Africa is a continent of 1.2 billion people. From a consumer potential standpoint it matches China or India. Yet historically, it has suffered from the lingering shadows of its colonial past, in addition to its current fractures, hostility, and ever-present corruption.
The continent is emerging fast, however, and is quickly accelerating into the 21st Century marketplace both from an investment and growth opportunity. From the digital revolution and increased free trade, to innovation in various industries, Africa may be the next market frontier to unfold into accelerated multinational presence.
In this podcast episode (available gratis on Apple, Spotify, and Sheppard Mullin‘s web site), Michael P.A. Cohen is joined by Africa competition and markets expert, Andreas Stargard, as he shares his insight to help multinationals navigate the African landscape.
What do the Africa markets look like from a multinational business opportunity perspective?
Which countries in Africa have established markets? Which ones have growth potential?
How and why has China’s investment and influence across Africa intensified over the last couple of decades?
What type of digital revolution is taking place in Africa?
Is there a huge opportunity for mobile money on the continent?
How is free trade shaping up across the African continent? How do the AfCFTA’s goals tie in?
What Free Trade cooperation agreements exist among the East, West and South African nations? Will they succeed?
Where is Africa leading innovations?
How will African wars and corruption impact its ability to grow a multinational marketplace?
Michael Cohenis the creator of the Nota Bene podcast. He began his career as an Assistant Special Prosecutor, investigating and prosecuting organized crime involvement with the failure of local financial institutions in the early 1990s, and has since practiced globally at several top law firms. In 2015, Michael joined Sheppard Mullin’s storied antitrust practice with a goal of putting his 25 years experience to work to complement the firm’s longstanding antitrust litigation group, helping to bridge government antitrust enforcement in Washington, D.C. to the firm’s strengths in Brussels, San Francisco and Los Angeles.
A co-founding senior member of Primerio, a business advisory firm helping companies do business within Africa from a global perspective, Andreas Stargard is legal, strategic, and business advisor to companies and individuals across the globe. He focuses on antitrust and competition advice, white-collar counseling, contract dispute and negotiation, and resolution of global business disputes, including cartel work, corruption allegations and internal investigations, intellectual property, and distribution matters. He has written and spoken extensively on these topics and many others. Andreas also advises clients on corporate compliance programmes that conform to local as well as global government standards, and has handled key strategic merger-notification questions, including evaluation of filing requirements, avoidance strategies, cross-jurisdictional cooperation, and the like.
As of January 1st, 2021, Kenya’s competition-law enforcer, the Competition Authority of Kenya (CAK), started benefitting from its new “Informant Reward Scheme” (IRS). The IRS encourages “confidential informants” — often also referred to as “whistleblowers” — privy to inside information about antitrust offenses to come forward and report the illicit conduct to the Authority.
The IRS incentivizes informants with promises of anonymity as well as — rather modest, as we will see — monetary rewards: the CAK vows to maintain the confidentiality of the informant’s identity, and provides for up to Sh1,000,000 (approximately US$9,100 at today’s Fx rate).
Andreas Stargard, a competition lawyer active on the African continent, has delved more deeply into the CAK’s enabling “Guidelines” document, trying to ascertain the precise contours of the IRS program. He reports as follows:
AfricanAntitrust.com: “Who is eligible to participate in the IRS?”
Andreas Stargard: “What we know from the implementing Guidelines, and also from Director General Kariuki‘s speech on the IRS, is that only third parties or those individuals playing merely a remote and peripheral role in relation to the anti-competitive conduct are eligible to benefit from the IRS. This means that a 3rd-party customer, or a non-executive employee such as a secretary or copy clerk of the offending company, may report wrongdoing under the IRS.”
AAT: “What about insiders with executive authority, then?”
Stargard: “Similar to Western countries’ antitrust regimes, those individuals can still report illicit conduct by their employers, but they would have to resort to the Kenyan leniency process as opposed to the Informant Reward Scheme.”
AAT: “Understood. Are there other, similar whistleblower schemes in existence?”
