The Roggeveld Wind Farm in South Africa

On 4 April 2018, Covington’s client Building Energy, a multinational company operating in the renewable energy industry, signed a power purchase agreement (PPA) with the South African state owned utility Eskom Holdings SOC Ltd (Eskom) to build, own and operate a 147 MW wind plant in Roggeveld (on the border of the Western and Northern Cape provinces of South Africa). Building Energy had been awarded preferred bidder status under Round 4 of the South African Department of Energy Renewable Independent Power Producer Procurement (REIPPP) programme for the wind project in April 2015. The Roggeveld wind farm will generate around 613 GWh per year and the energy generated will provide energy to 49,200 households every year, while avoiding the emission of about 502,900 tons of CO2 emissions. Construction work is scheduled to begin in 2018 and the commercial operation date is foreseen to be in April 2021. Matteo Brambilla (Building Energy’s Managing Director for Africa and the Middle East) commented “We are delighted to have signed the agreement in the presence of Minister of Energy of South Africa, for the construction of the Roggeveld plant, which represents our first wind farm in South Africa. We are also excited to develop two of the 2.3GW of renewable energy projects allocated by South African Government in the first major investment deal under President Cyril Ramaphosa”.

The REIPPP programme was implemented to assist the development of the renewable energy sector and encourage private investment in South Africa. The national renewable energy target is for 18,800MW to be supplied by renewable energy by 2030. Furthermore, the programme is designed to contribute to developing foreign investment, socio-economic and environmentally sustainable growth. The REIPPP programme has already delivered 5,243 MW in the space of four years, projects covered by the programme mainly consist of solar photovoltaic, concentrated solar power, biomass, landfill gas, small hydropower and biogas. A large spectrum of funding mechanisms have been utilised, ranging from a variety of foreign private equity, local private equity and large commercial and development banks. Some of the funding is composed of local private equity funds for black economic empowerment purposes to represent surrounding communities. The so-called “Broad Based Black Economic Empowerment” (B-BBEE) legislation is a central part of the South African government’s economic strategy. The B-BBEE policies are an enabling framework that allows government to implement a standard framework for the measurement of B-BBEE across all sectors of the economy. The aim is to increase the number of black individuals that manage, own and control the country’s economy, and to decrease racially based income inequalities. In public sector projects, achieving B-BBEE goals is a significant evaluation criterion.

In the past year the energy sector in South Africa has faced a series of political turbulence pertaining to several factors. The country’s economic volatility was evident when a cabinet reshuffle carried out by former President Jacob Zuma in March 2017 ultimately resulted in South Africa’s economic outlook taking a turn for the worst when credit ratings agencies downgraded the country’s sovereign rating. This was followed by the resignation of President Jacob Zuma, earlier this year, who was subsequently replaced by Cyril Ramaphosa. Eskom has also shown some reluctance to sign PPAs relating to twenty-seven independent power producer projects under the REIPPP programme. The signing was further delayed in March 2018 by an application brought in the North Gauteng High Court by the National Union of Metalworkers of South Africa (NUMSA) and the civic group “Transform Republic of South Africa”, to interdict Eskom from signing the twenty-seven outstanding renewable energy deals. The application alleged that (i) the entry into the PPAs would damage Eskom’s financial position and (ii) the purchase price in the PPAs over the next twenty years exceeded Eskom’s short-run marginal cost and the average price of electricity. The North Gauteng High Court ruled against NUMSA and was of the view that a case for urgency had not been made. As a result the new energy minister, Jeff Radebe, was not prevented from signing the PPAs, including the Roggeveld PPA. The projects are expected to create over 61,000 jobs and draw investment worth 56 billion Rand to the economy, according to the energy department. The conclusion of the projects marks a new dawn for South Africa’s REIPPP programme, as this reaffirms the government’s commitment to renewable energy and reinforces President Ramaphosa’s national agenda.

IP Protection Checklist for Tech Startups

As a startup founder, there are a number of issues vying for your attention on a daily basis, most of which are essential to the success of your business. Issues such as differentiating your product from competitors, developing stellar code, creating effective advertising, hiring the right staff and of course securing enough capital to fund it all. But how long have you spent planning an effective intellectual property (“IP”) strategy for your product? While creating the next “Big Thing”, it’s important not to overlook this crucial step because adequately protecting your company’s IP will not only help protect your brand, it will increase your competitive advantage, could help position your company as an appealing acquisition target and may increase your company’s valuation. For any savvy investor, due diligence into a company’s assets is a prerequisite to any substantial investment; for a tech company, this means that its IP assets will be scrutinized almost immediately. Therefore, incorporating an effective IP strategy into your company’s corporate development from the outset is essential to ensuring your most valuable assets remain protected. Below is a checklist of the types of IP protections most relevant for startups.

