 U.S.C. § 78m(b)(2)(A)-(B)).

Significantly, violators also face the potential of cross-debarment by other multi-lateral development banks, which is virtually mandatory for publicly disclosed debarments exceeding one year for the commission of a “sanctionable practice” that occurred within ten years of the debarment decision and which can be the death blow to companies that rely heavily on bank-funded projects. Sanctionable practices include corruption, fraud, coercion, and collusion as defined in the Agreement for Mutual Enforcement of Debarment Decisions. According to the AfDB, Hitachi’s “high level of assistance” contributed to the bank’s decision to refrain from imposing more onerous sanctions. The AfDB also cited Hitachi’s voluntary agreement to make an undisclosed “substantial financial contribution to the AfDB” and to “co-operate with the IADC on a variety of matters.” The financial contribution to the bank is an uncommon settlement component, and little is published about the bank’s objective and use of the contribution.   It will be interesting to observe whether targets making financial contributions to the AfDB will become a trend.

Hitachi’s settlements illustrate that FCPA-related enforcement actions can lead to substantial penalties, but resolution of a government enforcement action does not completely conclude the matter. In addition to the threat of parallel or subsequent enforcement proceedings by other country governments, multi-national development banks can also levy sanctions. Because certain multi-national development bank sanctions also lead to cross-debarment by other development banks, those facing sanctions should consider working with the banks to reach an agreement that avoids the potentially crippling sanction of cross-debarment. In the sanctions process one must weigh the potentially onerous conditions the banks may seek to impose with proposed settlement benefits. One potential benefit is the possibility of a global settlement of corruption allegations addressing enforcement actions by multiple agencies.

In addition to cooperating with the bank in the sanctions process, companies facing sanctions should take steps to review and enhance their anticorruption compliance programs to come in line with bank and international enforcement agency expectations. Enhancements to compliance programs even during the disclosure and sanctions negotiation process may ameliorate the potential sanctions imposed.

Numerous Greenberg Traurig attorneys have experience managing complex enforcement actions before the SEC and DOJ as well as suspension and debarment proceedings. Because actions of an investigation’s target can affect the enforcement result, companies and individuals should seek advice of counsel early in the process to best position themselves for a favorable outcome.

Impact Investing Makes a Huge Leap Forward with OPIC’s investment in LeapFrog Investments

Posted in Africa, Asia, OPIC

The US Overseas Private Investment Corporation (OPIC) has helped the impact investing sector over a major threshold with its recent $200 million commitment to fund manager LeapFrog Investments. With that investment, LeapFrog has claimed status as the first billion-dollar group dedicated to equity impact investing. LeapFrog also states that it has the distinction of being the recipient of OPIC’s largest single commitment to a private equity fund manager. The OPIC investment will be used to invest in companies in the financial services and healthcare sectors in Africa and Asia.

OPIC seeks to use its existing tools of project financing, political risk insurance and funding private equity funds to support companies and investments that address the world’s critical development challenges. Click here for more examples of OPIC’s impact investments.

Export-Import Bank of the United States Open for Business

Posted in Export-Import Bank

The Export-Import Bank of the United States is expected to be operational on December 8, 2015 after being reauthorized on Friday, December 4th pursuant to the Export-Import Bank Reform and Reauthorization Act of 2015. The reauthorization was tied to a highway bill that was overwhelmingly approved by Congress (313-118) on Thursday and signed by President Obama on Friday. The reauthorization increases EXIM’s mandate to make 25% of its authorizations available to small business, up from 20%. While the reauthorization lasts through 2019, the future of the EXIM is far from settled. The issue could remain a political issue during the 2016 presidential race because the political divide between Republican opposition and Democratic support exists amongst the current presidential candidates. EXIM will still be limited from approving transactions over $10 million until its Board of Directors has at least three members to meet quorum for the five person board. However, this important resource for exporters and their supply chains will allow US exporters to continue competing in the global economy. To learn more about EXIM’s and reauthorization FAQs, click here.