Managing Risks Amid New Opportunities in Africa’s Extractive Industries

As Africa's landscape continues to open new opportunities for investors in the extractive industries, challenges such as navigating high-risk jurisdictions and maintaining the support of governments and local business partners persist. Indeed, rapid political shifts can strain or irreparably damage relationships, while adverse actions by key local business partners can create significant operational hurdles.

While the decision to operate in volatile markets can be a lucrative one, businesses and individuals can take proactive steps to ensure their investments stay protected, including:

1. Prepare for Increasing Political Tensions: Elections and shifting government priorities may increase risk of tensions with state-owned partners and national regulators. Investors should prepare for increased scrutiny and actively defend commercial interests amid changes in the public policy environment that may threaten their operations.
2. Assess Asset Vulnerabilities Against Future Attacks. Companies and individuals at risk of attack by government authorities or politically motivated third parties can consider a detailed examination of their asset structures – including those in offshore jurisdictions such as the British Virgin Islands and the Cayman Islands – and explore lawful preventative and defensive measures that can be taken should such attacks be launched. Some of these include deploying offshore strategies with foreign entities that hold share interest in the local companies being targeted, or restructuring relevant parent companies to limit potential exposure.
3. Focus on Local Decision Makers. Understanding key local decision-makers’ motivations is a crucial component of staying on top of any potential political or economic attack. Offensive investigations targeted against potentially compromised decision-makers may uncover specific evidence demonstrating the illegitimacy of possible claims. If such a threat comes from corrupt actors, third-party governments can provide support through criminal investigations and/or economic sanctions against the wrongdoers.
4. Proactively Collect Evidence for Global Use. When facing politically motivated allegations, it is important to quickly – and pre-emptively, if possible – gather evidence to prove lawful conduct. Ideally, evidence should be collected and prepared in a manner acceptable to international regulatory authorities in order to effectively halt politically motivated investigations and preserve a company’s brand (both in-market and globally).
5. Consider Cross-Border Enforcement: For creditors and investors being politically targeted for looking to collect what is legally theirs, a clear understanding of enforcement strategies against sovereigns across jurisdictions can often build the leverage needed to reach successful recoveries. For example, leveraging the role of large international organizations (e.g. World Bank, International Monetary Fund) can be an effective pressure point when paired with ongoing litigation efforts. Companies at risk may also consider initiating investment treaty claims against countries that have ratified bilateral investment treaties for their failure to protect local business.

Continuing political and economic volatility on the African continent poses serious risks to multinational companies, their executives, investors, Ultimate Beneficial Owners and other key individuals should they become the targets of politically motivated enforcement actions. To protect their businesses, reputations and potentially personal liberties, parties are well advised to take pre-emptive measures if such attacks appear likely.

If you wish to learn more about potential threats to companies in extractive industries operating in Africa, our team will be attending this year’s Investing in African Mining Indaba conference taking place in Cape Town, South Africa from 3 to 6 February. For more information please contact Vicky Kay, Product Director at victoria.kay@kobrekim.com or Samira Poisson, Regional Manager (Middle East and Africa) at samira.poisson@kobrekim.com. Please direct any media-related queries to media@kobrekim.com. 

About Kobre & Kim

Kobre & Kim is a global law firm focused on disputes and investigations, often involving fraud and misconduct.

To preserve the assets, liberty and reputation of individuals and their global business interests, our firm:

• Provides offensive and defensive cross-border litigation and crisis management strategies in court and out-of-court.
• Brings together over a dozen former U.S. and UK government lawyers in EMEA, Asia, Latin America and the U.S., including former prosecutors from the U.S. Department of Justice (DOJ) and UK Serious Fraud Office (SFO);
• Has deep experience with global foreign policy, national security and economic controls and regularly interfaces with regulatory agencies that impose these controls.