Reading Africa’s rulebook

In July last year, the African Venture Capital Association (AVCA) announced the launch of its Legal and Regulatory Committee bringing together a distinguished group of senior legal practitioners, both in and outside of the continent, who collectively have a wealth of knowledge and experience in African private equity. The board of AVCA tasked the committee with the mission of providing the association’s members with information on significant legal and regulatory developments and leading any advocacy/educational initiatives that impact the African private equity and venture capital industry.

Mara Toppling

In the current storm of legal and regulatory changes facing global private equity industry, the committee will have its hands full in trying to navigate AVCA’s members and other stakeholders through the barrage of legal changes (mainly from outside of the continent) which will no doubt impact the development of private equity in Africa. As a starting point, the committee’s work will focus on the following three core areas of:

· Preparing informed industry responses to material policy and regulatory developments, including consultation exercises with governmental and regulatory bodies and non-governmental organizations and trade bodies and liaison with the wider financial community, institutional investors, the media, regulators, governments and other policy makers on legal and/or regulatory issues relevant to the private equity and venture capital industry in Africa. In addition to the regulatory developments in the US and EU, a number of African governments/regulators are reviewing their regulations relating to private equity investing. For example, in Ghana, the Securities and Exchange Commission will soon be embarking on a review of its rules for the private equity and venture capital sector; in Nigeria, recent pension regulatory changes have increased the pool of pension funds accessible to private equity funds and the Kenyan pension regulator is also reviewing its rules with regard to pension funds investing in private equity. Working with local and/or regional associations (as appropriate), the committee will seek to engage with regulators and governments, especially in key regional hubs, to ensure that the views of the industry is fully represented.

· Ad-hoc provision of information to assist AVCA members on topical legal or regulatory issues. The private equity industry in the US and EU are currently witnessing some of the most intrusive pieces of legislation, aimed at the industry, since its inception. In the US, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank) and the Foreign Account Tax Compliance Act (FATCA) amongst other have introduced new rules that regulate private equity in the US. Similarly, the European Union (EU) Alternative Investment Funds Managers Directive (AIFMD) is, amongst other things, set to introduce severe restrictions on non-EU managers marketing their funds in the EU. These regulations are incredibly complex and will have far reaching consequences for African private equity managers who are either seeking capital from investors and/or investing in these jurisdictions. We are building a database of materials to help members of AVCA understand how these regulations may impact them and their businesses.

· Legal training aimed at new entrants, junior and mid-level practitioners in the African private equity industry.

Solomon Wifa

A significant number of private equity managers on the continent are small or mid-sized firms (i.e. less than 15 investment professionals) that in many cases have limited capacity to build a sizeable in-house legal function. We believe that, through our extensive network of legal firms/professionals, we can help these firms build capacity within their deal teams and support functions by sharing best practices in private equity transactions across the continent. The legal systems in Africa are incredibly diverse and in many cases difficult to navigate. We aim to act as a portal of learning where we can share real life examples on how to navigate legal issues that may be specific to a particular country or transaction execution; issues that are common to regions or a collection of countries on the continent. 

· In addition to the above initiatives, the committee is currently busy working on a series of Private Equity Country Guides. These guides are aimed at both African and non-African deal makers and institutional investors interested in picking up the basics of what they need to know about the legal framework of a particular jurisdiction in advance of considering a transaction there. The committee will initially focus on a handful of countries on the continent and will build out the guides over time to cover all the hotspots for private equity on the continent. The first guides will be launched in Cape Town, South Africa at the 10th annual AVCA conference in April this year.  

Since its launch, the committee (and AVCA) has received tremendous support and goodwill for its work from both members and non-members of the association alike. That said, there is still much to do to ensure that African private equity managers are not at an unfair disadvantage in the increasingly fierce global competition for investment capital and that these managers get all the support they need to build on best practices and human capital development on the continent.  Harnessing this support and partnering with all stakeholders in the African private equity community (including governments, regulators, investors and other country/regional associations) will no doubt be critical to the success of the committee.  

Solomon Wifa, partner at O’Melveny & Myers and Mara Toppling, partner at White & Case are co-chairs of AVCA’s Legal and Regulatory Committee. The other members of the committee are: White & Case; Karim Anjarwalla, Anjarwalla & Khanna; John Bellew, Webber Wentzel; Myma Belo-Osagie, Udo Udomo & Belo-Osagie; Carolyn Campbell, Emerging Capital Partners; Arnaud Duhamel, Gide Loyrette Nouel; Mark Kenderdine-Davies, CDC Group; Bayo Odubeko; Nuvin Proag, Citilaw Chambers.

Aside from legal and regulatory matters, private equity firms operating in Africa will also need to consider LPs' considerations when investing in the continent. An Africa Think Tank hosted by Private Equity International will discuss these matters and more this July, details HERE.