‘Africa Rising’ has been accompanied by significant legal challenges for many African governments. These have included costly, protracted creditor litigation against sovereign debtor states, poorly negotiated and drafted commercial agreements, and limited local legal expertise and experience. Since its establishment in 2008, the African Legal Support Facility (‘ALSF’) has successfully tackled many of these difficulties. It has ensured that African governments have access to competent legal and technical assistance on demand to advocate for their contractual interests. This has helped to rebalance their asymmetric negotiating capacities when dealing with international investors. Despite continued legal capacity deficits and operational limitations, the organisation’s work over the last decade has led to more sustainable and equitable commercial agreements. These results illustrate how legal remedies can be employed to successfully address social and economic challenges in developing economies. Such initiatives may be instructive for governments facing similar issues in other regions beyond Africa.
Growth and Challenges
The expression ‘Africa Rising’ has found common currency because there is much truth to it. Over the past two decades, Africa has undergone rapid rates of economic growth. During the mid-2000s, GDP growth across the continent averaged at 7% a year. Today, five out of the ten fastest growing economies are African nations (Ethiopia, Ghana, Côte d'Ivoire, Tanzania and Djibouti). Much of this economic growth has been driven by increased investment in infrastructure and the natural resources sector as well as growing domestic demand.
In spite of these developments, Africa faces a number of challenges, including high rates of poverty, youth unemployment, sovereign debt, corruption, weak institutions, and marked periods of political instability in certain countries.
Unfavourable partnerships relating to extractive industries and infrastructure development have contributed to these difficulties. For example, the Democratic Republic of Congo experienced significant problems when attempting to rectify inadequately drafted mining contracts completed during the country’s civil war between 1998-2003. This process was both costly and time-consuming. Crucially, it rendered Congo a less attractive destination for foreign investment.
A key concern for many African governments has been the prevalence of ‘vulture fund’ litigation. Despite a significant debt cancellation agreement by creditors in 2005, many African countries still rely on large amounts of external dollar-denominated debt. In 2018 alone, nearly $25 billion of sovereign debt is expected to mature in the region. In recent decades, a secondary market for sovereign debt has developed. Subsequently, ‘vulture funds’ have sought to purchase distressed debt trading at a discount to its value, with a view towards recovering the full amount plus interest and penalties through litigation. This has had a detrimental effect on a number of African countries by undermining their restructuring efforts through protracted litigation. This has typically been disproportionately costly for debtor nations and a distraction from pressing domestic policy considerations. In 2007, following a prolonged civil war in the country, creditor claims against Liberia amounted to $130 million (almost one fifth of annual GDP). It is likely that better legal capacity, advice, and institutions would have prevented many of these issues, leading to more sustainable overall economic development.
Evaluating the ALSF
The ALSF was conceived and developed in response to some of these challenges. It is an international organisation hosted by the African Development Bank, providing legal advice and technical assistance to African countries in matters relating to creditor litigation and complex commercial transactions. Its membership includes 47 African countries, all of which are eligible for legal assistance, which is primarily requested and initiated by national governments.
The principal criteria used to evaluate the success of the ALSF must necessarily be the extent to which it has been able to remedy the difficulties associated with unsustainable commercial agreements, creditor litigation, and limited local legal capacity.
The organisation’s work is divided into four strategic areas: advisory services, capacity building, creditor litigation and knowledge management. It has provided advisory support to help African governments strengthen their legal expertise and negotiating capacities, particularly in areas such as large-scale infrastructure projects, investment agreements, and public-private partnerships. The ALSF has also provided assistance to develop legal capacities by focusing on the transfer of knowledge and skills to nationals through workshops, conferences, and seminars. Furthermore, the organisation has sought to provide African countries with the financial resources to obtain specialist legal assistance for the negotiation, settlement, or litigation of creditor claims, with the aim of discouraging and limiting opportunities for vulture fund litigation. Finally, the ALSF’s knowledge management initiatives have focused on providing assistance relating to the development and dissemination of legal manuals, publications, contracts, and model documents.
