Jay Ireland Joins Covington’s Africa Practice

New York, January 29, 2018 — Jay Ireland has joined Covington as a senior advisor in New York.

Mr. Ireland has nearly four decades of senior executive experience across a number of industry sectors, including telecommunications and media, healthcare, energy, financial services, and manufacturing. Most recently, he served as President and CEO of GE Africa, where he was responsible for expanding the company’s footprint across Sub-Saharan Africa in power generation, healthcare, transportation, oil and gas, aviation, and financial services. His efforts led to being named “International Business Leader of the Year” in both 2012 and 2013 by Africa Investor Magazine.

In addition, Mr. Ireland has held a number of executive positions outside of GE including as the co-chair of the U.S.-Africa Business Center at the U.S. Chamber of Commerce (2017-2018), a vice chair and member of the Corporate Council on Africa (2012-2018), and the chairman of the U.S. President’s Advisory Council on Doing Business in Africa (2013-2018). He currently serves as a board member of the MasterCard Foundation, a charity dedicated to promoting youth employment in Africa.

“For the last eight years Jay has been one of the top business leaders on the continent. He has a keen understanding of how business and policy intersect and how business can positively affect the development priorities of African nations,” said Witney Schneidman, chair of Covington’s Africa Practice Group and the former Deputy Assistant U.S. Secretary of State for African Affairs. “We are very fortunate to have someone with Jay’s experience and business acumen as part of our team and I know that our clients will benefit from his expertise across the continent.”

“I have deeply enjoyed my time living and working in Africa and have made the decision to join a firm that allows me to continue my efforts in helping local and international businesses succeed on the continent,” said Mr. Ireland. “Covington’s Africa Practice is just the sort of platform I had in mind. With the global expertise in government affairs, a strong sense of commitment to Africa, and a growing office in Johannesburg, I strongly believe the firm’s clients will be able to benefit from the team’s insights and experience.”

Mr. Ireland received a B.A. in Political Science at St. Lawrence University and serves as a member of its Board of Trustees.



In an increasingly regulated world, Covington & Burling LLP provides corporate, litigation, and regulatory expertise to help clients navigate their most complex business problems, deals, and disputes. Founded in 1919, the firm has more than 1,000 lawyers in offices in Beijing, Brussels, Dubai, Frankfurt, Johannesburg, London, Los Angeles, New York, Palo Alto, San Francisco, Seoul, Shanghai, and Washington.

© 2019 Covington & Burling LLP. All rights reserved.

Throwing Doubts to the Wind: an Interview with Tebogo Movundlela, the CEO of Aurora Wind Power

Tebogo Movundlela is the CEO of Aurora Wind Power, which is operating the West Coast 1 wind farm in South Africa. Owned by a consortium formed by Engie and South African investors (Investec Bank Limited and Kagiso Tiso Holdings), Aurora Wind Power celebrated the commercial operation of its 94 MW wind farm in June 2015. Secured in the second bidding round of the Renewable Energy Independent Power Producer Procurement (REIPPP) programme organized by South African authorities, West Coast 1 is strategically situated in the Western Cape Province, 130 km north of Cape Town, where the quality of wind resource produces high quality of electricity. The wind farm is expected to offset an estimated 5.6 million tons of CO2 over the 20-year duration of its power purchase agreement (PPA). The estimated annual energy production represents the consumption of approximately 110,000 low income houses.

Tell us a bit about your involvement in the South African renewable industry?

I am currently the CEO of Aurora Wind Power, a role that I have held since 2017, previously being the CFO of the company. My role is to ensure the optimal operation of the plant under high health and safety standards. Aurora interacts with a diverse group of stakeholders (from lenders, shareholders, and Government authorities to the surrounding community). Through the multitude of agreements in place and through common goals, we are continuously engaged with these stakeholders to ensure that the project objective – to deliver clean, safe and reliable energy, in a socially responsible way – are achieved.

In parallel, I also hold the position of chairperson of the South African Wind Energy Association (SAWEA). The organization is concerned with advocating for the growth and sustainability of the wind industry in South Africa. The country is undergoing an energy transition and we would like to see wind well established in the energy mix, including activities across the value chain and in a manner that contributes to a just energy transition.

What challenges is Aurora Wind Power facing?

In spite of being a ring fenced entity, we are continuously looking for opportunities to maximize shareholder value, whether this is through operational efficiency or financial optimization. Aurora has also made socio-economic development commitments to the South African government where we have contractual obligations to expend a percentage of our turnover on community development programmes. South Africa has one of the highest Gini coefficients* in the world and therefore the need is substantial. Through relevant and targeted programmes, we hope to leave behind empowered communities after the end of our 20-year PPA.

How do you see the future of renewable energy in South Africa?

The signing of the 27 projects in 2018 was indeed a positive signal by the South African government after over 2 years of no activity in the REIPPP programme. Further the draft Integrated Resource Plan (IRP) 2018 indicates a notable allocation of 16,270 MW of renewables leading up to 2030, subject to ministerial determinations and periodic review of the IRP. The ruling party, the ANC, has also recently stated that it will “Continue to support the use of renewable technologies in the country’s energy mix to reduce the cost of energy, decrease greenhouse emissions, build the local industry through increased localization and create jobs […]”. The potential for renewables is diverse and ranges not only from utility scale power generation, but to mini-grids, off-grid, energy efficiency solutions to integrated grids, storage, hybrid models and the necessity for investment in additional transmission lines. My role at SAWEA is to contribute to the realisation of this potential.

* The Gini coefficient is a measure of statistical dispersion intended to represent the income or wealth distribution of a nation’s residents, and is the most commonly used measurement of inequality. It measures the inequality among values of a frequency distribution (for example, levels of income). A Gini coefficient of zero expresses perfect equality, where all values are the same (for example, where everyone has the same income). A Gini coefficient of 1 (or 100%) expresses maximal inequality among values (e.g., for a large number of people, where only one person has all the income or consumption, and all others have none, the Gini coefficient will be very nearly one).

Vive le Prezida! Madagascar Presidential Elections of 2018

Vive le Prezida!  Madagascar Presidential Elections of 2018

In November and December 2018, Madagascar went through two rounds of presidential elections. These were supposed to pull the country out of its marasmus of irregularly changing leaders that bedeviled its entire 20th century history.

