This article examines key regulatory challenges and offers practical strategies for success, leveraging insights from CDH’s extensive experience in African markets. Our comprehensive Africa Corporate Guide is also a valuable resource that has been designed to help investors navigate the diverse legal and regulatory landscapes across the continent: See link to CDH Africa Corporate Guide here.

Diverse regulatory landscapes

Africa’s regulatory frameworks are shaped by a blend of legal systems and regional agreements, making compliance highly jurisdiction-specific. For instance, South Africa offers a robust legal framework under statutes like the Companies Act, No 71 of 2008 and the Competition Act, No 89 of 1998, yet its compliance requirements can be daunting. Navigating these laws often requires alignment with public interest criteria, including employment and transformation objectives. Nigeria, with its dynamic economy, presents another compelling market, but requires careful negotiation of sector-specific regulations. Authorities such as the Nigerian Investment Promotion Commission enforce strict compliance measures for the incorporation of local entities, with lapses potentially leading to operational setbacks. Meanwhile, Francophone Africa, governed by the Organisation for the Harmonisation of Business Law in Africa (OHADA) framework, benefits from a degree of legal harmonisation across 17 member states. However, the interplay between OHADA regulations and national laws necessitates nuanced compliance strategies, particularly for cross-border transactions.

The evolution of competition laws across Africa is adding another layer of complexity. South Africa’s Competition Commission, for instance, considers not only market impacts but also broader public interest factors such as employment and transformation. The regional Common Market for Eastern and Southern Africa (COMESA) framework, while aiming to streamline processes, introduces its own set of challenges, as mergers often require dual compliance with national and regional authorities. This dual oversight can lead to prolonged timelines and added costs.

Sector specific regulations and resource nationalism

Critical sectors such as mining, energy, telecommunications and agriculture are governed by intricate and often protectionist regulations. Many jurisdictions impose local content and resource nationalism laws, requiring significant local ownership, government equity stakes, or joint ventures with domestic partners.

For example, Ghana’s Minerals and Mining Act imposes restrictions on foreign ownership, compelling investors to explore innovative deal structures, such as joint ventures with local partners. In 2002, Ethiopia opened up its telecommunications sector to foreign investors after decades of state ownership. However, the country’s regulatory framework still imposes strict licensing and equity requirements on foreign entrants. These include limits on foreign equity stakes, mandatory partnerships with local entities, and additional regulatory approvals for foreign investors seeking to enter this sector. In Kenya, restrictions on foreign ownership of agricultural land necessitate alternative strategies, including long-term leases, to secure investments. South Africa’s Broad-Based Black Economic Empowerment framework mandates significant local ownership and procurement, particularly in the mining sector. In Tanzania, regulations demand a 16% free carried interest for the Government in mining projects, reflecting a prioritisation of national wealth retention. Angola’s local content requirements in the oil and gas sector further illustrate the growing emphasis on fostering local industries and workforce development, where foreign investors are required to prioritise Angolan suppliers and employ local talent in their operations.

Currency restrictions and exchange control

Currency restrictions pose additional challenges, particularly in countries with strict exchange control regimes. Nigeria’s foreign exchange shortages can delay the repatriation of profits, compelling companies to adopt hedging strategies or alternative financing structures. Zimbabwe’s stringent controls similarly necessitate creative solutions, such as escrow accounts or offshore structures, though these require careful legal and tax planning to mitigate risks. Similarly, Mozambique enforces exchange controls that require prior approvals for foreign currency transactions. Only as recently as 30 July 2024 did Ethiopia relax its exchange control regulations, ending decades of stringent controls on the value of its currency. 

Pan-African integration and the AfCFTA

The African Continental Free Trade Area (AfCFTA) represents a transformative initiative aimed at harmonising trade and investment regulations across Africa, with the goal of creating a single market for goods, services, and investments. By reducing trade barriers, such as tariffs and quotas, and encouraging greater economic integration, the AfCFTA has the potential to significantly boost intra-African trade and attract foreign investment. See our comprehensive insights on AfCFTA.

Strategies for success

Navigating this environment demands meticulous preparation. Thorough due diligence, tailored to the specifics of each jurisdiction, is essential to identify and address potential risks. Establishing partnerships with local entities can provide invaluable insights into cultural and regulatory nuances while fostering goodwill with authorities. Proactive engagement with regulators, well in advance of transactions, helps pre-empt challenges and facilitates smoother approvals. Innovative deal structuring, whether through joint ventures or other mechanisms, offers a means to comply with local laws while achieving strategic objectives.

While Africa’s regulatory landscape can appear daunting, it also holds unparalleled opportunities for those who approach it with the right strategies and expertise. Investors who embrace the continent’s complexities with informed, adaptable approaches will find themselves well-positioned to navigate its challenges and unlock its potential.

CDH focuses on delivering extensive legal assistance to clients based in Africa or seeking to engage in cross-continental business endeavours. We harnesses the collective knowledge and capabilities of esteemed African business law firms, providing a wealth of proven expertise in collaborating with governmental bodies, local and international corporations, and their associated entities. Through our substantial experience and comprehensive grasp of varied markets, we have established ourselves as a renowned facilitator of successful business ventures throughout Africa.