An analysis of the results of these projects reveals that the ALSF has achieved much success since its active operations began in 2010. The scale and breadth of many of the organisation’s advisory projects is particularly notable. Between 2010-16, 116 projects were approved and implemented in 40 African countries, involving $54 billion worth of transactions. Many of these have been large infrastructure projects with far-reaching consequences for wider economic growth, such as the development of the Bagamoyo Port in Tanzania. This is a tri-governmental venture between Tanzania, China and Oman, costing almost $10 billion, and is expected to be the largest port in East Africa when operational by 2020. The ALSF’s involvement in this project has been extensive. The Facility supported the Tanzanian Government’s negotiation of at least 6 agreements and contractual documents relating to the development of the seaport and portside industrial zone, as well as draft concession agreements, a framework agreement, term sheets for the portside economic zone, a joint venture agreement, and a development agreement. The ALSF also played a key role in the development of the recent Taiba N’Diaye Wind Farm in Senegal, by supporting the Senegalese Government in its negotiations of a power purchase agreement and related agreements to develop the largest wind farm in West Africa.
The ALSF’s provision of advisory services to African governments on such high-profile transactions and commercial agreements is highly commendable. This has done much to rebalance the asymmetry between negotiating parties, resulting in more equitable and sustainable commercial agreements. It is likely that this will assist Africa’s economic development, ensuring fuller capture of the benefits of large-scale infrastructure and extractive projects by local governments and populations.
A promising development during the decade since the ALSF was first established has been an overall reduction in levels of ‘vulture fund’ litigation for many African countries. However, the extent to which the ALSF is responsible for this is unclear. In 2016, the organisation did not receive any requests for assistance in the defence of African countries in creditor litigation cases before courts or arbitration tribunals. There may be a number of explanations for this. It is possible that the existence of the ALSF has acted as a deterrent against ‘vulture funds’ bringing claims against sovereign African governments.
Despite these achievements, there have been significant limitations to the progress made by the ALSF. One key difficulty has been the unequal geographical distribution of ALSF service provision across African states, as most projects have been exclusively focused on West and East Africa. According to the ALSF 2016 annual report, nearly 70% of USD spending on regional operations during that year was concentrated in these areas. Greater emphasis should therefore be placed on focusing efforts on Central, and particularly Southern and Northern Africa to ensure more equal distribution of the benefits of the organisation’s services and programmes.
The ALSF has also encountered significant operational implementation delays on a number of projects. This can be explained in part by the limited institutional and management capacity of the organisation, as well as the uncertain political circumstances existing in some member states.
Finally, efforts to improve local legal capabilities in Africa have been too narrowly focused on education and knowledge management. Initiatives have failed to adequately address the legal institutions and regulatory frameworks under which these large-scale commercial agreements operate. Consequently, legal institutions in Africa remain relatively weak and local legal capacities in many countries continue to be very limited. A significant proportion of the ALSF’s work focuses on providing advisory support on commercial transactions, and knowledge building programmes. However, the agreement establishing the organisation in 2008 envisaged the possibility that it would also contribute towards law and development in general. The ALSF could further its strategic objectives by playing a larger role in developing legal institutions in African states, and assisting in the drafting of legislation and development of appropriate regulatory regimes.
Over the last decade, the ALSF had done much to remedy the significant legal challenges facing many African countries. National governments have benefitted from improved legal and technical assistance on a number of significant large-scale commercial transactions, and the decline of crippling creditor litigation. While operational limitations and local legal capacity deficits remain, the organisation has helped to ensure more equitable, balanced negotiations for complex commercial agreements. Further benefits could be achieved if the ALSF were to expand its focus beyond existing practitioner-centred legal education programmes, towards development of legislation and legal institutions.
Zyad Wright is a graduate from the University of Cambridge and Columbia University.