In 2001, election results were disputed: victory was claimed both by Didier Ratsiraka, the on-and-off President for the previous quarter century, and by Marc Ravalomanana (Marc), the mayor of Antananarive (Tana), the country’s capital. The world looked on at the bizarre picture of a country with two presidents (and two capital cities, for a period of time). Marc eventually prevailed, with the support of the international community, and embarked on an ambitious development program.

In 2009, something of a repeat followed: during Marc’s second term in office, he was challenged by another mayor of Tana, Andry Rajoelina (Andry) who with military support staged a coup d’état. Andry’s rule, however, was not recognized internationally. The economy stagnated.

Elections were finally held in 2013, with proxies of the two antagonists running against each other. Andry’s man, Hery Rajaonarimampianina (Hery), won narrowly.

The 2018 elections featured all four of the above mentioned former presidents among the 36 total candidates, on what ended up being a rather complicated ballot, particularly considering that one third of the population is illiterate. There were a considerable number of alleged spoiled ballots based on incorrect markings denoting the voter’s preference, for example, by markings like “+” rather than the required “x.” These errors were so significant in some jurisdictions that the central authorities had to eventually review and correct some local results.

The first round of elections was marred by a variety of other problems as well. A group of 25 long-shot candidates formed “the Coalition,” joining together to protest against various aspects of the election, including the incomplete and/or obsolete election rosters, as well as the non-transparent sources and uses of campaign financing. Many of these complaints were shared by international observers. Ballot counting was undercut by poorly trained election workers and remarkably complicated post-election procedures. It did not help that the Central Election Commission (CENI) took a long time to collate the votes. The High Constitutional Court (HCC)—using different software than CENI—eventually verified the results.

Only two candidates realized support in the double digits and progressed to the second round: none other than the old adversaries Andry Rajoelina (39.23 percent) and Marc Ravalomanana (35.35 percent). In a traditional division of the country (the Madagascar Darby, as it has been called), Andry’s support proved to be strongest in the agricultural lowlands in the North, the Eastern seaboard and South, whereas Marc polled best in the more industrial Central Highlands, including the capital Tana. Hery, the outgoing president, trailed badly, with 8.82 percent of the vote, but still won outright in the Sava region in the North-East and made a strong showing in the extreme South of the country. Of all the other candidates, which included five women and the 84-year old veteran Didier Ratsiraka, only three topped 1 percent of the vote.

In the run-up to the second round of voting, CENI made important efforts to improve the voting logistics, particularly in training election personnel. Of course, having two candidates instead of 36 in and of itself simplified the voting dramatically. The question was, would Andry manage to protect the relatively slim lead that he held over Marc in the first round? Up to a point, this depended on which way the defeated candidates would throw their support. In effect, they split three ways—between the two leaders, and non-committed. Hery, the only third candidate with any serious backing, stayed non-committed (“ni-ni”). One might imagine, however, where his true inclinations lie, having acted as Andry’s erstwhile finance minister, and his proxy in the 2013 elections.

In the second round, Andry defeated Marc fairly persuasively, roughly 55 percent to 45 percent. The provisional results, published on December 27, were consistent with the final results published on January 8, 2019: 55.66 percent for Andry, 44.34 percent for Marc. Another noteworthy statistic was the participation level which was even lower than in the previous elections: in the second round, it dropped from over 54 percent to just under 48 percent—recapitulating the pattern of 2013, when the first round saw over 60 percent participation, dropping to under 51 percent in the second round.

Not surprisingly, the results were challenged by Marc, the loser, but have been upheld by CENI and the HCC, as well as the significant international observer community. On January 8, 2019, the high constitutional court confirmed the election results and Marc reportedly shook Andry’s hand in court. Andry later told supporters that Marc congratulated him, easing fears of significant post-election unrest. With more than two-thirds of the island’s 25 million people living in extreme poverty, the people of Madagascar and the international community can now focus on whether Andry Rajoelina, the new “Prezida,” succeeds in kick-starting the economic motor of the country.


Karel Kovanda, a Covington Senior Advisor, was part of the 2018 European Union’s Election Observation Mission in Madagascar.

The Trump administration’s Africa strategy: Primacy or partnership?

Last week, the Trump administration launched an Africa policy that seeks both primacy and partnership on the continent. The administration’s efforts at partnership, especially as it relates to promoting U.S. business on the continent, are likely to be far more lasting and consequential.

Ambassador John Bolton set the tone for the administration in a speech where he challenged African governments to choose the United States over China and Russia for their commercial, security, and political relationships. This throwback to great power rivalry runs counter to the most significant current trend in Africa’s external relationships, which have more diversity than at any time since the end of the Cold War. This diversity is a key aspect of the economic growth that Africa has enjoyed over the last two decades.

Shortly after Bolton’s presentation, U.S. Agency for International Development Administrator Ambassador Mark Green rolled out the development agency’s first-ever “Private Sector Engagement Policy.” At its center is Green’s belief that the “future of international development is enterprise-driven.” Going forward, USAID will seek to deepen its collaboration with U.S. firms across “all areas of [its] work,” including energy, agriculture, humanitarian assistance, women’s empowerment, education, and crisis and conflict. This reset for USAID will help to increase U.S. commercial engagement in Africa and reflects important developments on the continent. Last month, at the first Africa Investment Forum in Johannesburg, Dr. Akinwumi Adesina, President of the African Development Bank, said, “Africa is not going to be developed by aid. It will be developed by investment.” Creating opportunities for the private sector to impact Africa’s key development priorities is central to addressing some of the continent’s most pressing challenges.

The Strategy: Prosperity, Security, and Stability

The strategy announced by Ambassador Bolton on December 13 is organized around three main principles: prosperity, through “advancing U.S. trade and commercial ties with nations across the region to benefit both the United States and Africa;” security, through “countering the threat from radical Islamic terrorism and violent conflict;” and stability, through foreign aid, while ensuring that U.S. taxpayer dollars for aid are used efficiently.

The focal point of the strategy is countering China’s commercial, security, and political influence in Africa. The administration is right to criticize China where its practices contribute to growing the debt of African nations and worsening corruption and detrimental labor practices. By labeling China’s commercial practices as “predatory” for the strategic use of debt to hold African states “captive,” the administration clearly seeks to offer the U.S. as an alternative, mutually beneficial commercial partner to African nations. However, when it comes to trade and investment, the Trump Africa strategy does not reflect the preference by most African countries and the African Union for a regional approach through the newly created African Continental Free Trade Area, but favors instead a country-specific, bilateral approach. The administration should consider both approaches.