Don’t Publicly Disclose Your Product Before Evaluating its Patentability

If your technology can qualify for patent protection, and you decide that seeking patent protection is the right next step for your company (as opposed to protecting your proprietary invention as a trade secret, discussed below), filing a patent application should be your first step. Remember, patents only give you the right to exclude others from making, using or selling your claimed invention; patents do not give you the right to actually make, use or sell the claimed invention. This is why conducting diligence into your company’s “freedom to operate” (i.e., determining whether third party patents exist) is an important part of your product development activities. This is especially true in the saturated consumer electronics industry, where components of your invention may be covered under separate patents owned by others. If you hope to receive global protection for your technology, it is crucial that you file a patent application before making any public disclosures–and yes, this includes pitch competitions! This is because, in order to obtain patent protection in some countries, you must avoid disclosing your invention anywhere in the world before filing a patent application. Therefore, failing to file a patent application before publicly disclosing your product could have seriously adverse consequences on your ability to obtain worldwide patent protection.

  • File a patent application before you publicly disclose your product.
  • Determine whether other patents exist that impact your ability to commercialize your product (including its components).
  • Reevaluate your patents regularly as your product evolves. When applicable, consider filing new patent applications on new features.

Register Trademarks During Entity Formation

Once you’ve made the decision to form a company, your first step is typically to register your company with the relevant business authority in your jurisdiction. In the US, this will be your state’s division of corporations or the secretary of state’s office. No matter where you are, one of the most important parts of this application process is registering and gaining approval of your company’s name. However, it’s important to remember that approval of your company’s name only prevents duplication of company names (and often only at the local level). Therefore, conducting a trademark search in target markets will help you determine if someone else is already using your desired company name or trademark. In other words, just because you’re the only “Born to IPO, Inc.” in your state doesn’t mean that “Born to IPO” isn’t a protected trademark. Building a recognizable brand takes time, so get a head start and file a trademark application for your company’s name and logo. Also, consider registering your domain name. This prudent step may save you from territorial trademark rights disputes with other companies unknowingly using the same or a confusingly similar brand, or even worse, from having your trademark or domain held hostage by cyber-squatters who may register domain names and file trademark applications after seeing your public disclosures. If you qualify, use the Madrid System to register your mark in nearly 100 countries via a single application.

  • Save yourself the hassle of having to change your company’s name or logo by first conducting a trademark search.
  • File a trademark application and register your domain name at this time to protect your company’s name, logo and web address.

Be Careful When Asking Your Best Friend to Help You Code

You’ve got your big idea, a registered entity and some cash. Now it’s time to focus on building and launching that minimum viable product. So you hire contractors, ask your best friend to pitch in and help you code and your cofounders work around the clock to try and get your product to market. When the dust settles, you’ll notice that a lot of the people who worked on your product are long gone– and sometimes on less than friendly terms. Without the right contractual protections, they may leave with the rights to the IP they helped develop. Therefore, don’t overlook the importance of putting in place contractual protections with contractors, founders and employees.

  • Require all contractors, founders and employees to sign written contracts that include a present assignment of any IP they developed to the company.

Think Before Copying Code

Copyright gives the author of an original piece of protectable work exclusive rights for such work’s use and distribution. Among the types of works protectable are books, music, motion pictures and software code. Although copyright ownership is automatic upon creation of the original work, protection against infringers isn’t. For example, in the US, you can’t sue an infringer unless the copyright has been registered with the U.S. Copyright Office. Registering your copyright would also make you eligible to recoup statutory damages such as attorneys’ fees and court costs, and would allow US Customs to halt the importation of infringing or counterfeit works. If your country is a member of an international copyright convention (the Berne Convention and the Universal Copyright Convention being the two principal ones) or a bilateral agreement, your registered work may also benefit from copyright protection internationally. It’s important to keep in mind that it is extremely rare for any software product to be made up of code 100% owned by the distributor as most software is used under license.  This raises two important issues to consider when reusing code: 1.) does the license you’re utilizing permit commercial distribution or use at all, and if so, to what extent? and 2.) does the license have requirements for redistribution? The latter consideration is common in Open Source Software (OSS) licenses, which typically require that you make attribution to the original developer, forward the underlying license terms with any distribution that includes the OSS and distribute derivative works under the same license (which in turn may require making your source code available).

