Public mood in the West has become intolerant of corruption. For investors, ensuring deals are above board can prevent large problems down the line and enhance communities, says global white collar crime expert Barry Vitou.
Vitou is co-chair of Greenberg Traurig’s Global White Collar Criminal Defense Practice and head of its London’s White Collar Defense & Special Investigations Practice. His focus is defending clients accused of white collar crime, conducting corporate investigations into concerns around misconduct and advising businesses on how to keep their operations clean.
Over the years he has helped clients looking for investment opportunities in mining and his advice, especially if they are considering the developing world, is the same.
“Do your homework, don’t pay bribes and build something which enhances the local community!”
Vitou advises investors should focus their homework on two key areas. First local laws and regulations and second, the local environment, including local partners.
On the other side of the coin, Vitou is often asked to advise local companies seeking to partner with investors, acting as a bridge between the two sides and ensuring the local partner is able to meet the expectations of the investor.
“When investing in an emerging African market companies are often going into an environment without the checks and balances that they are familiar with. Before investing, companies need to know and understand how their money will be spent.”
“The adage marry in haste repent at leisure still holds good. There are plenty of people who rue the day they went into a project without knowing the full picture – people can and do sleepwalk into problems.”
“The sadness is that if only the proper due diligence had been done and time spent understanding the environment those problems could have been avoided.”
Transparency International’s Corruption Perceptions Index is likely to be the starting point for investors.The Index ranks 180 countries and territories by their perceived levels of public sector corruption. In 2019 the worst performing country was Somalia at 180 and the best Denmark at 1. Botswana is at 34, Rwanda 51, South Africa 70, Kenya 137 and Nigeria 146. So Africa is a mixed picture.
“On top of the regional risk which apply to all businesses operating in the region, the mining industry faces additional challenges. Mining has high level government control which manages the licensing/permit regimes, high value contracts and a high value product for export.”
The poor Transparency International rankings in some countries do not mean that investors should avoid Africa. Instead they are simply the starting point in a diligence process which should identify areas of weakness and the introduction of compliance systems and controls to try to prevent problems in proposed new investments. The imposition of compliance systems and controls offers opportunity. Potential local businesses who comply with investors compliance standards will be attractive prospective partners.
For Vitou finding reputable partners, including a reputable local lawyer, with an understanding of the local regulatory regime and with insight into the local politics- be it nationally or in the community – is often important.
“Likewise, it is very important to understand local administrative processes. Something taking too long is a common complaint – but with homework a longer process can be factored into any timetable and processes properly followed.”
“So often a lack of knowledge can result in a person or business unwittingly transgressing. This is easy to fix by investors taking the time to understand local laws and processes and ensuring that they know their local partners as well as understanding the local culture and set up.”
But what if a bribe is the only way through to securing the big deal?
“Simple. Don’t be tempted. Don’t pay bribes. Bribery is fraud and the potential criminal consequences of bribery should be deterrent enough. From a commercial perspective the dishonesty and violation of trust associated with bribery is hugely destructive. Put another way why would anyone want to do business with someone who is dishonest in the first place.”
At the end of the day Africa offers huge opportunities for investors and Africa. A big investment shouldn’t be a one-way relationship but instead offer returns for the country with the potential to enhance uplift the local economy and providing lasting employment for local people as well as offering returns for the investor.
Investors doing their homework and ensuring clean business is a solid foundation.
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