Russia was specified as another country that is rapidly expanding its financial and political influence across Africa, although the reference appears to be more reflexive than anything else. While Russia’s trade with Africa has increased 10-fold between 2000 and 2012, it still accounts for less than 1 percent of Africa’s total trade.

More problematic for U.S. commercial interests in Africa than Russia and perhaps even China are the economic partnership agreements that the European Union has struck with 41 African countries that put U.S. exports to the region at a significant disadvantage. As the U.S. Trade Representative’s 2018 Trade Barriers report notes, the agreement between the EU and the Southern Africa Development Community “will further erode U.S. export competitiveness in South Africa and the region.” This seems to have escaped the administration’s attention.

Tolerating Foreign Aid

The Trump administration, which once wanted to cut development assistance by 30 percent, has now promised to use it “efficiently and effectively” to further U.S. interests in the region. There is no question that aid resources have been squandered in some areas. However, some U.S. aid programs have achieved extraordinary successes, such as the multi-billion dollar President’s Emergency Plan for AIDS Relief (PEPFAR), which has provided more than 13.3 million HIV-infected men, women, and children with antiretroviral therapies globally, the majority of whom are in sub-Saharan Africa.

Along these lines, in a White House fact sheet accompanying Bolton’s address, the administration committed to “preventing, detecting, and responding to outbreaks of deadly infectious diseases.” Given that the Trump administration asked Congress to rescind $252 million in Ebola funding earlier this year, prevented U.S. health experts from working on the frontlines of the current Ebola outbreak in the Democratic Republic of the Congo, and dismantled the global health security and biodefense directorate on the National Security Council, it remains to be seen how the administration will fulfill this commitment.

Security and the United Nations

When discussing peace and security, Ambassador Bolton stated that the U.S. would only support effective and efficient U.N. peacekeeping missions. The world agrees that the United Nations needs more accountable, robust, and effective peacekeeping missions that can decisively bring peace and ensure stability. But it is critical for the U.S. to be more specific about the actions it will take to address this issue and join efforts to reform and empower rather than weaken U.N. peacekeeping operations. The U.S.’s actions should be taken primarily against the belligerents who are causing conflicts and instability rather than the peacemakers and peacekeepers who are trying to end conflicts and bring stability.

Prosper Africa

While Bolton focused on only the administration’s Africa strategy, he also referenced a new initiative, “Prosper Africa,” that presumably will be announced in the near future. This program is intended to support U.S. investment across the region, improve the business climate, and accelerate the growth of Africa’s middle class. The program should be aggressively pursued if the U.S. is serious in its intention of providing an alternative to China or Russia in Africa while advancing U.S. and African interests. Inevitably, USAID’s Private Sector Engagement Policy will be a central piece of the new initiative.

With the passage of the Better Utilization of Investments Leading to Development Act in October—which will create the $60 billion U.S. Development Finance Corporation—the Trump administration may have established an agency with impact on par with the Millennium Challenge Corporation and initiatives such as PEPFAR, the African Growth and Opportunity Act, the Young Africa Leaders Initiative, and Power Africa. By emphasizing partnership over primacy, the Trump administration has the potential to establish a very positive legacy on the continent.

This article was co-authored by Landry Signé and originally published on the Brookings Institution’s Africa in Focus blog.

Transformation of Renewable Energy in South Africa

This is the first of a three-part blog series modified from the Renewable Energy Law Review’s Chapter on South Africa, written by Covington’s Lido Fontana and Sharon Wing. The full article as published in the Law Review is available here.

The fundamental driver for renewable energy projects in South Africa remains the Renewable Energy Independent Power Production Procurement Programme (REIPPPP) of the Department of Energy (DoE). Prior to the formal launch of REIPPPP in August 2011, the local renewable energy market was fairly inconsequential. A lot has changed since then, with REIPPPP being heralded globally as a shining example of how to successfully implement renewable energy auction programmes.

The success achieved by REIPPPP has, however, not been without its challenges. Eskom Holdings SOC Limited (Eskom), the state-owned national utility and sole off taker of electricity from projects under REIPPPP, has refused to sign any further power purchase agreements (PPAs) with independent power producers. Eskom’s position has not been unexpected, with its historical monopoly on generation in South Africa now being gradually challenged by independent power producers that are able to deliver generating assets largely on time and on budget – key features that have been somewhat lacking in Eskom’s skill set for some time, leading to above-inflation increased costs of electricity to the end users (while the tariff prices under REIPPPP continue to drop dramatically in each procurement round).

Eskom’s open hostility to REIPPPP had a dramatically negative effect on the renewable energy market in South Africa, forcing the programme to an unwelcome halt for more than two years. Positive winds of change appeared to be blowing during 2017, however, with promises from government and Eskom that the much delayed Round 4 (as well as the final remaining Round 3.5 concentrated solar power (CSP) project) would be signed. In the end, the government and Eskom did not deliver on these promises during 2017.

While this was a disappointment to the industry, a rather important political event did take place in December 2017, with a new African National Congress leader emerging in the form of Cyril Ramaphosa. Many believe Ramaphosa will play a key role in helping to unblock the issues with Eskom and the DoE’s energy procurement programmes (including REIPPPP) to ensure that the country’s burgeoning renewables market continues. So far, the signs are positive, with all the outstanding Round 4 REIPPPP projects having now been signed with Eskom and the DoE.  The much anticipated draft Integrated Resource Plan (IRP) was published for public comment by the DoE.  Renewables and gas feature prominently as part of the proposed future energy mix.  The widely criticized push by Government for additional nuclear generation appears to have disappeared, at least until 2030.

There is a small but growing rooftop solar market in South Africa. The regulatory regime in South Africa does not currently allow for excess energy to be sold back into the grid, as is the case in certain parts of the United States. A change in the regulatory regime allowing for this would most likely stimulate the rooftop solar market and allow it to grow far more quickly than is currently the case. In addition, there are currently no significant tax incentives or other government-led programmes that mirror those in the United States or the EU that have fostered the growth of renewables to such an extent in those markets. Large-scale retailers are now installing large rooftop solar facilities to reduce their reliance on Eskom as a supplier and what is perceived as ever increasing above-inflation tariff costs. Furthermore, reflecting international market trends, a number of international corporate entities are looking at renewable off-grid solutions. We expect this off-grid market to continue to grow, which presents a challenge for Eskom as its customer base continues to shrink.