  • Where possible, obtain the full breadth of copyright protection for your original works of authorship by registering it with the appropriate copyright authority within your jurisdiction.
  • Carefully analyze any reused code to determine the rights and obligations that come with the license.
  • Avoid using third-party pictures, music, or writings on your website, marketing materials or products without consent as this could lead to costly disputes with the copyright holder.

Protect Your Sensitive Information

While patents are often viewed as the holy grail of IP, in reality patents can be difficult to obtain and enforce (especially for software-based inventions), there are numerous costs involved, and the quid pro quo of filing for a patent is public disclosure of the invention. Regardless of whether your IP assets qualify for patent protection, consider whether they may be protectable as trade secrets. Generally, trade secrets meet three criteria: 1. it is not generally known or ascertainable outside of your organization,  2. you derive a business advantage from the information not being generally known, and 3. you take reasonable efforts to preserve its secrecy. Unlike the other forms of IP discussed, no official registration procedure exists for trade secrets. Instead, rights are procured and maintained solely by the efforts you undertake to preserve the information’s secrecy. This means restricting access to sensitive information within your organization (including by employees and contractors) and limiting disclosure among third parties to those who have a need to use or review the information (including customers, suppliers and prospective acquirers). This can be accomplished via security measures (both technical and digital) and the use of written confidentiality agreements.

  • Require all employees, agents (including executives and board members) and contractors who will have access to sensitive information to sign non-disclosure agreements.
  • Construct physical and digital barriers to restrict access to sensitive

Although easy to overlook during the hectic early stages of establishing a business, a thoughtful IP strategy could provide serious value for your startup in both the long and short term. Consider the types of IP that will have the biggest impact on your business and consider whether patent, trademark, copyright or trade secret protection is appropriate. Considering the importance of a tech company’s IP assets to its viability, safeguarding your IP could prove to be the most important investment you make.

Project Finance Master Class: Addressing Africa’s Infrastructure Deficit

There are ample studies that quantify Africa’s infrastructure deficit in terms of projects and funding. The World Bank estimates $93 billion of annual upkeep investment is needed for projects and Ernst and Young estimates that there are some 800 projects, largely in the power and transportation sectors, that require approximately $700 billion in new investments.

Less well understood is the skills deficit on the continent that is an impediment to these projects being developed. In particular, African governments and state-owned entities have a critical role to play with project developers to ensure that contracts, studies and documents related to these projects are executed effectively and efficiently. On the other hand, outside developers, financial institutions, and other professional service firms need to better understand local regulations and challenges faced by governments across the continent.

Given this situation, a group of stakeholders have come together to develop strategies to address  these gaps. This effort is predicated on the notion that skills development and local knowledge are critical aspects of addressing Africa’s infrastructure deficit.

Covington & Burling LLP, Kaplan & Stratton, Fieldstone Africa, and USAID’s Power Africa Initiative are organizing a Project Finance Master Class in Nairobi, Kenya on June 4-6, 2018. The African Legal Support Facility of the African Development Bank is also supporting this initiative. Intended for African government ministries, regulators, and state-owned off-takers, project developers, and infrastructure companies, the master class seeks to strengthen the enabling environment for project finance transactions by providing important technical skills training and creating a platform for the exchange of best practices.

If you would like more information or would like to participate, please contact Kamala Murugesu of Covington at

Competing in Africa: China, the European Union, and the United States

Given recent developments in the global economy, especially Brexit and the Trump administration’s “America First” policy, it is worth assessing how Africa’s three largest commercial partners—China, the European Union, and the United States—are likely to impact the region in the near future as it relates to trade and investment trends.

The China-in-Africa story may be increasingly familiar, but its complexity cannot be overstated. As China’s domestic growth began to surge at the end of the last century, demand for natural resources and job creation forced China to look for markets abroad. Africa was a willing partner, due to its abundance of commodities and need for infrastructure development.


China’s role on the African continent has been defined by the financing of more than 3,000, largely critical, infrastructure projects, according to the AidData Project. China has extended more than $86 billion in commercial loans to African governments and state-owned entities between 2000 and 2014, an average of about $6 billion a year. In 2015, at the sixth Forum on China-Africa Cooperation (FOCAC), President Xi Jinping pledged $60 billion in commercial loans to the region, which would increase lending to at least $20 billion a year if that pledge is fulfilled.