Stargard: “Yes. We recently held a very timely webinar with leading international and African experts on the topic of whistleblowing, which I moderated. A recording of it is available on the web. Whistleblowing has become an important piece of the enforcement puzzle for many governmental authorities around the globe, not only on competition issues. In Kenya, specifically, President Kenyatta recently doubled the rewards for tax-fraud whistleblowers, who are now entitled to receive up to Sh5,000,000 ($45,000), and the country’s revenue service implemented the so-called iWhistle portal to allow informants to report tax fraud anonymously.”
AAT: “Speaking of money, what is your take on the amount of the offered reward under the terms of the IRS?”
Stargard: “Frankly speaking, one million Kenyan shillings is a paltry sum. I cannot comprehend how reporting a competition-law violation such as a price-fixing cartel that may cost the Kenyan economy and its consumers billions in losses is deserving of 5-times less reward than an informant reporting an individual’s tax fraud to the revenue service, which may cause significantly less injury to the government purse than an international cartel of corporates…”
AAT: “Strong words.”
Stargard: “I’m serious. Compare and contrast the meager sum of not even US$10,000 maximum IRS reward with the potential 5-year prison sentence liability for executives convicted of collusion! There is simply no comparison…”
AAT: “In a perfect world, what would you change about the Kenyan whistleblower scheme?”
Stargard: “If I had had any input into the process of devising the IRS Guidelines, I would have ensured that the maximum reward amount be commensurate with the economic harm and financial damage done by cartels — in short, I would raise the IRS reward to an un-capped straight-up percentage portion of the fines recovered by the CAK. The more, the better for everyone.”
AAT: “Do you have any parting words or final observations on the IRS program for our readers?”
Stargard: “Well, for starters, it is not too late to implement changes to the regime. The CAK (and the legislature, to the extent necessary) can easily increase the maximum reward, as I proposed earlier. I am certain that it would yield better results than the current Sh1m cap, which can easily be ‘outbid’ by an already-corrupt employer, seeking to ‘buy’ its employees’ loyalty! So, Mr. Kariuki, if you’re reading this interview, I’d strongly suggest considering an increase in the reward.
Secondly, from our international experience, we know one thing about ‘secret’ informant schemes: One key element of any successful whistleblower regime (besides ensuring adequate rewards) is the strictest maintenance of confidentiality of the informant’s identity. I realize that section ‘F’ of the Guidelines assures the public that anonymity will be guaranteed and that the CAK will ‘take utmost care to ensure that the identity of the confidential informant is not disclosed.’ However, as an attorney, I can only say that the proof is in the pudding. We will have to wait for the first proceedings pursuant to IRS-provided reports, in order to determine whether or not the whistleblowers’ anonymity will indeed be preserved successfully in practice. That said, I look forward to advising clients on the many issues that are likely going to arise from the Scheme!”
AAT: “Thank you for your time and insights on this new development!”
Thank you to our panelists for putting on a spectacle that gripped the audiences attention, breathing life into what it seems has quickly become a somewhat de rigeur medium. The commoditizing of the WEBINAR surely has come about due to expedience and the overlooking of a crucial point – the passion of the speakers.
John, Bill, Johannes, Mary and Khadiya (sadly Glynnis could not attend), effortlessly shepherded by moderator Andreas, effused on a topic that is by no means brand new but this time sublimely unpacked by experts.
The plea for urgent updating of legislation governing whistleblowing came through strongly, with several speakers advocating the inclusion of a whistleblower reward a la the SEC reward scheme. Johannes’ recount of his harrowing experiences after blowing
the whistle in the now notorious “Fishrot” case only served to re-affirm the vagaries surrounding legislation to adequately protect whistleblowers. Amazingly still not priority in developing and many developed countries. And there is more of course!
A quick request, please leave us your details and if you have another spare moment please leave a message about the webinar or anything whistle blower related!
Multiple regulatory agencies, competitor complaints and public interest concerns has posed a significant impediment to the proposed merger between Telkom Kenya and Airtel.
The Competition Authority of Kenya (CAK) recently announced that the Kenyan Ethics and Anti-Corruption Commission (EACC) is investigating Telkom Kenya amidst allegations of corruption in relation to historic transactions which gave rise to the current shareholding in Telkom Kenya.