The year 2017 brought with it significant uncertainty in respect of transformation in the South African energy sector in relation to renewable energy. In February 2017, then President Jacob Zuma announced in his state-of-the nation address that Eskom would sign all outstanding power purchase agreements from Rounds 3.5 and 4 within the coming months. However, as a result of Eskom’s  delaying tactics, 27 contracts, totaling US$4.7 billion and covering 2.3GW of renewable energy projects, were only signed in the first quarter of 2018 because of an interdict brought by the National Union of Metalworkers of South Africa together with Transform SA (a non-profit lobby organization).

There has been further uncertainty regarding the 20 small-scale projects (with capacity of between 1MW and 5MW and an aggregate capacity of 100MW) awarded through the bidding process under the Small Projects Independent Power Producers Procurement Programme. It is uncertain when these projects would be able to begin operations, as only 10 of the 20 have licences, while the remaining 10 are under evaluation. It is to be noted that the South African government has decided that independent power producers (IPPs) owning generators that do not exceed 1MW are to be exempt from the obligation to apply for and hold a licence.

Although coal-fired generation still dominates the energy sector (with a net output of 35.6GW, representing 85 per cent of the South Africa’s total capacity), by the end of 2017, a total of 3.2GW of renewable energy projects had been constructed and connected to the grid. This has brought total investments in renewable energy under REIPPPP to approximately 195 billion rand. Further, South Africa was ranked 10th among G20 countries for renewable energy investment conditions by Allianz Climate and Energy Monitor.

The future looks positive for renewable energy on account of the expectation that South Africa’s new president will be promoting renewable energy to restore investors’ confidence.

What Companies Need to Know About World Bank and African Development Bank Debarment (and How to Avoid It)

In March 2017, World Bank Group president Jim Yong Kim announced that the World Bank would provide a record $57 billion in financing for projects in sub-Saharan Africa in the 2018–2020 fiscal year period. Consistent with that commitment, the World Bank’s most recent annual report indicates that $19.8 billion was issued to partner countries and businesses in sub-Saharan Africa in the 2018 fiscal year. Moreover, the African Development Bank (“AfDB”) reached its highest ever disbursement level in 2017 at approximately $7.4 billion, and it has set an overall lending target for 2018 of approximately $9.5 billion. This means that there are and will continue to be substantial opportunities for companies to bid for and participate in World Bank and AfDB-financed projects in Africa. It is important for companies embarking on such projects to understand the risks associated with the sanctions and debarment procedures that the World Bank, AfDB, and other multilateral development banks (collectively, the “MDBs”) have put in place to ensure that development financing is used for its intended purposes and is not misspent through fraud, corruption, or other forms of misconduct.

The World Bank has aggressively enforced its sanctions and debarment procedures for several years, and the other MDBs, including AfDB, have in recent years followed suit. According to a report published by the World Bank’s Office of Suspension and Debarment (the “OSD Report”), the World Bank imposed sanctions on 489 firms and individuals from 2007 through 2017, excluding sanctions imposed on sanctioned firms’ corporate affiliates and cross-debarments imposed under the 2010 Agreement for Mutual Enforcement of Debarment Decisions between the World Bank, AfDB, the Asian Development Bank (“ADB”), the European Bank for Reconstruction and Development, and the Inter-American Development Bank (“IADB”). The increasing enforcement activity of the other MDBs is reflected in the number of cross-debarments that have recently been imposed by the World Bank. For example, the 2018 annual report published by the World Bank’s Integrity Vice Presidency (“INT”) indicates that the World Bank cross-debarred 73 entities and individuals in the 2018 fiscal year alone, in recognition of debarments imposed by AfDB, ADB, and IADB.

We described the World Bank’s sanctions and debarment process (which is similar to the other MDBs’ processes) in a prior alert. In this post, we discuss the kinds of misconduct that can lead to sanctions proceedings, the potential consequences of a sanctions proceeding, and steps companies can take to guard against the risk of a sanctions proceeding.

What conduct leads to sanctions proceedings?

The World Bank and AfDB sanctions procedures define “sanctionable practices” to include fraudulent, corrupt, collusive, or coercive practices in connection with the awarding or execution of a Bank-financed contract, or the obstruction of a Bank audit or investigation. Most sanctions cases are based on fraudulent practices, followed by corrupt and collusive practices. According to the OSD Report, 81% of World Bank sanctions cases between 2007 and 2017 involved allegations of fraudulent practices, 20% involved allegations of corruption, and 10% involved allegations of collusion (the figures exceed 100% as some cases involved allegations in more than one category).

A fraudulent practice is defined as “any act or omission, including a misrepresentation, that knowingly or recklessly misleads, or attempts to mislead, a party to obtain a financial or other benefit or to avoid an obligation.” Past fraudulent practices matters have involved: the misrepresentation of facts in tender submissions (such as the qualifications, experience, educational background, or availability of key personnel); forgery or falsification of documents (such as audited financial statements, bank guarantees, powers of attorney, business licenses, references, expense claims and supporting documents, and purported agreements with sub-contractors or joint venture partners); over-billing, including by submitting inaccurate time sheets or misrepresenting work progress; failure to disclose agreements with or payments to agents, sub-contractors, or joint venture partners; and failure to disclose conflicts of interest.

A corrupt practice is defined as “the offering, giving, receiving or soliciting, directly or indirectly, of anything of value to improperly influence the actions of another party.” Past corrupt practice cases have involved active corruption (including the payment of bribes, directly or through third parties, to influence tender processes, secure contracts, influence the implementation of projects, or facilitate the processing of invoices) and passive corruption (such as accepting bribes to direct contracts to particular contractors, or to approve inaccurate progress reports or fraudulent invoices). Several cases have involved the provision of non-monetary things of value, such as purported study tours that were primarily recreational in nature, vehicles provided to project officials for personal use, and extra-contractual services.

A collusive practice is defined as “an arrangement between two or more parties designed to achieve an improper purpose, including to influence improperly the actions of another party.” Past collusive practices cases have involved parties simulating competition by bidding with knowledge of each other’s prices or agreeing in advance to win different tenders and share the profits; making arrangements with procurement staff to obtain confidential tender information, modify bid specifications, or artificially inflate prices; and directing contracts to parties in exchange for kickbacks.

