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Changing Needs, Growing Expectations

Competition in the African legal industry is growing more intense as trends reshaping global legal markets spread across the continent, a survey of Africa’s top 50 law firms has found.

Dec 09, 2020
Africa Legal
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Almost 86% of firms believe the level of competitive pressure in the African legal market has increased to some degree over the last five years. That is not just because of the arrival of international firms, but also the growing footprint of the Big Four consultancy firms, the rise of alternative legal services providers and clients expanding their in-house capability.

For some survey respondents, that competition is healthy for the industry in general. It means clients have more bargaining power in terms of fees, forcing firms to be more commercial in their approach to winning business and retaining clients.

“Overall, this is positive for the market… In South Africa alone, the increase in competition has significantly improved the overall service that clients are provided,” one respondent said.

While a number of respondents cited competition from international firms as the biggest challenge that the African legal market will face over the next five years, other potential threats exist.

One area where survey respondents said African firms are lagging is with the slow pace of innovation and technology deployment.

“To operate in a much more efficient and cost effective manner, and to engender process improvement as well as increased client satisfaction, African law firms must embrace technology,” one respondent noted.

A more immediate challenge is Covid-19 and the impact it will have on the macroeconomic outlook across the region. All survey respondents expected trading conditions to be tougher next year, with roughly 86% citing the pandemic as the biggest threat to the financial position of their firms next year.

“The biggest challenge will be the lack of growth in the economy of the respective African nations,” a respondent said. “This will generally stunt development and affect the legal market negatively.”

Not only has Covid-19 forced firms to adopt remote working strategies, which has restricted travel and in-person client meetings, for some it is also curbing the amount of incoming work.

“We are experiencing fewer instructions than previous years,” said one respondent. “Clients are restraining from giving legal work because of the Covid-19 effects on businesses, while some are preferring to use their internal lawyers.”

However, others are seeing a shift in matter type, with an uptick in disputes, restructurings and insolvencies.

“The overall workflow may be the same for a law firm—but the ability of clients to pay may be less,” another respondent noted.

While half of respondents said Covid-19 is the biggest challenge their firm is facing, 75% of respondents cited fee pressure as an even bigger challenge. Slightly more than a third of respondents also said changing client requirements, new forms of competition, and talent attraction and retention are top of mind.

One respondent said: “For several years, clients’ needs and expectations have changed. They demand more value from their legal service providers, while wanting to reduce their spend on fees.”

Yet, while the outlook remains uncertain, opportunities still abound. Some 71% of survey respondents cited technology investment as the biggest opportunity over the next five years, followed by expanding the range of legal services they offer (67%). Meantime, roughly two in every five firms said their biggest opportunity stems from demand growth and lateral hiring.

As one respondent summarised: “The size of the African market has demonstrated strong growth over the years. Through this growth in the African consumer market, we have seen increasing demand for legal services, allowing space for both local and international law firms to flourish and support local, regional and global businesses that are looking to Africa to take up new market opportunities.”

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