As a result, China has become the region’s largest creditor, accounting for 14 percent of sub-Saharan Africa’s total debt stock, according to Foresight Africa 2018. In Kenya, for example, the volume of Chinese loans to the government is six times larger than that of France, the country’s second-largest creditor. The FOCAC that will be held in Beijing later this year is likely to continue this trend of extending commercial loans for infrastructure projects.

While China’s level of foreign direct investment (FDI) is relatively low, accounting for just over 5 percent of total FDI inflows into the region in 2015, two-way trade has grown 40 times over the last 20 years and now exceeds $200 billion. More recently, there has been a surge in Chinese private investment combined with a continued, but more limited, state engagement. A 2017 McKinsey study reports that there are more than 10,000 Chinese-owned firms operating in Africa today, about a third of whom are involved in manufacturing. Notably, French academic Tierry Pairault points out that the overwhelming majority of these enterprises are small and micro businesses. McKinsey also reports that Chinese investment in Africa increasingly contributes to job creation, skills development, and the transfer of new technologies, practices more generally associated with Western business norms.

As China works to implement the Belt and Road Initiative, the largest public works program ever, the issue of China’s commercial loans and the subsequent debt incurred by African governments is likely to increase as a public policy concern. There is room to limit the negative consequences of these loans: China should consider transitioning toward a blended financing model, based on Western and Chinese sources of financing, for its support of Africa’s much-needed infrastructure projects. In addition, Africa would benefit if China were to more actively open tenders to international competition as opposed to tying commercial loans to the exclusive use of Chinese companies and materials on terms that are often opaque. A larger portion of grants, as opposed to a singular reliance on commercial loans, even at concessional rates, would be in Africa’s interest.


While the history of colonialism continues to haunt the Europeans—see the viral video of President Akufo-Addo declaring his intent to free Ghana from aid while sharing a stage with French President Macron—when it comes to doing business, language, local knowledge, and historical connections matter.

The launch of the Africa-EU Strategic Partnership and the first-ever summit between the 27 members of the EU and the 54 nations of Africa in 2007 seem to have hit a reset of sorts in the two regions’ relationship. Indeed, over the last decade, the EU has worked, with a large degree of success, to transition to a partnership model based on reciprocal trade. The fifth EU-Africa Summit took place in Abidjan in 2017 against a background in which two-way trade exceeds $300 billion. In association with the summit, the EU pledged to mobilize more than $54 billion in “sustainable” investment for Africa by 2020.

The EU is shoring up its commercial position in Africa through a web of free trade agreements, or Economic Partnership Agreements (EPAs), which Brussels is negotiating or has concluded with 40 African nations in sub-Saharan Africa. The EPAs provide European companies with preferential access to markets across the region and will liberalize about 80 percent of imports over 20 years. Progress on concluding the EPAs is not without its challenges. Not surprisingly, Nigeria contends that an EPA undermines its industrialization strategies, and Brexit detracts from the EU ability’s to negotiate as a common market.

A comprehensive EU trade strategy combined with a private sector that has historic ties to local markets sets the stage for continued growth and influence by European firms in the African market. In addition, the EU is well positioned to share lessons learned from its decades of experience with regional economic integration as, especially as the Continental Free Trade Agreement was signed by most African Union members in Kigali on March 21.


Since 2000, U.S.-African commercial relations have been based on the African Growth and Opportunity Act (AGOA), a non-reciprocal trade agreement that grants about 40 countries duty-free access for approximately 6,400 products to the U.S.

AGOA has had a mixed legacy, given its goal of growing Africa’s export markets rather than building two-way trade and investment partnerships. AGOA has helped integrate trade and investment into the U.S.-Africa policy dialogue and led to the creation of more than a million jobs, directly and indirectly, on the continent. However, only approximately 300 of the available product lines are utilized and a relatively small number of countries—principally South Africa, Lesotho, Kenya, Mauritius, and Ethiopia—have taken advantage of AGOA to establish a significant volume of non-oil exports to the U.S. At the same time, the EU’s assertive free trade strategy and China’s surge in trade and commercial loans have left the U.S. in need of a new commercial strategy.

In fact, the U.S. commercial engagement in Africa is waning: Over the last five years, U.S. exports to sub-Saharan Africa have averaged $19 billion. Two-way trade has fallen from a high of $100 billion in 2008 to $39 billion in 2017, largely due to U.S. energy self-sufficiency.