Obstructive practices are broadly defined to capture any conduct that may impede an investigation or hinder the Bank’s contractual audit rights. Past cases have involved outright refusals to cooperate with audits or investigations; providing inaccurate or incomplete documentation in response to requests for information; fabricating documents; and deleting email correspondence relevant to an investigation.

Coercive practices include harming a person or property, or making threats, to improperly influence the actions of a party. Coercive practice cases are rare, but in 2014 the World Bank debarred an individual for fraudulent and coercive practices on the basis that he submitted a fraudulent expense claim and made threats in an effort to have the fraudulent expenses paid.

What are the potential consequences of a sanctions proceeding?

The same range of sanctions appears in the respective sanctions procedures of the World Bank and AfDB. The sanctions, which are generally publicized, may be imposed in connection with a negotiated settlement or a contested proceeding.

The most commonly-imposed sanction is debarment, which means that the sanctioned company or individual is declared ineligible to participate in or otherwise benefit from any Bank-financed project. A debarment may be permanent or for a specified period of time, which in practice ranges from less than one year to many years—for example, the World Bank’s Sanctions Board recently imposed a 22.5-year debarment in a case involving allegations of corrupt, collusive, and obstructive practices. A debarment of longer than one year will generally qualify for cross-debarment by the other MDBs.

Debarment is often combined with “conditional release,” which means that the sanctioned party must demonstrate that it has satisfied certain conditions to have the debarment lifted. A party may also be “conditionally non-debarred,” which means that the party will remain eligible for participation in Bank-financed projects but must comply with specified conditions, failing which the non-debarment will be converted into a debarment. The conditions that are imposed typically include the implementation of a satisfactory compliance program and may include additional conditions such as cooperation with Bank investigations or the appointment of a compliance monitor.

The MDBs may also require sanctioned parties to pay restitution or other financial remedies. For example, in 2014, AfDB required four companies implicated in the Bonny Island corruption matter in Nigeria to pay a total of $22.7 million, to be used in AfDB projects preventing and combating corruption in countries across Africa. In 2017, a company that settled a corrupt practices case with the World Bank agreed to pay a financial remedy of €6.8 million to the DRC.

Finally, the MDBs frequently make referrals to national law enforcement authorities, which may initiate their own investigations and bring administrative or criminal enforcement actions. The introduction to INT’s 2017 annual report noted that the World Bank has “formalized information sharing and joint activities with . . . counterparts through 55 cooperation agreements” and “helped national authorities and other anti-corruption bodies stay apprised of relevant fraud and corruption risks by making 456 referrals in 101 countries.” INT’s 2018 annual report indicates that a further 43 referrals were made in the 2018 fiscal year. There have been a number of instances in which parallel enforcement actions were brought by an MDB and a national law enforcement authority—for example, in 2015, Hitachi Ltd. entered into settlements with AfDB and the U.S. Securities and Exchange Commission (“SEC”) based on allegations that its subsidiary channelled payments to the African National Congress to secure power contracts in South Africa. In a press release announcing the settlement, the SEC noted that it appreciated the assistance it had received from AfDB’s Integrity and Anti-Corruption Department and hoped the cooperation would represent “the first in a series of collaborations.”

How can a compliance program help?

Companies involved in MDB-financed projects should implement policies, procedures, and controls to guard against the occurrence of sanctionable practices. Even if such controls fail to prevent misconduct, they can put the company in a better position to defend itself in a sanctions proceeding. For example, when determining whether a misrepresentation was reckless for purposes of assessing whether a company has committed a fraudulent practice, the World Bank’s Sanctions Board has indicated that it will consider whether the company took precautions that were commensurate with the risk at issue. Similarly, in assessing whether a company should be held responsible for the actions of a “rogue employee,” the Sanctions Board generally considers whether the company had controls and supervision in place sufficient to prevent or detect the misconduct in question. If a company is sanctioned, being able to demonstrate that a robust compliance program is in place may help the company secure a shorter period of debarment or avoid the imposition of a compliance monitor.

The compliance measures that are put in place should be guided by a thoughtful risk assessment, the Integrity Compliance Guidelines published by the MDBs, and the patterns of conduct on which past sanctions cases have been based. In addition, insights regarding the control failures underlying past enforcement matters can be gleaned from past World Bank Sanctions Board decisions, which have been published in full since 2012. For example, past decisions have highlighted the importance of taking steps to ensure that no inaccurate or misleading information is included in tender submissions (including by implementing four-eye verification procedures and processes to authenticate key documents, structuring performance incentives in a way that promotes ethical practices, and providing sufficient guidance to personnel involved in preparing submissions); ensuring that robust financial controls are in place and regularly tested through audits; and ensuring that the use of agents is subject to appropriate due diligence and monitoring. Many of these principles will be familiar to anti-corruption compliance professionals, as they are consistent with the compliance best practices articulated by enforcement authorities including the U.S. Department of Justice (“DOJ”), which we discussed most recently in an alert describing 2017 guidance released by the DOJ’s Fraud Section regarding the criteria it has generally found relevant in evaluating corporate compliance programs.


This article is intended to provide general information. It does not constitute legal advice. If you have questions about navigating World Bank or AfDB sanctions proceedings, or implementing a compliance program that can help mitigate debarment risk, please contact Ben Haley at bhaley@cov.com, David Lorello at dlorello@cov.com, or Sarah Crowder at scrowder@cov.com.

Covington Strengthens Africa Practice with Key Additions to Johannesburg Office

We are pleased to share that partner Ben Haley has relocated to the firm’s Johannesburg office to lead the firm’s Africa-focused compliance and investigations efforts. Mr. Haley joins another recent addition to the Johannesburg office, Robert Kayihura, who will lead the office’s Public Policy and global problem solving practice.

Mr. Haley is an experienced compliance and investigations lawyer who assists corporations and individuals in navigating the dynamic enforcement environment. In addition to representing companies and individuals in complex internal and government investigations, Mr. Haley regularly advises clients on a range of compliance issues, including by conducting risk and program assessments, providing advice in connection with proposed transactions, and assisting companies in building and strengthening compliance programs and controls. He has deep experience on the ground in Africa, including in Kenya, Nigeria, Tanzania, Uganda, and South Africa. His recent engagements in Africa include:

  • serving as lead counsel in a compliance integration and enhancement project for one of the world’s largest fast-moving consumer goods companies;
  • supervising a large-scale project focused on the use of data analytics to address and mitigate compliance risks; and
  • advising a major East African financial institution on complex sanctions and AML issues.

