With law firms and corporates increasingly drawn to the burgeoning African market, Legal Week Intelligence has extended its Client Satisfaction Report to the continent. James Mayer reveals how in-house legal teams in the region rate their external advisers, and assesses the challenges facing international outfits operating there

Ian Isdale, group company secretary and general counsel of leading African food and consumer goods company Tiger Brands and immediate past president of the Corporate Lawyers Association of South Africa, is putting it mildly when he says: "There has been a heightened interest in Africa and in the next five years I don't see that interest waning."

Recent years have seen a host of UK and US law firms – ranging from Norton Rose Fulbright and Linklaters to Hogan Lovells and even Slaughter and May – attempting to come up with ways to penetrate a market where activity levels have remained buoyant, despite economic challenges elsewhere in the world.

So with law firms and corporates increasingly turning their attention south, Legal Week Intelligence has, for the first time, extended its flagship Client Satisfaction Report to Africa, to uncover the key trends affecting in-house legal teams in the continent and their satisfaction with external legal advisers.

The move reflects both the expansion by international law firms and the growing maturity of the market. It adds to the hard-hitting analysis of client satisfaction levels Legal Week Intelligence has been providing in the UK and globally since 2005.

In a thriving legal market attracting mounting attention from international businesses and law firms, the results make for interesting reading, with Africa-based in-house counsel emerging as more satisfied generally with their law firm advisers than their counterparts elsewhere in the world.

However, while the number of international firms drawn to the region increases, the rankings demonstrate the challenges of gaining traction in such a large and diverse continent, highlighting the difficulties global firms face.

With responses from 52 Africa-based GCs and company secretaries at companies such as Absa Capital, De Beers, Essar Global, Tiger Brands and Standard Bank, creating rankings for more than 20 law firms, just five clear winners emerge: DLA Cliffe Dekker Hofmeyr, Bowman Gilfillan, Webber Wentzel, Werksmans Attorneys and ENSafrica.

So here, against a predicted backdrop of further growth for the African legal market, Legal Week Intelligence takes a detailed look at the key service trends in the burgeoning market and the firms driving the agenda.

An energised sector

The reason for international firms' interest in Africa is clear. The continent's legal market – like the its broader economy – has been relatively recession-resilient, with the economy growing by 5% last year compared with -0.3% in the EU. 

On that basis alone it is not surprising that firms have been keen to gain a piece of the action. Recent months have seen Linklaters, which last February launched an alliance with South Africa's Webber Wentzel, courting Nigerian outfit Aluko & Oyebode, and Hogan Lovells merging with former Eversheds ally Routledge Modise. Meanwhile, everyone from Freshfields Bruckhaus Deringer and Clifford Chance to Pinsent Masons has been looking at ways to strengthen ties in the continent.

The economy – and therefore the expansion – has particularly been driven by lucrative sectors that play well to international  firms' strengths: energy, mining and infrastructure.

What is notable is that growth in Africa is happening across the whole continent and is far from restricted to a particular nation, such as South Africa. As countries such as Mozambique, Nigeria, Kenya, Ghana and Tanzania are tipped to see further oil and gas activity, clients and law firms are being forced to look at how they too access these markets. Hence, global firms' need to look beyond individual office openings in the region to reflect the advice their clients need. 

As Lyndon Pinnock, senior adviser for risk management at accounting firm RSM Betty & Dickson in Johannesburg, explains: "The energy giants will be the countries growing the most; any with oil or gas, especially Mozambique. Africa needs power, and anything related to providing power will be a growth area. Mining seems to be taking a hit at the moment, but once the cycle turns this will again drive the need for legal services in this industry." 

Bruce Campbell, GC at GE Africa, agrees, but believes African legal growth will be even more universal: "I think there will be rapid growth in demand for legal services in most African countries. Furthermore, it will predominantly be linked to the countries that are resource-driven, with oil, gas and mining fuelling the growth. Also, in countries that are investing in infrastructure, there will be increasing demand for legal services. 

"The number one obstacle is the lack of visibility over regulatory developments. There is no transparency or no real database to track legislative change and developments. That's a huge barrier."  

Going local?

In such a geographically large and diverse market, where the legal and regulatory framework is still developing, the challenge international law firms face comes from smaller, but experienced and more locally aware, African firms. 