The CAK’s decision to suspend the assessment of the merger was announced approximately a week after the Communications Authority of Kenya also suspended its assessment of the transaction pending the outcome of the EACC’s investigation.
The Communications Authority’s investigation will likely include an assessment of a complaint filed with the agency by Safaricom, a competitor to the merging parties.
Furthermore, the deal was also opposed by certain Telkom employees, ostensibly on the basis that their jobs were at risk should the deal go ahead.
Accordingly, the parties appear to have a long road ahead of them before clearance to implement the deal is granted.
The proposed transaction has no doubt attracted an additional degree of scrutiny as the telecom sector in Kenya is a significant market and there have been a number of disputes regarding the CAK’s jurisdiction to assess anti-competitive conduct, particularly abuse of dominance conduct, in this sector. A study into the telecom sector prepared by the Communications Authority was presented to Parliament in 2018. The CAK objected to the findings and remedial actions contained in the report which the CAK argued would amount to “price regulating” by the Communications Authority. Instead, the CAK urged the Communications Authority to focus rather on features of the market which raise barriers to entry or preclude effective competition between competitors.
While Parliament has, as far back as 2015, urged the Communications Authority to consult the CAK before making any determination regarding a telecom service providers’ “dominance”, subsequent litigation led to a High Court ruling in 2017 which confirmed that the Communications Authority’s powers vis-à-vis competition related matters remain vested exclusively with the Communications Authority.
The concurrent jurisdiction between the CAK and the Communication’s Authority has created somewhat of an enforcement discord – at least in so far as assessing abuse of dominance cases are concerned.
The fact that both the CAK and the Communications Authority have decided to suspend their assessments of the proposed merger following the outcome of the EACC’s investigation suggests that the outcome of the EACC’s investigation is relevant to both the CAK and Communication Authority analysis of the proposed transaction. This in turn, seemingly appears that there is at least an overlap in relation to the key issues under assessment by the respective agencies. Assuming there is indeed an overlap between the CAK and the Communication Authority’s assessment of the proposed transaction that naturally raises the risk of having two agencies come to different conclusions based on the same facts.
Telkom Kenya, however, remain confident that the merger will ultimately be cleared by all regulators.
Telkom Kenya have indicated that the merger will have significant pro-competitive and pro-public interest benefits which will have a positive impact on employees (and the market more generally). Whether the CAK conducts a comprehensive assessment between the short term negative impact on employment versus long term positive impact remains to be seen.
Assuming the proposed deal does not raise any traditional competition issues, it cannot therefore be ruled out that the transaction will be approved subject to public interest related conditions regarding retrenchments and/or re-employment obligations.
Whatever decision is ultimately reached, one hopes that the authorities will publish detailed reasons based on a robust assessment of the evidence in order to provide greater objectivity and transparency as to the analysis which is undertaken by the CAK when analyzing a merger – both from a competition and public interest perspective.
The CAK has in the past number of years have made significant positive strides forward in this regard and is deserved of the recognition it receives as one of the most active and robust competition authorities in Africa.
[Michael-James Currie is senior contributor to AAT and a practicing competition lawyer who has assisted clients with competition law related matters in multiple jurisdictions across Africa]
The Public Protector, in theory, was designed and created to strengthen the constitutional democracy within South Africa along with the other Constitutional Institutions established under Chapter 9 of the Constitution of the Republic of South Africa. In order to strengthen this constitutional democracy, it is imperative that the Public Protector be independent from any governmental branch or agency, as making it accountable to the exact organs it seeks to protect society from renders it ineffective and voiceless. What follows is an elaboration on the role of the Public Protector within a constitutionally democratic South Africa and whether its purpose and effectiveness has in essence fallen into redundancy by making it accountable to Parliament.
Establishing a constitutionally democratic Public Protector
The unfailing oppressiveness and secretiveness of the Apartheid government lead to a distrust of such a government and one which was consequently not open and accountable. State organs could and often did act ultra vires, doing whatever they wished regardless of whether such powers were given to them, and would not need to be accountable for any such actions.