For nearly two decades, Mr. Kayihura has assisted leading multinationals in making critical business and legal decisions relating to operations in Africa. Drawing on his collective experience as an entrepreneur, outside counsel, and as legal director in Africa for both Uber and Microsoft, Mr. Kayihura is able to draw on a diverse set of perspectives to provide holistic solutions to regulatory and policy issues. His clients benefit from his carefully honed understanding of best practices for engaging with national governments, regional policy-making bodies, and other key stakeholders across the continent.

The firm’s expanding presence in Johannesburg will allow clients with cross-border interests to further leverage Covington’s extensive resources to achieve their business objectives on the continent and similarly, to support African businesses as they seek do business around the world. By pairing these on-the-ground resources with an experienced public policy and government affairs team led by Witney Schneidman, Covington’s Africa team is able to deliver integrated advice on a range of complex and cross-cutting commercial, policy, government affairs, and compliance issues.

If you would be interested in discussing how Covington can assist your organization in achieving its business goals related to Africa, please contact Witney Schneidman at wschneidman@cov.com, Ben Haley at bhaley.com, or Robert Kayihura at rkayihura@cov.com.

China in Africa: Recent Developments

In 1998, China announced its “go out” or “go global” policy aimed at encouraging its enterprises to invest overseas. In 2013 this policy was reinforced with China’s introduction of its One Belt, One Road (OBOR) or “Belt & Road” initiative, which seeks to enhance development and trade routes in the region, connecting China with other countries along the ancient Silk road and a new Maritime Silk Road. Significant international anxiety has been expressed about China’s global ambitions generally, and as it pertains to Africa in particular, with some calling China’s OBOR initiative “neo-colonial” and raising concerns about China’s investments in Africa serving as a possible “debt trap.” On the other hand, China’s general policy of non-interference has led African leaders to describe China’s partnership with African countries as a “win-win.”

Below we examine recent trends related to China’s activity in Africa, including China’s 2018 FOCAC pledge of US$60 billion in financing, recent commitments made at the BRICS Summit, and China’s increasing foreign direct investment (FDI) on the continent.

Forum on China-Africa Cooperation (FOCAC)

On September 3, 2018, Chinese President Xi Jinping pledged US$60 billion in financing for projects in Africa. Of this total pledge, US$15 billion will take the form of grants, infrastructure, and concessional loans; US$20 billion will be available in credit lines; US$10 billion for development financing; and US$5 billion to buy imports from Africa. China made a similar US$60 billion pledge in 2015.

At the opening ceremony, President Xi emphasized China’s “five-no” approach to Africa:

[N]o interference in African countries’ pursuit of development paths that fit their national conditions; no interference in African countries’ internal affairs; no imposition of our will on African countries; no attachment of political strings to assistance to Africa; and no seeking of selfish political gains in investment and financing cooperation with Africa.

It is China’s policy of non-interference that leads many African leaders to echo South African President Ramaphosa’s rejection of the view that a new colonialism is taking hold in Africa regarding China’s investment in Africa.

A recent briefing paper published by Johns Hopkins School of Advanced International Studies’ China Africa Research Initiative concludes that “Chinese loans are not currently a major contributor to debt distress in Africa.” Although the initiative raised concerns in 2015 about the ability of African countries to repay Chinese loans due to fluctuating commodity prices and decreasing absorptive capacity, data analyzed in 2018 suggests that in at least eight of 17 countries, Chinese loans are quite small and have not contributed to debt problems. In six other countries, Chinese loans are larger, but those nations have also borrowed heavily from other creditors. In three countries, Chinese loans are currently the most significant contributor to high risk of actual debt distress; these countries are Zambia, Djibouti, and Congo.

In Zambia, a country that in 2012 could borrow more cheaply than Spain, bond yields have risen above 16 percent. According to The Economist, this suggests that investors fear Zambia will default. After having much of its debt cancelled under the IMF’s 2005 heavily indebted poor countries (HIPC) scheme, Zambia is now saddled with new debt worth 59 percent of its GDP. Although no one knows the exact amount, it is suspected that China holds between a quarter or one third of Zambia’s debt. One fear is that if infrastructure projects financed by the Chinese are cancelled, China may refuse to roll over existing loans. Alternatively, The Economist opines that China could demand to take control of a state-owned entity as compensation.

The coming months will be revealing in terms of how China responds to African nations nearing default on Chinese loans.

Highlights from 10th Annual BRICS Summit

In July, leaders from Brazil, Russia, India, China and South Africa (BRICS) met in Sandton, South Africa for the 10th Annual BRICS Summit. The Annual BRICS summit aims to strengthen economic and political ties between member countries.

In 2010, China invited South Africa to BRICS. Many questioned why China invited South Africa to join BRICS rather than other larger developing economies (e.g. Indonesia and Turkey). Some pointed to the “economic complementarities” between China and South Africa. See Foreign Capital Flows and Economic Development in Africa: The Impact of BRICS versus OECD at 31 (2017). As with China’s investments throughout the continent, its invitation to South Africa to join BRICS promoted China’s self-interest. Today, South Africa is China’s largest trading partner on the continent.

Since 2010, China has financially bailed out many parastatals (state-owned entities), which are common throughout Africa. At the 10th BRICS summit in July, China announced significant loans to two South African parastatals—Eskom, the public utility that provides electricity to 95 percent of South Africans and is the largest producer of electricity in Africa, along with Transnet, the country’s largest port, rail, and pipelines company. Eskom secured a US$2.5 billion loan from the China Development Bank, while the Industrial and Commercial Bank (ICB) extended US$27 million to Transnet. Transnet is said to deploy the funds for “general corporate uses,” providing the port and freight-rail operator “with liquidity in the near term.” Both loans have been described as “normal commercial loans” that are guaranteed by the government, which Eskom will use to fund the construction of the Kusile coal-fired power station.

This funding comes at a time when the state-owned entities face difficulties raising finance from local banks and investors. Eskom has growing debt burden that stood at over US$25 million at the end of March 2018; the loan secured from China Development Bank raised its debt ceiling significantly. Absent a revenue surge to help with interest payments, Eskom could be compelled to convert its debt into equity.