For any business looking to make the leap to Africa or expand its activities in the continent, the selection of the right legal team can be just as daunting as the marketplace itself. Piet Faber, chief executive of ENSafrica, paraphrases the situation clients find themselves in: "Clients require cost-effective legal, tax, IP and forensics advice irrespective of where they choose to do business, and we all know that doing business in Africa is complicated. Not only are there significant cultural and language differences, but each African country has its own regulatory, IP and tax systems and processes."

Overall, clients are faced with the decision between a local firm that will be more integrated with legal culture and customs, and an international firm that can provide the same level of service across the globe. 

Local firms may also have access to pan-African networks that rival the wider geographic spread of their larger, international rivals. For example, the LEX Africa network, of which Werksmans is a founding member, operates in 25 African countries, and there is the Africa Legal Network (ALN) founded by Kenyan firm Anjarwalla & Khanna. Taking a more global perspective are DLA Cliffe Dekker Hofmeyr – the South African firm allied to DLA Piper – and the Webber Wentzel alliance with Linklaters, which has access to the ALN. 

Given the difficulty of operating in so many diverse nations within one continent, clients are unusually open to instructing smaller firms. Even large multinationals such as GE "are very comfortable using local law firms", according to Campbell. Not surprisingly, client needs are dictated by the work that needs to be done.  

Isdale elaborates: "If it is an uncomplicated transaction from a legal perspective, I'm happy to use a local firm that has that expertise. If it is more complicated such as raising funds in London or elsewhere and wider experience is required beyond the countries we are targeting then I would use an international firm with experience in the relevant areas and jurisdictions."

Local firms give clients a "hometown advantage", says Pinnock, that can help to navigate "local sensitivities". Furthermore, the decision to commission local counsel may actually pay dividends for a client's business. Why? Because, Pinnock adds, "briefing local firms shows your commitment to the country".

Advice is king

After clients have navigated this market and made their decision to go with either a large global firm or a smaller local player, what is the most important thing they want from legal service providers?

Inevitably they look first to what is most important: the quality of legal advice. Like all the respondents to the Client Satisfaction Report, legal advice provides the foundation for the rest of the client experience in Africa. African firms fare well here, scoring a high average of 8.7, 0.2 over the all-firm average of 8.5. Scores for service delivery/responsiveness are also noticeably higher than for non-African firms. African firms tally in at 8.6, 0.5 above all other firms surveyed, which score 8.1. African firms are undoubtedly making the right moves on this front, though many have market-specific reasons for keeping clients happy.

Cliffe Dekker wins gold for this category, securing first place among the top five African firms for quality of legal advice. Chris Ewing, the firm's chairman, puts this down to the alliance with DLA Piper, which incorporates the DLA Piper Africa Group, a network of African firms. "DLA has a more individual offering than its competitors simply because the DLA link allows the African firms including Cliffe Dekker to have access to the firm's knowledge base – we therefore have access to international best practice through DLA, which our competitors don't have. 

"We also have access to the DLA knowledge management systems. I don't think anyone else has this when it comes to Africa."

Johannesburg-based Werksmans believes its high legal advice score of 8.1 is a result of its trusted reputation with African counsel. "Werksmans has highly skilled African practitioners, whose expertise in the law is well known," says Greg Nott, a director at the firm. "It has its own track record of significant transactional and litigious work over many decades."

Central to its approach to work on the continent is this track record, coupled with the LEX Africa network it helped found.

However, it may be difficult for firms to maintain such impressive legal advice satisfaction levels in the near future because of an acute legal skills deficit across the continent. Pinnock notes: "The biggest roadblock is a shortage of legal skills. Very sophisticated laws are being passed in African countries and are often imported from, or based on, laws in legally mature overseas countries."  

With 54 African states implementing or importing laws into their marketplace simultaneously, clients will need to look more than ever to the most solid contributing factors to legal advice quality: personal access to legal staff, especially partners.

The results of the survey suggest African firms are doing a good job of maintaining these relationships, with the average for these firms standing at 8.4 versus 8.2 for other firms in the Client Satisfaction Report. The level of personalisation that African clients receive is exactly what they expect at this stage of Africa's legal development. "The first thing in my mind is the individual I will be briefing in that law firm," explains Pinnock. "I brief lawyers, not law firms. I would drill down into the experience of the partners I will be using in a law firm. I prefer the combination of someone who has been legal counsel [and has knowledge of both law and business]. Pre-existing relationships, obviously, are preferred."

Scores for personal/partner relationships range from 9.3 at the high end for Cliffe Dekker to 7.5 at Bowman Gilfillan.  