However with the dawning of a constitutional democracy in 1994, the need to divide the once monopolised parliamentary power among all branches of government and the implementation of checks and balances ensuring that all branches of government became accountable towards one another became imperative in securing the ideal of a democratic nation once founded upon racial oppression and impunity. With the implementation of the 1993 Interim Constitution, in terms of principle 29, the office of the Public Protector was first established and by including it the Constitutional Principles, secured its existence within the final Constitution.
The Public Protector was designed to assist in the transformation of an oppressive society into an open and democratic society, creating an accountable and credible government through the re-establishment and respect of the rule of law. No longer was government above the law nor could they do a they wished, rather the government was in theory, accountable to the people of the nation, echoing the entire theory of the social contract. Consequently the office of the Public Protector was ideally to act as a check between the Executive and Legislative branches of government and to provide a link between the citizens and such branches.
The powers, functions and duties of the office of the Public Protector
The Public Protector is an institution established to investigate purported or supposed indecorous behavior of state affairs, whereby upon the decision to investigate such, which is at the discretion of the Public Protector, the Public Protector must report on such conduct and if applicable the taking of appropriate remedial action must occur.
The Public Protector may not investigate judicial decisions, as this is the function of the Judicial Services Commission as well as owing to the fact that the Public Protector acts as a check between the Executive and Legislature. The Public Protector may also not investigate human rights issues as such issues fall within the jurisdiction of the South African Human Rights Commission. Once the Public Protector has an affirmative finding of misconduct, such a finding is then referred to the Director of Public Prosecutions.
What follows is a determination of the ability of the Public Protector to accurately fulfill the role of its office. Such capability is determined by means of the independence which is afforded to it.
How independent is the Public Protector?
In order to hold the Executive and Legislative branches of government accountable, the Public Protector requires a “sufficient” amount of independence. This leads to predominant issues of what constitutes sufficient independence and the issue of over independence of such institutions which would then lead to an abuse of such independence.
Independence is a characteristic, which is established objectively in terms of whether a reasonable person would perceive such an institution as being independent. Thus the impact that the Public Protectors perceived independence upon the reasonable person would in hindsight affect the Public Protector to fulfill the role of its office.
In order to accurately understand the independence which the Public Protector is afforded, its independence needs to be divided amongst five aspects namely a prima facie contradiction that exists between sections 181(2) and 181(5) of the Constitution, financial independence, administrative independence and finally, the independence of appointments and dismissals of the Public Protector.
Amid section 181(2) and 181(5) of the Constitution, there exists a prima facie conflict of these two provisions in the sense that section 181(2) holds Chapter 9 institutions to be independent and only subject to the Constitution whereas 181(5) holds such institutions accountable to the National Assembly. This inconsistency was settled in Independent Electoral Commission v Langeberg Municipality  whereby the court held in accordance with section 239 such institutions are not governmental departments which the Cabinet may have stimulus over, rather they are independent from government. Thus by holding such, the court made it clear that although the Public Protector is accountable to the National Assembly, it is not accountable to government nor is it afforded the same independence as the judiciary.
Two reasons exist at the outset for such accountability. Firstly the Public Protector is said to be accountable to the National Assembly, as through representative democracy, the National Assembly represents the population of South Africa, their opinions and ideologies, and thus by making the Public Protector accountable to the National Assembly, it is in essence making the Public Protector accountable to the public.
Financial independence of the Public Protector was too dealt with in Independent Electoral Commission v Langeberg Municipality whereby the Constitutional Court affirmed such Chapter 9 institutions need a degree of financial independence but it is not to say that such institutions may set their own budget. Rather Parliament as opposed to the Executive has the obligation to provide sufficiently reasonable funding in order for the Public Protector to fulfill its functions.
Appointments of the Public Protector are made by the President through a shortlisting of candidates, by the National Assembly, whom the Public nominated. Therefore there exists a grave deficit in terms of public participation, as the public does not participate beyond the nominations stage.
It is too the National Assembly who may dismiss the Public Protector with a two-thirds majority vote. Such a majority is to ensure a simple majority does not unjustly dismiss the Public Protector.
