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Q: The economy in sub-Saharan Africa is set to grow significantly, which should mean a rise
in tourism and hospitality-related projects. What opportunities is this likely to create for Africa’s leading local law firms?

Jason Wilkinson, partner, Bowmans: The hospitality and tourism industry has seen a significant increase in activity and dealflow in the past few years and tourism is expected to reach new highs. Many large hospitality groups such as Accord, Intercontinental and Marriot are very active. This is creating opportunities for lawyers in practice areas including M&A, banking and finance, real estate and regulatory.

Noor Kapdi, South Africa managing partner, Dentons: The anticipated increase in investment will see a surge of activity in real estate, intellectual property and project finance work. The expansion of global hotel and hotel management brands will be closely followed by the franchised food and services segment. Project finance and banking lawyers will benefit.

“The anticipated increase in investment will see a surge of activity  in real estate, IP and project finance work” Noor Kapdi

Ian Gaitta, partner, ACH Legal: We anticipate a growth in transactional work. Also, in some markets where government has traditionally been a key player in the hospitality industry we expect to see privatisations as governments divest themselves of their operations.

We also expect to see more financing and real estate development work related to hospitality and tourism projects, and tax and regulatory advisory work in this sector should also increase as projects are developed. There will be increased activity around contracts such as hotel management and hotel franchise arrangements as international hotel brands grow their portfolios.

Helen Tapadar Hangari, legal director Dubai, DLA Piper: There’s a growing demand for commercial law firms in Africa to fully understand the operating models of the international hotel operators and have a strong understanding of the key issues. These include ensuring the owner or developer has suitable rights to the land, tax certainty (for example, details of any relevant double taxation agreements), restrictions on currency transfers, the risks of compulsory purchase of land or private businesses and the ability to carry out due diligence into proposed business partners and employment laws.

As more foreign investors move in it will be important for local firms to keep up with financing trends and procurement methods. Robust due diligence will also be essential, especially when representing banks.


Lynne Wells, principal associate, Eversheds Sutherland: Firms with strong real estate, financing, employment and possibly logistics/outsourcing practices will find opportunities in the travel and tourism sector. The market will attract new entrants and if successful, lead to larger scale infrastructure projects such as airport upgrades and other transport-related projects.

The key challenge with any development project is access to financing and securing land rights. From an East Africa perspective this may lead to further implementation of the free movement of workers across the region pursuant to the East African Community’s [EAC] Common Market Protocol of July 2010, including setting up centralised work permit procedures and databases.

Tourism could lead the way in East Africa towards a more centralised and harmonised approach, but it is too soon to tell how popular such policies will be at national level.

Andrew Kibaya, partner, Shonubi Musoke & Co Advocates: Leading law firms should see more opportunity to provide services, particularly in relation to financing for hospitality-related projects, corporate set-ups, real estate and immigration law. There is a government move to promote tourism and this focus on the industry builds investor confidence – a true hallmark of law firm success.

Q: Which countries have most potential for tourism and how is the legal market adapting in response?

Kapdi: South Africa continues to lead both in terms of untapped potential and maturity of the legal services market. Malawi, Kenya, Mozambique, Tanzania, Namibia and Botswana represent the greatest near-term opportunities. Local law firms are making progress but have not yet gained the confidence of international tourism investors who continue to seek support from African and international firms based in South Africa and London.


Gaitta: From the perspective of tourism’s contribution to the job market, based on research published by the African Development Bank countries such as South Africa, Ethiopia, Nigeria, Tanzania and Madagascar in sub-Saharan Africa have the highest tourism employment numbers on the continent. In terms of tourism employment as a percentage of total employment, the small island nations such as Seychelles, Cape Verde and Mauritius rate highest in the region.

From the perspective of number of openings or anticipated openings of internationally branded hotels the data we’ve seen indicates that countries such as Nigeria, Angola and Zambia, which are highly dependent on commodities for government revenue and foreign exchange but have traditionally featured high on the wish lists of international hotel brands, are showing slower hotel pipeline growth. Countries with more diversified economies such as Ethiopia, Kenya and Tanzania seem to be attracting more interest from international hotel brands.

“Countries with more diversified economies such as Ethiopia, Kenya and Tanzania seem to
be attracting more interest from international hotel brands” Ian Gaitta

The legal market is responding by developing sector-specific legal expertise and experience. Lawyers and firms with a sound understanding of market trends and key commercial drivers from the perspective of investors, owners and operators in the hospitality sector, and their lenders as well as the experience of structuring and negotiating transactions and contracts in this sector, will have an edge.