According to Institute of Race Relations (IRR), privatisation may be the viable option for struggling state-owned enterprises (SOE) such as Transnet and Eskom. Privatisation or bust by IRR argues that the alternative to privatisation is continued poor governance and rapid costs in both tax payers and continued delay in meeting the country’s need to upgrade and expand its economic infrastructure. Earlier this year former Finance Minister Malusi Gigaba issued dire warnings about Eskom, stating that the economy would collapse if Eskom’s liquidity crisis went unresolved. Consideration is being given to ring-fencing and selling stakes in Eskom’s non-core businesses or power stations as well as into Eskom’s business as a whole. In anticipation of possible privatization and an end to the electricity monopoly, the government forbade Eskom from constructing new power stations. The government advertised for private competitors to enter the market, but none were forthcoming mainly due to Eskom’s unnaturally low prices which deters profit-seeking enterprises from seeking to compete.

Of course China’s investment in Africa began prior to South Africa’s invitation to BRICS in 2010. China’s overall foreign direct investment (FDI) in Africa has also increased dramatically in the 21st century. In 2003, China’s FDI in Africa was approximately US$491 million. In 2014, it was US$32.4 billion.


What will come of China’s “go global” policy as it pertains to Africa? One thing is apparent: China’s influence throughout the continent will endure for decades. This, in part, is assured by China’s involvement with African parastatals that now rely on Chinese financing to remain liquid. China’s reputation on the continent, and the attitude of African leaders toward Chinese investment, will likely be influenced by how China responds to any African country that does default on a Chinese loan.

Summary of the Final 2018 Report of the President’s Advisory Council on Doing Business in Africa

In its final deliverable of the 2016–2018 term, the President’s Advisory Council on Doing Business in Africa (“Council”), issued a call to the U.S. Government and the American business community to make a deliberate effort towards nurturing greater U.S. commercial engagement with Africa. The final report was prepared by the private-sector members of the council and does not necessarily reflect the views or policies of the Trump Administration.

The final report followed the Council’s fact-finding trip with U.S. Secretary of Commerce Wilbur L. Ross and Under Secretary Gilbert Kaplan to Ethiopia, Kenya, Côte d’Ivoire, and Ghana from June 24–July 5, 2018. The Council’s trip was designed to underscore the commitment by the U.S. government and the American business community to expanding trade and investment in Sub-Saharan Africa. Details of the delegations’ experience in each of the four countries visited are summarized in the full report, available here.

The Council set forth numerous recommendations inspired by the delegations trip to the continent. A summary of the Council’s key recommendations follow.


The Council observed that it is necessary to secure financing in support of trade and investment flows to Africa, while also finding ways to help mitigate risk exposure for U.S. businesses. The Council proposed numerous solutions calculated to promote U.S.-Africa commercial and investment flows. These include:

  • Make the Export-Import Bank (EXIM) fully functional. EXIM is the export credit agency of the United States, designed to facilitate exports. For the last three years, EXIM has been unable to authorize transactions of more than $10 million due to a lack of a three-board member quorum. The Council highlights the need for the Senate to confirm pending EXIM nominees and, absent that, encourages the Administration to seek alternative ways to realize a fully functioning EXIM.
  • Pair Concessional and Commercial Financing. Selectively blending aid funds with export financing (i.e. concessional financing) is attractive to African governments because such financing is not counted under the IMF’s limits on non-concessional borrowing. The Council highlights this type of financing as an effective method to mitigate competition from China and Europe.
  • Promote African country access to U.S. Dollar Liquidity. African nations are experiencing low levels of U.S. dollar reserves as a result of higher dollar-denominated debt servicing, among other issues. This is further complicated by the fact that many African countries have very little revenue inflows from exports and taxes due to the pervasiveness of the informal business sector in most countries. Pressure on U.S. dollar reserves within African countries has an adverse effect on the private sector. Absent a robust response from the U.S. Government, the Council warns of private sector companies turning to alternative currencies like the euro and yuan. To this end, the Council calls on the U.S. Government to explore “how official U.S. agencies can prudently engage with African Central Banks in swapping dollar liquidity for local currencies, baskets of reserve currencies, and/or transferable and liquid commodities.”
  • Passing the Better Utilization of Investments Leading to Development Act of 2018 (the BUILD Act). The Council expressed its support for passage of the BUILD Act, which was passed by Congress on October 3 and signed into law by the President on October 5, 2018. The law transforms the Overseas Private Investment Corporation (OPIC), a U.S. Government agency, and components of the United States Agency for International Development (USAID) into a new institution called the U.S. International Development Finance Corporation (IDFC). Witney Schneidman, the Chair of Covington’s Africa practice, discusses the BUILD Act in more detail here.
  • Develop Mechanism to Sell Aggregated Risk Exposure from U.S. Agencies to Private Investors. The Council calls for the development of a mechanism to facilitate the ability of private investors to buy aggregated risk exposure from U.S. agencies. Support of trade and investment flows to Africa has attendant risks. Upon deploying and transferring the risks to private investors, the U.S. Government would be able to do more by taking advantage of its competitive strength as it contributes to Africa’s economic growth. This will foster stronger economic ties between the U.S. and the continent, providing ample opportunities accruing for U.S. businesses.
  • Increase Visibility of the African Development Bank (AfDB). Noting the commonalities between the goals of AfDB, OPIC, and USAID, the Council calls for an effort to raise the profile of the African Development Bank’s (AfDB) within the U.S. business community. Bringing the AfDB into deals between U.S. and African businesses would be a win-win for all parties concerned.

Public Procurement

  • Provide private sector public procurement expertise to the U.S. Government. The Council highlighted the need for “more consistent, thoughtful consultation” with the private sector regarding challenges of the competitive tender process in Africa. The Council specifically called for more training of Foreign Commercial Service and Political/Economic officers who are placed in Africa.
  • Support Direct or Unsolicited Public Procurement Proposals. In addition to competitive tenders, the Council calls on the U.S. Government to support private sectors proposals submitted directly to African Governments.
  • Promotion of Rule-of-Law in Support of Best-Value Procurement. Perceived risks of doing business in Africa continue to deter private sector engagement. The Council calls for continued and enhanced efforts by the U.S. Government to encourage greater transparency and more efficient and predictable processes related to business transactions. The Council highlights this opportunity as having the potential to encourage a “second wave of U.S. firms actively examining opportunities in Africa.”
  • Department of Commerce Should Develop a Modern Database Platform. Encouraging many Small and Medium Enterprises (SMEs) to look for new business opportunities in Africa should be a priority for the U.S. The Council observed that most SMEs were risk averse, and lacked information about how to navigate the risks on the African continent. To address these concerns, the U.S. Department of Commerce should create a platform to enhance information dissemination on key investment and other opportunities across Africa.