In theory, affording the Public Protector this amount of Constitutional independence at first glance, seems to allow it the ability to perform its functions. However, over the past couple of years, grave injustices have been committed towards this Chapter 9 institution that raises doubts as to whether the Public Protector can effectively fulfil its office, and whether the continued lack of the required independence renders the office of the Public Protector redundant.
The Constitution can be said to afford the Public Protector “sufficient” independence. However I posit that sufficient independence does not mean effective independence, and it is evident that the Public Protector as a chapter 9 institution is fundamental in the supporting of a democratic South Africa, representing a mechanism of holding the Executive and Legislature accountable, but such an office is not effective for as long as those whom the Public Protector seeks to hold accountable are the exact persons who have the power and ability to dismiss the Public Protector and furthermore have the ability to dictate the funding it therefore receives. With the recent cries for funding by the Public Protector, and the closing of its Mpumalanga office with others following suit, the question arises of whether the Public Protector has been reduced to a mere symbol of a ideology of democracy, unable to protect the public. Furthermore the manner in which the Nkandla Report was received in Parliament shows its inability to effectively exercise its powers and functions. Not being able to protect the public renders the Public Protector a useless feat.
I therefore posit that the theoretical independence afforded to the Public Protector is not enough to allow it to effectively fulfil its powers and duties. Therefore all efforts must be made to afford the Public Protector such effective independence in order to fulfil its role and allow it to effectively protect the public.
 Constitution of the Republic of South Africa, 1996 section 181(1)(a).
 Pierre de Vos ‘Balancing Independence and Accountability: The Role of the Chapter 9 Institutions in South Africa’s Constitutional Democracy’ in M Danwood, M. Chirwa and Lia Nijzink ‘Accountable Government in Africa Chapter 10’ (2012) 160 at 160.
 Ibid; Iain Currie and Johan de Waal The New Constitutional & Administrative Law vol 1 (2013) 46 to 50.
Public Protector v Mail and Guardian Ltd and Others 2011 (4) SA 422 (SCA) paras 5 & 6; C. Thornhill ‘Role of the Public Protector’ (2011) 2 Case Studies of Public Authority at 87.
 C, Murray ‘The Human Rights Commission et al: What is the Role of South Africa’s Chapter 9 Institutions?’ (2006) 2 PELJ 122 at 123 & 124;Ex Parte Chairperson of the Constitutional Assembly In Re: Certification of the Constitution of the Republic of South Africa, 1996 1996 (4) SA 744 (CC) certification case 1996 (4) SA 744 para 161.
In sync with greater enforcement: Firms’ compliance budgets grow
According to a recent survey, the budgets allocated to compliance have grown over the last year, including those of African participants in the study. Consulting giant Deloitte has released its 2015 Compliance Trends report, the result of its survey in which 20 large corporations across Africa (out of 364 total qualified respondents) participated.
Below, we summarise some its key conclusions on…
The Role of the Chief Compliance Officer
Taken together, these statistics … suggest that most CCOs, especially those at larger corporations, now have an opportunity to participate in high-level discussions about corporate strategy, values, and culture.
The key items under the CCO’s responsibility were:
code of conduct, and
Primerio director John Oxenham observes that, “unfortunately, the assessment of culture was perceived as the least important among the CCOs’ responsibilities. This is a serious problem, as pointed out in prior articles emphasising the importance of a culture of compliance, rather than sterile top-down pronouncements that often go unheeded by mid-level management.”
While firms from the continent have increased their compliance budgets (about 16% by 10 to 19%, and many more by 1 to 9% over the past year) along with their U.S. and European counterparts, they are perceived to be dilatory in their evaluation of their own compliance efforts and results, and lacking in their ability to make full use of their compliance efforts. In short, many still (wrongly) view dollars spent compliance as a “grudge cost.”
Significant enforcement in Africa (both in the anti-corruption and competition-law domains) across various sectors of the economy (food, technology, construction, to name a few) have awakened many corporate boardrooms across Africa to the reality of effective home-grown government enforcement.