Wilkinson: We are seeing most activity in South Africa, Nigeria, Kenya, Tanzania, Ghana, Mozambique and Mauritius. The tourism industry is fairly well-established and playing an important role in the diversification of economies. The industry is also becoming a substantial provider of jobs and is considered to be an enabling environment for skills transfer and capacity-building. We’re also seeing property funds such as Mara Delta diversify into the hospitality and hotel industry.


Wells: East Africa is being increasingly marketed to the world as a single tourist destination, with the introduction of the East African tourist visa and the newly launched East African tourist portal. This covers Kenya, Uganda and Rwanda, with Tanzania opting out of the collaboration. This will be further boosted by Jomo Kenyatta International Airport in Kenya recently obtaining category one status, which is expected to lead to direct flights between Nairobi and the USA

Tapadar Hangari: A number of countries in sub-Saharan Africa show huge potential for tourism. Steps have been taken in various countries to relax visa requirements for tourists, further develop land registration systems and offer tax incentives for larger scale tourism developments.

One example is Kenya, where the land registration system has been transformed in recent years from being paper-based to being an efficient automated system that is more accessible to the public and less vulnerable to corruption. This addresses two key concerns for hotel investors. This was accompanied by a number of changes to land ownership and dealings in land. The government of Kenya has also recently capped the maximum interest rate chargeable on a credit facility to no more than 4 per cent above the base rate set by the central bank. This protects borrowers from high interest rates and should increase access to finance by making it more affordable. It also addresses a key inhibitor to hotel development in sub-Saharan Africa – the high cost of financing.

Kibaya: Rwanda, Uganda and South Africa. The legal market is primed to take up new opportunities with a number of law firms in the region tying up alliances, mergers and other relationships with more developed markets to position themselves competitively. The South African legal market, being more developed, is leading in the region. The shared knowledge across the relationships puts local law firms in the right place.

Q: How is sustainable infrastructure to accommodate the fast-paced growth of the tourism sector in sub-Saharan Africa being developed?

Kapdi: The biggest problems are electricity supply and ground transportation systems. The investment in distributed energy systems, rollout of renewables and investment in transmission networks goes a long way towards addressing the energy problems. Consideration of rail projects, improved air traffic infrastructure and better national roads will help to overcome the challenges of traversing the extensive distances between regional tourist hotspots.

Gaitta: The idea of sustainability extends beyond the traditional focus on the use of ‘green’ or efficient technologies and environmental protection to such matters as indigenous people’s rights and human rights generally, sustainable consumption and community benefit and participation.

A good example of sustainability in tourism is the conservancy system in Kenya. Conservancies are, in simple terms, joint venture arrangements between local communities (as the land holders) and commercial tourism ventures (as the operators). The system developed as a response to challenges experienced in some of Kenya’s main wildlife tourism areas as a result of uncontrolled tourism facility development and operations, environmental degradation and concerns over host community exploitation/lack of benefits/ poaching/antagonism.

Under the conservancy arrangements there is better oversight of tourism development and operations in the area, more streamlined land use both for tourism and for human activity by the host communities and better enforcement of environmental safeguards. Host communities have also realised tangible economic benefits through land leases to the operators, revenue-sharing and job opportunities. Conservancies have also led to more acreage being used for tourism, a significant reduction in poaching and the regeneration of wildlife habitats.

It is important that governments, private operators and local communities in the region work together to explore similar initiatives to encourage sustainable tourism operations and conservation efforts that engender trust and participation in the local community.

Tapadar Hangari: The growth of tourism often starts with a focus on developing luxury hotels. This is no different in sub-Saharan Africa, where countries such as Nigeria have seen a proliferation of luxury hotels being developed in recent years. Governments must incentivise the development of mid-scale hotels – by, for example, offering tax incentives – for tourism to be sustainable. Mid-scale hotels also have the advantage of a shorter timescale for development and a lower development cost.

Wilkinson: There is a growing political commitment to the industry but it requires further engagement to develop sustainable tourism. Deals of this nature will always require investor confidence and governmental co-operation, but there is also a need for access to affordable funding. Transactions are therefore being structured across a number of jurisdictions to allow long-term access to flexible funding in various currencies.

“Transactions are being structured across a number of jurisdictions to allow long-term access to flexible funding in various currencies” Jason Wilkinson

Kibaya: There have been consistent incentives for foreign investment as well as budget prioritisation in respect of infrastructure. Uganda, for example, has seen increased investment from China in a number of infrastructure projects including expansion of the airport to handle more passengers, improvement of water transport on Lake Victoria and repairing and developing the road network.

Accommodation has also been improved and the government has been quick to surrender this to the more efficient private sector.

Q: How do you see foreign investment related to tourism and hospitality being encouraged in sub-Saharan Africa, and how could this be improved?


