IFLR 1000
The Guide to the World's Leading Financial Law Firms

Market consensus is that banking has been slightly reticent to return to high levels of activity, with banks continuing to be wary of lending. "There has been a definite slowdown in lending; credit isn't freely available [and] there have been a lot of collapsed transactions and all this despite interest rates being good....

Market consensus is that banking has been slightly reticent to return to high levels of activity, with banks continuing to be wary of lending.

"There has been a definite slowdown in lending; credit isn't freely available [and] there have been a lot of collapsed transactions and all this despite interest rates being good. It's been a strange year," says a partner.

Commentators also note that the effects of the global crisis are still lingering. "We have done well in having a well-run economy and [good] controls, as well as keeping the banks well capitalised, but we still see an effect," says a partner. On the flip side, says another, there has been "a good flow of deals from development funds, which come under political pressure to pick up the slack".

Another source of activity has been the growing presence of Bric (Brazil, Russia, India & China) country banking institutions following South Africa's accession to the Bric membership in 2010. "We are seeing a lot of interest from China. The China Construction Bank, the Bank of China, the ICBC and the CAD-Fund [China-Africa Development Fund of the China Development Bank] all have a presence here in South Africa to keep an eye on their investments," says on lawyer.

Elsewhere, the new Companies Act will have a seismic effect on banking, with a number of different rules and regulations coming into force. The big change that most partners are positive about is the development of a new business rescue structure, something many firms felt was lacking. According to one lawyer: "The new act contains some important business rescue provisions, we have always had a problem with companies in distress and now this can change"..

Things are also appearing sunnier on the projects side. "Project finance work has very much picked up," says a partner, "it's a lot of triple-P work [public-private partnership] related to infrastructure."

It seems infrastructure is one of two big drivers in this area not only currently but also into the future, with finance lawyers all referring to it. "There is a massive investment in infrastructure going on at the moment. The country has reached the point where it has to invest in these things," explains a partner.

The other driver, very much a worldwide trend, is energy and, in particular, renewable energy, where firms note that they are receiving a growing number of queries.

Another developing trend is also that projects lawyers are not sticking to their own jurisdictions but utilising 'best friends' networks throughout Africa to get involved in developments abroad. "We worked on the project side of a toll road in Zambia and also are working on a hydropower project in Botswana," says one partner.

Lastly and on more of a general note, one partner had a remark to make about the changing atmosphere in the South African legal services market. "There is also a strange phenomenon in the legal services market, in that there is widespread competitive bidding for jobs. It is not pleasant, as I feel it has commoditised a large part of what we do [and] cost becomes a big factor," the partner says. This could be a sign of increased competition as firms merge and South Africa's market becomes busier, but it is certainly something to watch for over the coming years.

By and large, the capital markets have continued their upward trajectory in the last year, fuelling optimism in what was looking to become a worryingly static market."[In the first half of 2010] there was an emphasis on restructurings with no new issues, but in the last six months this has changed....

By and large, the capital markets have continued their upward trajectory in the last year, fuelling optimism in what was looking to become a worryingly static market.

"[In the first half of 2010] there was an emphasis on restructurings with no new issues, but in the last six months this has changed. It is good to see new work!" says one partner, while another agrees that "there has been a definite uptick in work".

2009 had been something of a dry river-bed as regards securitisations, but this type of work appears to be creeping back, alongside other debt instruments. "The type of work I've seen is a lot of corporate bonds and securitisation, with all sorts of issues, including a lot of convertible and high-yield bonds," says a debt partner.

Equity is flagging behind debt somewhat and partners note that some vestiges of the financial crisis remain and that investors are still a little wary of getting too heavily involved at the moment.

The really big news in this practice area, as much as in any other, is the new Companies Act coming into law.

The new Act prohibits listings of no par value shares and sets new rules regarding shareholders' agreements, stipulating that they must be redrafted to become consistent with the Memorandum of Incorporation, which will replace the existing articles of association used to register a company.

There is a grace period for both of these changes to be carried out but partners are keen to get the work done as soon as possible to avoid backlogs and anticipate potential future problems.

The change in the classification of companies has worried some debt capital markets lawyers and according to one: "Bond issuers are a bit nervous about the Companies Act as it has certain ramifications regarding how companies are private and public."

Securitisation lawyers hope that the Consumer Protection Act, which accompanies the new Companies Act, will act as a booster to the gradually returning securitisations market. "The Consumer Protection Act also deals with underlying assets and provisions for securitisations, so there could be some changes there," says a partner.

The competition market in South Africa has continued to be extremely busy, with a lot going on that is both contentious and changing the way the market works. "It has been an extraordinarily busy year, dealing mostly with cartel litigation and dominance," says one partner, while another adds that "there has been a dip in merger work but prohibited practices work has kept us very busy"....

The competition market in South Africa has continued to be extremely busy, with a lot going on that is both contentious and changing the way the market works. "It has been an extraordinarily busy year, dealing mostly with cartel litigation and dominance," says one partner, while another adds that "there has been a dip in merger work but prohibited practices work has kept us very busy".