Information Technology and Compliance
IT Systems have not fared well in the latest report:
One possible disconnect emerges when asking CCOs about the IT systems they use to fulfill their missions: Most are not terribly confident in their IT systems’ ability to do the job. Only 32 percent of respondents were confident or very confident in their IT systems, down from 41 percent in 2014
Interestingly, smaller organisations with less than $5 billion in annual revenues showed higher levels of confidence in their IT systems when juxtaposed to their larger peers.
Dr. Tafotie is a Pr1merio advisor with a legal & business focus on both African and European markets. A member of the Luxembourg Bar, he is also a lecturer in law at the University of Luxembourg. His focus areas include project finance/public private partnerships, banking & finance, and corporate law.
In his latest paper on essential infrastructure development on the African continent, Roger not only embarks on a mission to clarify the valuable role of public-private partnerships (“PPPs”) — he also reminds us that, beyond “well-drafted projects contracts,” there must also be an “effective and efficient African regional regulatory oversight system, with clear roles and lines of command, that is able to protect against ills such as self-dealings and anti-competitive alliances or monopolies,” including “the monitoring of the tendering process against corruption.”
Enhanced competition and an effective oversight system to weed out corruption in the bidding (and execution) process not only protects the local, national or regional governmental issuer of the infrastructure PPP. In order to keep all stakeholders, including global financing institutions or other private lenders, in a position of “acceptable risk,” a well-supervised competitive process is essential to tender selection and project execution.
Questioning African antitrust growth prospects: Slowdown in economic investment (both organic and outside investment) may affect functioning of competition law on the continent
Recent developments in Africa have many scratching their heads and wondering whether the formerly wondrous economic-growth engine of the vastly resource-rich and otherwise economically still undervalued continent will soon experience a slowdown, if not come to a halt altogether.
For one, in April 2014, Nigeria surpassed South Africa as the continent’s largest economy (see Economist Apr. 12, 2014: “Africa’s New Number One“). This is a significant milestone for the former, and a setback for the latter — an economy that was 8 times the size of the Nigerian economy only 20 years ago, yet is now suffering from stagnating GDP, reeling from corruption allegations amongst its current leadership, undergoing a closely-watched presidential election process, and whose ruling ANC party is facing a heretofore unprecedented backlash and torrent of criticism.
Not only South Africa has weakened, politically and economically, however. Events such as the Northern Nigerian wave of violence – with sectarian Boko Haram forcefully displaying the impotence of the central Nigerian government of a weakened president Goodluck Jonathan – fuel the fire of outside investors’ mistrust of African stability and their concomitant reluctance to make good on prior investment promises. As The Economist notes in the article quoted above: “it is not a place for the faint-hearted” to invest, even though it highlights the successful Nigerian business ventures of outsiders such as Shoprite, SABMiller, and Nestlé. Bloomberg BusinessWeek quotes Thabo Dloti, chief executive officer of South Africa’s fourth-largest insurer Liberty Holdings Ltd. (LBH), as saying: “It does slow down the plans that we have, it does put out the projections that we have by a year or two.”
The upshot for competition-law practitioners and enforcers alike is rather straightforward, AAT predicts: more hesitation around African deals being done means fewer notifications, less enforcement, and overall lower billings for firms.
The flip side of the coin – as is usually the case in the economic sine curve of growth and slowdowns – is the commonly-observed inverse relationship of M&A and criminal antitrust: while we may see fewer transactions in the short term, the incidence of cartel behaviour and commercial bribery & government-contract fraud cases will likely increase.
AAT editor John Oxenham of Nortons Inc. is an invited speaker on current trends in African anti-corruption and anti-fraud enforcement. See more details on the conference and FraudNet here.
The emerging overlap of antitrust and anti-corruption issues – including significant efficiencies from combining preemptive internal audits as well as corporate compliance programmes in these two respects – presents a natural synergy for legal departments, allowing them to economise outside-counsel spend whilst at the same time enhance the rigour and comprehensiveness of their compliance and audit programmes.
Please contact the authors for more information on the services we can provide in Africa, the U.S., in Europe and Asia.