Wilkinson: Many African countries have recognised the lucrative opportunities available and are promoting the hospitality and tourism industry to improve economic development and reputation. Certain jurisdictions have government-backed incentives such as reduced tariffs to facilitate foreign investments. Land registry and security procedures can be cumbersome and lengthy in certain jurisdictions. If this is addressed it could significantly speed up transactions.

Gaitta: There are efforts by regional governments to promote foreign investment. Governments that have previously been players in the hospitality market as owners or operators of hotels are divesting and encouraging private sector ownership and operation. Also, governments are addressing macro issues such as security and road and telecoms infrastructure improvements to improve access to tourism facilities.

And governments are collaborating with each other to ease regional travel and promote tourism into the region as a whole. Examples of this include the Greater Virunga Transboundary
Collaboration, an initiative that co-ordinates conservation efforts in the Greater Virunga landscape shared by the Democratic Republic of Congo, Rwanda and Uganda, and the Northern Corridor Integration Projects, an initiative between Kenya, Rwanda, Uganda and South Sudan for collaboration in various areas including air space management, immigration and tourism.

Governments are also offering fiscal incentives such as capital allowances on the taxation of inputs into hotel development, as well as other allowances applicable during the operational phase. For example, industrial buildings allowances in Kenya apply to hotel buildings too.

Other similar governmental initiatives include removal of capital controls to facilitate efficient capital injection and the repatriation of profits from tourism operations, and streamlined visa and immigration processes.

Governments have also sought to implement quality assurance initiatives in relation to tourism facilities through standardised hotel grading and classification. There have been such initiatives across the EAC, using standardised criteria. It is hoped such initiatives will enhance tourism and that increased demand will stimulate more investment.

There is, of course, room for improvement. Concern has been expressed in some markets over the level of taxation of tourism-related activities ranging from aircraft landing fees to game park entry charges to VAT on ancillary services. There have also been concerns over the cost, time and uncertainty of the approval process for construction projects and, in some cases, duplication of roles between national and local governments. Greater transparency and efficiency around the approval processes would help.

Sub-Saharan African governments should also give renewed impetus to the implementation of the ‘Yamoussoukro Decision’ to realise truly open skies in the region.

Wells: The tourism industry benefits from considerable financial support from development finance institutions. We’d like to see commercial banks take a more active role but high interest rates and local currency concerns are problematic. From the East African perspective, terrorism and political instability concerns remain, but there have been improvements in the past few years so the outlook is promising.

“We’d like to see commercial banks take a more active role but high interest rates and local currency concerns are problematic” Lynne Wells

Kapdi: The establishment of compliance and enforcement agencies with respect to intellectual property protection is creating a more secure environment. Improved regulation of land ownership or leasehold has resulted in foreign investment in real estate. Historical uncertainties are being addressed by better organisation of regulation and better policy clarification in, say, Mozambique and Malawi.

Improved export credit insurance legislation has also made it easier to support investments in several of the regions.

Tapadar Hangari: As mentioned before, tax is a concern when investing in hotels in sub-Saharan Africa. The EAC introduced the Common Markets in July 2010. Once ratified, the EAC’s double taxation treaty should lower corporate taxes and increase cross-border investment.

Land ownership is restricted in many countries. It is fairly common to find that all the land in a country is owned by the government, with private ownership being limited in time, particularly when it comes to foreign ownership. For example, in Angola foreigners are entitled to leases with a maximum term of 60 years.

While foreign ownership is welcome it will also be increasingly important for sub-Saharan countries to establish or improve their land registration systems to efficiently show all types of real estate interests, including such long leases.

One example of foreign investment in the real estate sector, including tourism, being encouraged is in Ethiopia where foreign ownership of land is permitted on a leasehold basis with a maximum term of 99-years, the government being the landlord. In the city suburbs the government has held a land bank ready for investors seeking to develop real estate. A foreign investor will obtain the land via a leasehold interest granted by the government and case law confirms that all interests must be registered by the Lands Commission, despite the commission previously not wishing to register a partly-foreign owned company.

Kibaya: There have been incentives in the form of preferred land allocations, tax incentives and more liberal immigration laws.

However, clear policies on foreign investment have to be set, in addition to ensuring peace and security in each country and in the region as a whole. There’s also a need to vigorously promote good governance.

Q: Are there any issues relating to the financing of major projects that are specific to the region? If so, how can these be addressed?


Kapdi: The cost of capital remains a major hindrance. Several jurisdictions are not considered as investment grade and those that remain investment grade-rated by the ratings agencies are challenged by virtue of their economies not being sufficiently diversified and too reliant on commodities extraction. This impacts on interest rates. Diversification is a medium-term solution. In the short term private equity funds with tourism and real estate mandates could play a role in facilitating investment.

Wilkinson: Access to affordable funding is often a concern for investors. However, with sustainable assets, motivated management and aligned strategies a number of banks, alternative financial institutions and private equity organisations can be keen financiers. As competition increases the time taken to implement projects will become critical, putting further pressure on governmental co-operation, legal responsiveness and regulatory systems. Political uncertainty unfortunately often signals risk for investors and funders too.

“Governments must incentivise the development of mid-scale hotels – by, for example, offering tax incentives – for tourism to be sustainable” Helen Tapadar Hangari

Tapadar Hangari: The cost of borrowing is generally high and certain jurisdictions have cumbersome laws relating to the taking of security.

An example of this is Mozambique, where land is the property of the government and therefore cannot be sold, mortgaged or pledged. A right to use land can be obtained from the government – commonly called a DUAT – for a term of up to 50 years. Whilst this right to use cannot be encumbered, the improvements made on such land (such as a hotel) can be provided as security.

As a result, developers can find it difficult to provide security to fund a new development before there is any construction that can be offered as security. While it is possible to work around such restrictions by, say, the borrower and lender entering into a promissory mortgage arrangement whereby the borrower promises to grant a mortgage over the improvements when they are completed, this is not ideal.

Risks remain as the DUAT is initially granted for a short time (two years for foreigners and five years for nationals) and can be revoked if the development plan is not carried out. Therefore, further reform of the laws relating to the right to use land and the ability to take security over land would be helpful.

Kibaya: Any issues arising in respect of the financing of major projects would be country-specific and not necessarily regional. The levels of government commitment and appetite for contracting sovereign loans vary.

Uganda is generally investor-friendly, with no foreign exchange control restrictions or requirements for approval of foreign investors having residence status.

Q: What are the biggest challenges facing sub-Saharan Africa in terms of promoting tourism and its related infrastructure or investment projects?

Wilkinson: There are concerns that while a foreign investor may have a positive impact on the economy in terms of job creation and skills transfer, there should be more positive returns to the host company instead of profits returning to  the offshore entity. This may require further rationalisation of investment policies and engagement at governmental level.

Regulatory and political risk often scare investors towards countries considered less risky.

Gaitta: In terms of promoting foreign tourism, one of the major challenges is airlift capacity. There is a shortage of quality airport infrastructure and regional airlines. In addition, intra-African transport is quite expensive due to the ‘closed skies’, as many countries still protect their air space and national airlines at the expense of greater access and competition.

Although many sub-Saharan African countries are signatories to the ‘open skies’ Yamoussoukro Decision, implementation is poor. This has dampened the growth of intra-African air transport and curtailed tourism. Apart from air transport, the on-the-ground transport, telecoms and security infrastructure in the region still needs improvement to ease access to tourism facilities and enhance visitor experience, and also to help develop secondary tourism markets.

A related issue is the restrictive visa policies of various countries, which add to the cost of accessing tourism offerings. There is need to make visa processes more efficient and cost-effective, and also take advantage of the regional blocs such as the EAC and ‘Ecowas’ in West Africa to promote freedom of movement.

There are also significant challenges arising from overall land use policies. The primary form of tourism is nature-based and lack of proper enforcement of sustainable land use practices causes degradation of the water catchments, forest cover and land and marine ecosystems that are critical to wildlife. This also encourages encroachment on wildlife areas and migration corridors by agriculture and settlement.

Another critical issue is poaching and the illegal hunting of wildlife which, if uncurbed, will decimate species such as the rhino and the elephant. Data indicates that the continent has lost 100,000 elephants to poaching in the past three years alone, and the rate of rhino deaths by poaching now exceeds the rate of births. The value chain that supports poaching must be dealt with decisively if wildlife-based tourism is to be sustained.

Tapadar Hangari: Safety is paramount to attracting investment and tourists. This is a challenge that must be led by governments and supported by the private sector. Relaxing visa regimes would benefit tourism, as would a better internal flights network.

Legal developments such as improving land registration systems and allowing for the easier creation of enforceable security over land is a challenge in much of sub-Saharan Africa but governments are taking steps to make the legal framework for investment more appealing.

“Governments are struggling to deploy a ‘local content’ regime that facilitates investment” Noor Kapdi

Kapdi: Attempts at transforming economic ownership patterns to ensure political and economic stability are important – the challenge is that governments are struggling to deploy a ‘local content’ regime that facilitates investment. Poor local content regimes and the cost of capital are the biggest challenges.

Kibaya: Bottlenecks in promoting tourism projects include insecurity, lack of clear policies and laws pertaining to investment, poor infrastructure and corruption or lack of good governance.

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