There have been some big changes to the Competition Commission and competition law itself this year. This includes a restructuring of the commission and the creation of a new department within it, the Cartels Division. Advocate Oliver Josie has been named as the head of the newly-established department, which has been active since April. Elsewhere, the Woodlands Milk decision that was handed down in September 2010 effectively narrowed down the scope of what the Commission can investigate, which has made most partners extremely happy.

"The old regime played fast and loose with the rules of investigating. I agree with this change as sometimes it was like representing clients with my hands tied behind my back," says one antitrust lawyer.

"The Woodlands Milk decision led to a change in subpoenas, narrowing the focus and investigating powers down. It was a procedural thing. It created more certainty and jurisdictional challenges and things like that will be a hallmark for 2011," explains a peer.

Some partners however feel that these changes are merely superficial and will not permanently affect the Commission. "I don't think the commission has had its wings clipped. It looks like they've taken a knock but overall it isn't that significant," remarks one, while another states: "I think they should just stop crying over spilt milk and get on with it."

A trend from last year has also spilled into this period too, with the Commission increasingly being used as a tool to steer the economy.

"An interesting hallmark of work in 2010 into 2011 has been the shift in the government regarding competition. The Competition Commission is now within the economic planning department. They are using the commission to help with the government's growth strategy," explains a partner, as others feel the Commission is doing well: "The commission has been flooded with work but have been successful, despite being under-resourced."

In other areas, things have been changing too, as one partner comments: "On the prohibited practices side, cartel prosecutions and the taking off of the leniency program are two big trends." The leniency programme has been focussed on certain areas such as manufacturing and food and beverage companies as well as offering a Settlement Process for the construction industry.

"The Settlement Process is big now. What this does is asks construction companies to come forward and disclose knowledge of collusion before it is revealed. There is a similar application of this in Europe," states a partner.

On the merger side, there have been seismic changes too, with intervention becoming more prominent and referred to by a large number of lawyers: "In terms of merger control the government involved themselves in two big matters, with Walmart probably being the biggest," remarks one. "Merger control is seeing a lot of intervention, not just government departments but trade unions too," observes a partner, while it is clear that public interest issues, such as employment, will also become heavily weighted factors in future Commission judgements.

Another practitioner however points out that the government does not really have the power to halt deals outright: "I feel the government is going to be a lot more interventionist in merger control. They only have a public interest power though; they can put information in but they can't actually veto things."

One final thing that is still hovering over the market is the new Competition amendment act, signed but still not promulgated. This is due to arguments regarding the potential unconstitutionality of criminalising some aspects of conduct covered by the act. "It's passed but not promulgated, as they are having issues getting it through due to the collective responsibility aspect of the law. There are some fears about it being possibly unconstitutional," explains a practitioner.

After 2010, which is described as "a bit of a dead duck" by one practitioner, the small improvement in M&A has been a cause for much optimism. "There is a definite pick-up in activity, 2011 kicked off well and I think it will be a reasonably good year," says a partner....

After 2010, which is described as "a bit of a dead duck" by one practitioner, the small improvement in M&A has been a cause for much optimism. "There is a definite pick-up in activity, 2011 kicked off well and I think it will be a reasonably good year," says a partner.

The reasons for this modest uptick appear to be multitudinous. "It is a combination of people being more confident and finance opening up," says one. Another adds: "Banks are starting to get involved now," while a third partner says that "it also helps that commodity prices are high at the moment"; with commodities being a key issue for the mineral-rich country.

A big factor is the diversification of investors, with players from outside the traditional hubs of the US and Europe looking to get involved. Since South Africa added an 's' to the Bric (Brazil, Russia, India, China) collection of countries in December 2010 other markets have become more open to the country. "The Brics thing is significant as it keeps us in the mix. There has been a lot more involvement from China. They look at mining and resources and infrastructure mainly. There are talks with Brazil, but nothing solid at the moment," says a partner.

"Five years ago I would get deals and nine out of ten of them would have been UK and US. That's all changed now," says a corporate partner and another agrees: "A big trend in the market is the rise of Chinese interest. Certainly the number of deals crossing my desk with a Chinese interest is significantly higher."

Other Bric countries are not quite as engaged however: "The interest hasn't come too much from Brazil, but India are involved here, more in the buying and selling sense than the resources," observes a partner.

There is another potential driver of work, says one partner: "The economy has now come out of its recessionary phase and some company's share prices could potentially make them subject to unsolicited moves." With companies vulnerable in this way there could potentially be a rise in the number of hostile deals over the next 12 months.

The new Companies Act will also have a heavy effect on corporate work. "It is reinventing the wheel from an M&A point of view. There will be different requirements to take into account," says one lawyer, while a peer adds: "It is fascinating and interesting. For example, it introduces new concepts and new techniques, like the new statutory merger. Appraisal rights too are a new concept, familiar to American lawyers."

There is also a new Scheme of Arrangement coming in and, despite some reservations from partners wondering how long it is going to take to get the legislation workable on a practical basis, those in the market are generally keen.