Trade Facilitation

In their engagement with government officials while in Africa, members of the Council observed that numerous benefits would accrue from governments’ collaboration with industry. A key area of mutual engagement where this could play out to the distinct advantage of all parties is in the modernization of customs processes and regional integration. Other areas of potential improved market access and trade facilitation include cross-border cargo movement, regional economic collaboration, as well as unlocking value in the manufacturing and extractive industries.

The Council recommends that the U.S. Foreign Commercial Service (FCS), the U.S. Trade and Development Agency (USTDA), and the Office of the U.S. Trade Representatives (USTR) engage in the process of connecting U.S. businesses with African governments in the sphere of trade and commerce. The Council also supports an effort to incorporate U.S. private sector input through the African Union, Southern African Development Community (SADC), Common Market for Eastern and Southern Africa (COMESA) or Economic Community of West African States (ECOWAS).
Global Value Chains

The Committee noted that African nations would benefit significantly from economic diversification. Both the private and public sector were united on the need for development of value-added products through encouraging domestic economic investments in order to create employment and added value downstream. This would improve revenue collection through taxes and lead to long-term sustainable development.
Africa has always had a low share of global trade, currently around two percent. By establishing robust engagement through its various consulate offices, agencies and U.S. firms active in African markets, the Council encouraged the U.S. Department of Commerce to engage in bilateral discussions to establish specific mechanisms that will advance trade facilitation and regulatory cooperation.

Technology and Digital Economy

Technology is a vital tool in driving economic growth, embraced by African nations throughout the continent. The creation of inclusive digital societies manifests in nearly every aspect of the economy. The Council encouraged U.S. Government’s engagement with local technology partners in the development of market-friendly policies calculated to trigger economic growth and sustainable development. The Council articulated several principles to this end:

• Foster appropriate regulatory policies that support the growth of the digital economy;
• Commit to cross-border data flows;
• Embrace international competition;
• Enable market-based economics and avoid unnecessary regulations; and
• Get data protection right, by recognizing variants across industries in how they use data.

Workforce Development

According to the Committee’s report, the volume of exports from the U.S. to Africa has been affected by lack of skilled human capital and the absence of vocational training programs. A significant percent of U.S. exports to Africa require highly skilled operators, without which the consumers of the product would remain unable to purchase the product, even if offered competitively. In order to enhance skills development across the continent, exporters should offer after-sales services and training on the installation and maintenance of the products and technologies in the destination market. This would contribute to the development of Africa’s workforce and demonstrate the U.S. Government’s commitment to the market while increasing the opportunities for U.S. businesses in Africa. This could be achieved through the creation of regional training hubs in order to deliver skills closer to the destination market, which would in turn create brand visibility, foster trust, loyalty, and enhanced reputation.

MOU Implementation

The Council’s delegation to Africa found that the U.S. Government and U.S. companies need to demonstrate that they are committed to expanding trade and investment in Sub-Saharan Africa, and do so in a coordinated manner. A clear example of such ambition was the signing of Memoranda of Understanding (MOU) between the U.S. Government and three of the governments of the countries visited (Ethiopia, Kenya, and Ghana). This is an encouraging first step designed to invigorate U.S. commercial engagement in Africa.

Covington’s Africa Practice Hosts African Leadership Academy

Covington’s Africa Practice Hosts African Leadership Academy

On October 3, 2018, Covington and Burling hosted the African Leadership Academy (ALA) for a celebration of its impressive ten-year existence. Located in Johannesburg, ALA offers a two-year diploma program to some of the most promising students from across the continent. To date, ALA has provided 983 students from forty-six African countries with a world-class education steeped in values of ethical and entrepreneurial leadership. Many of the school’s accomplished alumni remain dedicated to the advancement of Africa long after they leave ALA. While most ALA students attend university off the continent, 70 percent of alumni are currently in Africa or have worked on the continent full-time following university.

The barriers to quality education that so many students in Africa face make ALA’s contributions all the more important. Accordingly, 95 percent of ALA students receive financial assistance to attend the school. Though there have been improvements in recent years, Sub-Saharan Africa has the highest rates of education exclusion of any region in the world. According to the UNESCO Institute for Statistics, one-fifth of children between the ages of 6 and 11 are out of school, as well as one-third of youth between the ages of about 12 and 14. As for the age population served by ALA, nearly 60 percent of youth ages 15 to 17 are out of school. Rapidly growing African populations and economies make improving access to quality education critical for continued progress on the continent.

As part of the celebration, ALA Dean Hatim Eltayeb moderated a panel discussion between United States Senator Chris Coons and ALA alumni, Brian Karugira and Gift Kiti. The panelists shared their leadership values and ALA’s role in their personal and professional development. Senator Coons observed that there has been a long history of bipartisan leadership and collaboration in Congress and across administrations when it comes to policies concerning Africa. The presence of Senator Coons was especially timely given his leadership role in the Senate’s passage of the BUILD Act earlier that day.

The BUILD Act, which has enjoyed broad bipartisan support, will combine the existing Overseas Private Investment Corporation (OPIC) with a new agency, the International Development Finance Corporation (IDFC). The IDFC, unlike its predecessor, will have the ability to take an equity stake in development projects. The new legislation also doubles the authorized financing ceiling to $60 billion. Senator Coons remarked that the legislation removes risks associated with investing in emerging markets, such as those in Africa, and that it will increase the visibility of the United States in Africa in relation to countries like China. Part of the development of ALA’s campus was financed through OPIC, and the IDFC will continue to drive investments in projects that advance development priorities across Africa.

As ALA looks forward to its next ten years, co-founder and CEO, Chris Bradford, reflects, “The urgency of growing a critical mass of ethical and entrepreneurial leaders has never been greater, and the proof that we can do so has never been so compelling.” Covington provides pro-bono legal services to ALA and is deeply committed to providing pro bono services to individuals and entities throughout the continent. Covington was particularly proud to host ALA’s celebration as Witney Schneidman, Chair of the firm’s Africa practice, currently serves on the ALA advisory committee.