A lack of effective insolvency legislation is still hindering investment in many parts of Africa.  This issue, and ways to implement effective legislation, was under discussion at the Africa Round Table held in Cape Town in late 2015. The Africa Round Table is an annual project founded by Insol International and the World Bank Group.

The theme of this year’s event was Restoring Financial Sector Stability and Promoting Growth – the role of insolvency regimes. The Round Table specifically addressed the issue of the importance of insolvency regimes in maintaining the stability of financial systems, including through the effective resolution of non-performing loans, while also focusing on the role that insolvency plays in promoting access to credit and therefore growth.

“There are currently fewer modern insolvency legislative regimes across Africa than in any other region of the world,” explained Adam Harris, vice president of Insol and a partner at Bowman Gilfillan Africa Group.

“The World Bank’s Doing Business 2015 report states that in Sub-Saharan Africa, recovery is currently 24.1 cents to the US dollar compared to 71.9 cents in OECD countries.  There are clearly many different issues facing countries in Africa and the solutions are complex. At the same time it is important for countries to realise that there is a direct correlation between a country’s insolvency regime and the business environment. A sound insolvency system has a direct impact on economic performance,” he noted.

“Legislation protects capital and so investors will look at the legislation in the countries in which they wish to invest. Those with adequate protections and sound mechanisms for exit or resolution, are therefore more likely to attract investment,” Harris said.
John Jeffery, South Africa’s Deputy Minister of Justice and Constitutional Development discussed this issue in his keynote address at the Round Table.

Minister Jeffrey said, “Effective insolvency and creditor rights systems are an important element of financial system stability and can be viewed as a means to foster and sustain growth and development.

“Speaking from the side of government, there are many factors to consider. A modern and well-developed insolvency law is important. But it is but one aspect.

“There are a host of other factors at play: Proper implementation is key, as well as creating and maintaining strong institutions, appropriate accounting and auditing standards, access to courts, capable insolvency administrators, proper restructuring regimes, enhanced corporate governance in corporations and financial institutions and effective regulatory oversight.”

The Africa Round Table has grown from an initial meeting of 15 people in Nigeria in 2010, into a sought-after annual event for Pan-African countries. The Round Table focuses on developing professional ties with the goal of improving insolvency and restructuring regimes across the African continent.

The Africa Round Table gathers policy-makers, practitioners and regulators from across Africa to discuss international best practice, matters of mutual interest and cross-border issues in insolvency law. This year, some 115 regulators, lawyers, masters of High Courts, registrars of companies, receivers of revenue, judges and academics from around Africa made their way to Cape Town for the Round Table.

The topics for discussion were chosen by Insol and the World Bank group, which works within countries across Africa on the issue of legislative insolvency reforms. Country delegates from jurisdictions as diverse as Burundi, Botswana, Ghana, Kenya, Mauritius, Malawi, Mozambique, Namibia, Nigeria, Tanzania, Uganda, Zambia, Zimbabwe, and the member countries of OHADA, attended the event.

“The Africa Round Table allows for engagement at the highest level. This peer-to-peer discussion is of great value because it means best practice for insolvency legislation can be benchmarked across Africa. Country delegates talk to each other and learn from the experiences and legislative frameworks in other countries,” noted Harris.

Harris added, “It is rewarding to note that we are now starting to see the ideas germinated in our previous sessions coming into force as insolvency legislation and practice in African jurisdictions.”