Australia: Local partners: perspectives from Africa

Business ethics and anti-corruption world

African jurisdictions are increasingly the focus of foreign investors and often use local partner requirements as a policy tool, as they are eager to ensure that Africans reap the benefits of increased economic opportunities.

The commodities boom and resource discoveries such as oil off the coasts of Angola and Ghana and gas reserves in Mozambique, coupled with increased flows of foreign direct investment in the years following the financial crisis, have led to unprecedented growth in many African economies. From a local policy perspective, the reasons for requiring local partners are thus easy to understand.

While this has the potential to provide opportunities to the people of Africa, it can present challenges to foreign investors.

Local content

There are a number of policy interventions which can broadly be described as 'local content requirements' and which are becoming common in African jurisdictions.

The first is employment. Countries such as Angola, Ghana, Nigeria and Zambia have rules in place which require a certain level of local employment, depending on categories of jobs (usually designated on the basis of skill and scarcity). Often the level of local employment required increases over time, which is intended to incentivise the transfer of skills to locals.

Additionally, some African jurisdictions have requirements for local representation in the management of companies, with an emphasis on the transfer of skills.

The supply chain is another common focus. Companies are required to procure their supplies through locally owned entities in an attempt to broaden the impact that particularly investment projects have on the local economy. Jurisdictions such as South Africa, Mozambique and Angola have rules which regulate procurement.

There are often local requirements relating to ownership. This aspect is discussed in more detail below.

Industries affected

The approach taken to local partners and local content varies greatly across jurisdictions and industries. In some instances the policies, rules or legislation applicable to local ownership may be limited in application and relate only to a specific industry – for example the oil industry in Angola.

Other countries, such as South Africa, have broader and more comprehensive legislation, which applies to all government procurement and which impacts on all sectors of the economy.1

Typically, local ownership requirements apply directly to industries focussed on the exploitation of natural resources of a particular country or indirectly to the industries which supply them.


The requirement to involve a local partner in a particular business presents potential risks to investors which need to be appropriately managed and mitigated. The industries to which local partnership rules apply usually require some degree of interaction with or reliance on local governments or regulators. Extractive industries, for example, usually require operational licences. The telecommunications industry, which is relatively well developed in Africa, is another example of a tightly regulated industry where regulatory approvals are essential for entry into the market.

In high risk jurisdictions, the sometimes blurred lines between government and business and the need for regulatory or government approvals often lead investors to seek out influential partners. The latent and associated risk is that the partner may engage in unlawful or corrupt activities in order to obtain a benefit perceived to be of mutual interest.

Adverse consequences

In addition to the contravention of local legislation, the investor could also be placed in violation of foreign legislation with extra-territorial reach, such as the US Foreign Corrupt Practices Act, the UK Bribery Act or the South African Prevention and Combatting of Corrupt Activities Act.

The risk that a licence could later be revoked on the basis of unlawful behaviour will hang heavily over projects that require large, long-term investment. Though historically there has been a lack of political will to prosecute and enforce bribery in the local jurisdiction, politicians and political views may well change over time.

A further risk is the possibility of tainting what would otherwise be a valuable asset. With anti-bribery and corruption due diligence investigations becoming an increasingly common feature of modern transactions, future attempts to sell the asset may be compromised. There is also the risk that revenue considered to be the proceeds of unlawful activity – including dividends paid through the shareholding structure – could violate anti-money laundering legislation in the foreign investor's home country.

Mitigating risk

Investors should conduct appropriate risk assessments when choosing a local partner and agreeing to the details of their contractual relationship. There are a number of steps that the prudent investor ought to take in order to manage its exposure to risk:

  • Care should be taken as to the identity of the local partner. Investors should conduct as thorough a due diligence investigation as possible and satisfy themselves that the partner shares their ethics and values. The most valuable social licence can often be obtained by allocating local ownership to broad based community or development structures.
  • Contracts with local partners should be transparent and have clear antibribery and corruption provisions. This should include an undertaking by the local partner that it will not do anything which would constitute a contravention of international best practice standards on anti-bribery and corruption regulation.
  • In many African jurisdictions lobbying is not regulated, but often operates in grey areas, so is best avoided. Where lobbying is necessary, it is imperative to ensure that the lobbyist is independent of the local partner and that its scope and role is clearly defined and controlled. Remuneration should be commensurate with the services required and rendered.
  • When obtaining regulatory approvals are included as conditions precedent to the transaction, any payment made to the local partner should only occur after these conditions have been fulfilled. Payments of large sums of money prior to required regulatory approval could create unnecessary risks.


Africa's developing economies hold the potential for high returns on investment, while at the same time providing the investor with the opportunity to contribute positively to socio-economic change. There is no failsafe way to eliminate all risks associated with investing or conducting business in these jurisdictions. Investors should ensure that they adopt appropriate and effective measures to mitigate these risks.

The effective course of action is for investors themselves to adhere to the standard of international best practice in business ethics and corporate governance, to apply these standards in all the jurisdictions in which they operate and to require their local partners to do the same.


1South African legislation, similarly to Namibian regulation, is applicable to individuals historically disadvantaged by race based discrimination and does not apply purely on the basis of nationality. It is a relevant distinction but not the focus of this article.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions