South Africa: The Rule Of Law In Africa: Enforcing Governance Or Scaring Off Foreign Investors?

Last Updated: 1 March 2016
Article by Kenny Chiu and Rita Chen

Most Read Contributor in South Africa, September 2016

In the era of globalisation, the degree of economic liberalisation is more pervasive than ever before. With the acceleration of market integration, even relatively regressive regions of Africa are enjoying the fruits of globalisation. An important factor in the expansion of globalisation is the rapid advancement of legal development, and, indeed, many developing nations in Africa, such as Ghana and Tanzania, have legal systems on par with developed countries and thus have a higher degree of cohesion due to the rule of law.

However, enforcing the rule of law in Africa against the backdrop of globalisation has not been without challenges. In 2015, the Nigerian Communications Commission fined Africa's largest telecommunications company $5.2-billion for its failure to register every subscriber's personal information and to unsubscribe unregistered SIM cards (a particularly important task to assist the Nigerian government in the crackdown on terrorists). Similarly, in 2013, in nearby countries such as Ghana, thousands of Chinese nationals were deported on suspicion of illegal gold mining in the region.

At the same time, foreign investors are expressing frustration with the slow pace and bureaucracy involved in being granted mining licences. West Africa traditionally relied on oil exports as its economic pillar; however, with the current global economic slowdown and depressed oil price, the revitalisation of manufacturing and other industries is necessary to attract foreign investment.

West African leaders and companies are largely aware that the advancement of technology and respect for the rule of law are the two fundamental factors that could accelerate their economic growth and provide foreign investors comfort and security when investing in their countries. Making efforts to uphold the rule of law, such as enhancing the ability and efficiency of law enforcement, and preserving the authority of the law, is a natural process, but is not without challenges.

Amid the current international economic crisis, it is disturbing when the enforceability of the law becomes questionable. The question that needs to be asked is: Is it possible that the rule of law in many African countries could be dissuading foreign investment? The issue of legal enforceability is a widespread concern of many investors and we believe it is prudent to analyse this problem.

Firstly, in terms of the market economy, a comprehensive framework of law and regulations in a country is a move towards modernisation, and the effectiveness and authority of the rule of law can only be maintained by strong and fearless law enforcement. Whether in a period of rapid economic growth or economic downturn, the government must assign great importance to the function of law, as this is crucial to protect market players and their rights, whether they are foreign, state entities or private enterprises. In creating fair rules and establishing a fair market environment for enterprises to participate in economic activities, increasing strict law enforcement is fundamental to the healthy development of the economy.

Secondly, in many parts of Africa (Nigeria in particular), strict law enforcement is a reflection of the important essence of the rule of law. If the law is not implemented, this will lead to a decline in legal efficiency. In relation to the rule of law in developing West African states, strengthening law enforcement is an important measure to further the implementation of the rule of law.

As an illustration of the importance of contract enforceability and the rule of law, the World Bank Group recently gathered and analysed comprehensive quantitative data to compare business regulation environments across economies and to encourage economies to aim for more efficient regulation. The World Bank Doing Business 2016 report ranks frontier economies like Ghana high on the index in terms of ease of doing business and the enforceability of contracts. In measuring contract enforceability, the report measured the time and cost to resolve commercial disputes through local first-instance courts, the quality of judicial processes indices, and evaluating whether each economy had adopted a series of good practices that promote quality and efficiency in the court system.1

Finally, it cannot be entirely ruled out that it is possible that some countries are appropriating the name of the rule of law to protect their local industry and workers, and thereby discouraging foreign investors and foreign capital. In the West African bloc, economic structures are relatively singular, as petroleum resources have always been the pillar of the national economy and the law may be developed to protect the industry it relies on to survive. The key to this discussion, however, depends on whether a country's legal system is designed to promote foreign investment, such as through protective measures, exemptions or priority access provisions, and the efficacy of their implementation. However, should there be selective law enforcement and the reduction of a favourable business environment, this could undoubtedly discourage foreign investors.

In a survey conducted by MergerMarket2, changes in the regulatory environment and transparency in Africa are identified as the largest concerns relating to investment, while cultural and organisational differences may result in a lack of trust and less flexibility between these countries and foreign investors. In order to deal with this effectively and to continue investing in Africa, investors should take time to familiarise themselves with local laws and actively pursue risk-mitigation measures to ensure that they are acting in line with law-abiding business practice.

In the era of globalisation, Africa should create favourable investment conditions and actively share in the dividends of globalisation by establishing legal frameworks that encapsulate equal, reasonable and non-discriminatory law enforcement, in order to mitigate any effects that could negatively impact investment and prejudice the continent.


1. Doing Business 2016, The World Bank Group.

2. Deal Drivers Africa – A comprehensive Review of African M&A 2014, MergerMarket

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”

Mondaq Advice Centre (MACs)
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
Check to state you have read and
agree to our Terms and Conditions

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.

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 by clicking here .

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.


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.