Aligning Africa’s Digital Transformation Strategy with Enabling Regulations. The African Union Commission (“AU”) has put forward a bold vision to build a Digital Single Market in Africa by 2030. The Draft Digital Transformation Strategy for Africa (2020-2030) identifies specific actions to achieve this vision. Specifically, adoption of an AU convention on Cyber Security and Personal Data Protection is a top priority for this year. To achieve this, policy and regulatory reforms need to be harmonized across a widely diverse group of Member States with vastly different priorities. We will be watching these trends to determine whether advances in computing capacity, storage, and the protection of digital data help to build a vibrant digital ecosystem that accelerates economic integration and the development of the continent. We will also be watching to see if the regulations result in excessive costs, compliance requirements, and related barriers for African entrepreneurs and businesses.
Business and Human Rights. For companies doing business in Africa, there are three areas deserving of attention in the business and human rights space in 2020: (1) compliance with existing and emerging regulations, (2) enhanced due diligence in light of an increased number of enforcement actions related to forced labor, and (3) risk mitigation in view of creative lawsuits. As we reported in December 2019, the global regulatory and enforcement business and human rights landscape is evolving rapidly. A plethora of national and regional initiatives have emerged which require companies to either report on their human rights compliance measures or conduct substantive human rights due diligence in relation to their global supply chain, or both. Many companies doing business in Africa are subject to regulations like the California Transparency in Supply Chains Act, UK and Australian Modern Slavery Acts, and the French Duty of Vigilance Act, and must ensure compliance with these regulations.
In regard to enforcement actions, we saw a significant uptick in 2019 and expect to see additional enforcement actions in 2020. The United States Customs and Border Protection (“CBP”), for example, has significantly ramped up enforcement of the forced labor prohibitions contained in Section 307 of the Tariff Act of 1930. Whereas only 32 Withhold Release Orders (“WROs”) (which effectively seize goods destined for import into the United States) were issued in the more than 50 years between 1953 and 2015, 13 have been issued in the last four years alone, including seven in 2019. Recent actions taken to block imports from Africa include regional bans on gold mined in artisanal small mines in eastern Democratic Republic of the Congo (“DRC”), rough diamonds from the Marange Diamond Fields in Zimbabwe, and all tobacco from Malawi.
Finally, companies doing business in Africa must be cognizant of the creative human rights lawsuits being filed around the world. For example, lawsuits have been filed in the U.S. based on novel theories of companies aiding and abetting child labor. In the UK, a claim has been filed on behalf of children and parents from Malawi against British American Tobacco alleging unjust enrichment based on the harvesting of tobacco leaves for little compensation.
Anti-Corruption/Compliance: In 2019, we saw continued international anti-corruption enforcement efforts focused on conduct in Africa, including high-profile U.S. prosecutions of individuals involved in Mozambique’s “Tuna Bonds” scandal, UK Serious Fraud Office investigations in the mining sector, and an investigation by Norwegian authorities into the so-called “Fishrot Files” matter in Namibia. We also continue to see increased enforcement activity on the domestic front. For example, in Angola, we saw the first conviction for graft of a senior official under Angola’s president João Lourenço, with the sentencing of the former Transport Minister to 14 years in prison for charges of corruption and embezzlement of state funds. In South Africa, as the “State Capture” inquiry grinds forward, at the end of 2019 we saw a spate of high-profile arrests, some in connection with alleged bribery at state-owned enterprises.
Along with this trend of cross-border enforcement and local authorities stepping up enforcement efforts, we see continually heightening expectations from enforcement authorities for corporate compliance programs. Against this backdrop, we believe that companies operating in Africa should be carefully considering the business case for investing in their compliance programs and taking proactive steps to mitigate compliance risk.
Elections. There are 12 major presidential and parliamentary elections on the continent this year: Burkina Faso, Burundi, Central African Republic, Comoros, Côte d’Ivoire, Ethiopia, Ghana, Guinea, Niger, Tanzania, Seychelles, Sudan, and Togo. Given the anticipated impact on foreign investment, opportunities for positive economic growth, and fears of destabilization and international interference, we are paying special attention to Ghana, Côte d’Ivoire, Tanzania, Central African Republic, and Ethiopia. Ghana is a stable democracy and key to economic growth in West Africa. Though President Nana Akufo-Addo’s face-off with former president John Mahama appears to be a close race, Akufo-Addo’s incumbency and track record on positive economic growth may offer him an advantage. In Côte d’Ivoire, it is unclear whether President Alassane Ouattara will seek re-election (as he has until July to make his decision), but if he declines to run or is defeated, the country will experience its first transfer of power since the 2002-04 civil war. In Tanzania, although Magufuli’s party, Chama Cha Mapinduzi, has been in power longer than any other political party on the continent, Magufuli’s socially conservative laws and alleged human rights abuses may give room for opposition presidential candidate Edward Lowassa to make the election competitive. The control of rebel groups in Central African Republic has caused President Faustin Touadéra to seek military relief from Russian mercenaries. That, along with recent Russian disinformation election tactics in Africa, may affect CAR’s elections. For Ethiopia’s parliamentary elections, Prime Minister Abiy Ahmed’s democratic reform agenda is expected to increase economic growth and greater inclusive development as the country undergoes a number of political and legal reforms.
Trump Administration’s Policy: Russia, China, the UK, the EU, India, Turkey, and other nations are working hard to unlock Africa’s commercial potential. Last year the Trump Administration rolled out an Africa policy built around promoting more U.S. investment on the continent. The key pillars of the policy are Prosper Africa and the new U.S. Development Finance Corporation (“DFC”). We will be watching the implementation of both of these initiatives. Prosper Africa promises “deal teams” that will help American companies with everything from market intelligence to identifying potential local partners. The DFC was created to make equity financing available for projects that have a developmental impact. We will be watching how the Trump Administration implements Prosper Africa and the new DFC in support of U.S. companies in Africa.