African Commercial Law Must Be Reformed

By Spraracino, Joann C. | African Business, October 1997 | Go to article overview

African Commercial Law Must Be Reformed


Spraracino, Joann C., African Business


Recent trade and investment headways in Africa have made it clear both here in the United States and abroad that an African economic renewal is underway. US exports to Africa grew 20% last year and foreign direct investment flows to sub-Saharan Africa reached $4.5bn.

Earlier this year, for example, the Texas-based BC Communications Inc. and Telex Malaysia Berhad bought a 30% stake in Telkom South Africa, the state-owned phone company, for $1.26bn.

A recent task force sponsored by the Council on Foreign Relations reported that the United States exports more to Africa than to Eastern Europe and the Soviet Union combined, and that Africa will become increasingly important as a market because more than a third of US economic growth results from exports.

Once marginalised continent

This once marginalised continent has been capturing the attention of US investors in a series of summits held recently, from New York City and Washington, DC, to African capitals. July's African African-American Summit in Harare, Zimbabwe attracted over 3,000 participants. AT&T, General Motors, Chevron, Chrysler, Coca-Cola, Shell Oil, Microsoft, Philip Morris, Johnson & Johnson, and Proctor and Gamble were among the US firms represented.

A major business summit held this spring in northern Virginia also included numerous Fortune 500 companies among its 700 participants. This surge in interest comes at a time when the Clinton Administration and a bipartisan group in Congress are presenting a ground-breaking trade and investment policy to move Africa away from dependence on foreign aid and into the international business arena.

Commercial Legal Reform in Africa

A recent conference in Washington, DC focused attention on a critical and often overlooked aspect of the trade and investment equation, the commercial legal regulatory environment.

The panel discussion, co-sponsored by the American Bar Association and the Centre for Strategic and International Studies, provided a timely discussion and debate on the need for commercial legal reform in Africa as an essential component to creating an enabling environment for domestic and foreign trade and investment.

The programme itself was testimony to the rising business interest in the continent by the standing-room only crowd which packed the hall.

The 120 participants included representatives of businesses, law firms, banks, embassies, the US Congress, and the State, Commerce and Treasury Departments. The Chairman of the International Law Institute, the Vice-Dean of Harvard Law School, and the Chief Counsel for Africa at The World Bank were among the distinguished panelists.

With the support of multilateral, bilateral, and local donors, commercial legal reform projects have been on the rise in Africa and are expected to continue to grow. Such projects have already taken root in Zambia, Uganda, Tanzania, Kenya, Mozambique, Namibia, and Ghana.

In addition, two major regional reform efforts are underway: the Harmonised Investment Code for the West African Economic and Monetary Union (UEOMA), and the treaty of the Organization for the Harmonisation of Business Law in Africa (OHADA). These have already been signed by 17 nations in a bid to harmonise the business laws of African nations, beginning with the francophone countries.

A comprehensive commercial legal regulatory reform project should address areas that directly and indirectly impact the private sector such as laws governing commerce, corporations, contracts, property and taxation, as well as those interconnected areas which support the legal environment. These include the recording and dissemination of laws, regulations, and court decisions; training for lawyers and government officials in new laws and legal concepts; public education campaigns about the role of law in a market economy; and efficient judicial and alternative dispute resolution mechanisms, including arbitration, conciliation, and mediation. …

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