A different perspective on cost control

If the recipe for African client success involves high-quality legal advice, personalised client relationships and skilful service delivery, how heavily does cost weigh in? In contrast to the developed and often cost-obsessed Western markets, the answer is simply 'less'. African clients know the skill limitations of the market and are willing to commit financially to the right legal team. Pinnock sums up this client view: "In the less developed African legal market, cost is an issue but it's more about finding the right skills and getting the right person." 

African firms are following their clients' leads here and are catering services accordingly. Jonathan Lang, head of Bowman Gilfillan's Africa group, notes: "It's one thing paying a lot of money if you are getting quality and service. If you are not, you are more likely to question the expense. There's a symbiotic relationship between service quality and fees."

African firms score on average 7.3 for cost/billing practices, compared with an average score for other firms of 7. Given that clients are putting less pressure on fees and that costs are already lower in the continent, popular cost-cutting measures that US and UK firms have been adopting in recent years, such as legal process outsourcing (LPO), do not figure highly on the priority lists of clients or firms. Nor do they look likely to come into the spotlight in the foreseeable future. 

Cliffe Dekker's Ewing comments: "There's not a lot of paralegal and LPO use. There is a very tight control on cost. We ensure that only value added is charged. We've had considerable experience here and are always open to looking at ways of limiting costs."

Christo Els (pictured, left), co-head of M&A at Webber Wentzel (scoring 7.6 for cost practices), believes partner relationships and cost control are two sides of the same coin: "Because of our good relationships with clients, we can have regular cost conversations with them. It often comes down to doing the right kind of work at the right level to the ultimate benefit of the client."

The practicalities of operating in an emerging market limit costs by definition, preventing some of the cost demands for outsourcing at the onset. Lower commercial real estate prices and operating costs mean that savings are already being passed on to the client. This helps relieve the pressure on law firms to be more ruthless in cost cutting. As Lang comments: "We are not yet at that stage for cost-cutting measures such as LPO. That's mostly due to pressure on margins not being as great as it is in places like London and New York, and I suspect that our cost base is lower anyway, being in an emerging market. However, we are always conscious that our clients operate on budgets."

The obvious risk is that keeping costs low will become more challenging as the African continent's economy continues to grow. 

Beyond 2014

At present then it seems legal advisers are doing a good job of satisfying their African clients. The difficulty for law firms will be continuing to meet client expectations in a rapidly changing market that is becoming ever-more sophisticated. As business continues to boom growing numbers of international firms will try to find a way in to this sprawling market, while African firms will face their own challenge from global rivals encroaching on their territory. How each group meets these challenges and deals with a likely increase in expectations from clients means future Client Satisfaction Reports for the region could look very different. 

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African Client satisfaction snapshot

Overall, African firms received a high average satisfaction rate of 7.8 out of 10, with firms receiving higher average scores than their rivals elsewhere in the world across all eight measures graded. The overall average – which includes categories such as cost/billing practice, service delivery and quality of legal and commercial advice – compares with an average score of 7.3 across all of the firms ranked globally in Legal Week Intelligence's 2013 CSR report. The report compiled responses from 1,361 major corporates globally. The highest overall scores among African firms mirror the highest scores among international, City, US and national UK firms. African firms score higher than the overall average for quality of legal advice (8.7), service delivery/ responsiveness (8.6) and personal/partner relationships (8.3). The lowest scores were for use of legal process outsourcing (5.9) and flexible workforce use (6.7). 

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Getting the technology right

Technological offerings, such as client extranets, knowledge management systems and smartphone/tablet apps, are largely expected as a standard offering in Western legal markets. Satisfaction scores overall have declined this year by 0.3 to 6.6, whereas in Africa they tally in at 7.0. Client-facing technology provision is a newer phenomenon among African law firms and clients are very satisfied with the offerings they are currently receiving from firms. Jonathan Lang of Bowman Gilfillan says: "In terms of interactive IT, emerging market firms are light years behind the developed countries. We have certainly made big strides on the knowledge management side. IT/knowledge management is certainly taken more granted in the West than it is in Africa, where there tends to be a lower level of investment in IT generally, although we have a world-class IT platform." The bottom line is the firms that can provide technological solutions for clients across borders and African legal cultures will have a distinct advantage over their competitors.

Click here to see how the top five African firms scored for client satisfaction.

Legal Week hosts a series of flagship events for leading corporate counsel every year – click on the following links for more information.

• Legal Week Corporate Counsel Forum Africa 2014
• The African Legal Awards 2014