In addition, summits are central to setting government priorities, especially as it relates to trade and investment targets. While the Obama administration held the first-ever summit with African leaders in 2014, the EU has held five summits with Africa, and China is about to hold its seventh heads-of-state dialogue.

Indeed, the U.S. commercial impact in Africa should be more significant than it is. With $54 billion of FDI stock, the U.S. is the largest investor on the continent. There are an estimated 600 U.S. companies in South Africa and more across the continent, including some of the largest American companies. The U.S. business model is welcomed across the continent, given the general practice of U.S companies to hire and promote locally, invest socially and reject corruption, among other practices.

There are important building blocks that could enhance the U.S. commercial presence in the region.

Between 2005 and 2017, the U.S. Millennium Challenge Corporation (MCC) invested more than $6.5 billion in 14 sub-Saharan African countries through completed or ongoing compacts in infrastructure, health, education, and other sectors. These compacts are designed to drive investment into projects deemed too risky for the private sector, promote economic growth, and enhance regional economic integration in Africa. It is worth noting that MCC investments are grants that are implemented through open-tender bids. While a competitive tender model is a critical component of the agency’s commitment to international best practices, finding more ways to involve American companies should be a priority for the MCC.

USAID’s Power Africa initiative, in many respects, has become the flagship U.S. program on the continent. The program is addressing a critical need: About 600 million people on the continent do not have a reliable supply of electricity. Over the last four years, Power Africa has developed a transactional model, based on public and private partnerships, that has led to 80 projects valued at more than $14.5 billion that are now either online, under construction, or have reached financial close. More than a third of these transactions involve the U.S. private sector, and more than 10.6 million businesses and homes now have electricity as a result of this initiative.

Finally, last month, Congress introduced the BUILD Act, which would create the U.S. International Development Finance Corporation (IDFC) by integrating parts of USAID into the U.S. Overseas Private Investment Corporation (OPIC). The potentially transformative nature of this legislation is in the fact that the IDFC would have a $60 billion lending cap, double the amount that OPIC currently can lend, and could make equity investments up to 20 percent of the total equity of a project. This will make the U.S. more competitive with Chinese state-backed funds, which often take a similar equity position in their projects. Given that Africa comprises the largest share of OPIC’s investment portfolio (27 percent), or $6.2 billion, the proposed IDFC is likely to be a significant benefit to the U.S. commercial engagement in Africa.

The challenge for the Trump administration is to develop a coherent trade strategy for Africa that builds on AGOA, is based on reciprocity, and utilizes existing programs to enhance the U.S. commercial presence on the continent. Given President Trump’s alleged derogatory remarks about African nations and Secretary of State Rex Tillerson’s abrupt firing while on a visit to the continent, the administration has yet to show that Africa is a priority for the U.S. Fortunately, investing in Africa remains a priority for the U.S. Congress.


China’s commercial presence on the continent will continue to grow, raising the principal concern that China’s significant role in addressing Africa’s infrastructure deficit could be offset by its contribution to a new, and ultimately unsustainable, African debt burden. The EU will work to implement its trade relationship, which will provide European companies competitive tariff advantages. In many respects, the U.S. Congress is driving U.S. policy toward Africa with its numerous and highly relevant legislative initiatives. However, until the executive branch provides diplomatic and policy leadership, the U.S.-Africa partnership will not fulfill its considerable potential.

Post contributed by guest blogger Joel Wiegert, Former State Department official who served in Angola, Tanzania, Ghana, and South Africa and is not affiliated with Covington & Burling LLP. This piece was also cross-posted on Brookings’ Africa in Focus blog.

The Technology Bank

Artificial intelligence and big data are some of the new technologies dominating discourse in 2018.  These technologies are expected to change the way that we travel, learn, and transact.  However, this forecast is less clear for the least developed countries (LDCs).

According to a United Nations study, science and technology and resource and development remain limited in LDCs—several of which are in Africa. Though Africa contains various tech hubs such as Kenya’s Silicon Savannah and Rwanda’s Innovation City, the concern is that without the infrastructure to adapt and absorb existing technologies, it will be difficult for these LDCs to upgrade industries, effectively partner with high tech businesses, and contribute to sustainable development.

So, the question is: how do we overcome the technological divide?

In late 2017, the U.N. General Assembly and Member States operationalized a new mechanism that may provide an answer to this question.  This mechanism is called the Technology Bank.

The Technology Bank is a new entity guided by a Council of thirteen independent experts in science, technology, and innovation (STI) and development cooperation.  The Bank’s goal is threefold:

(1) Improve LDCs’ scientific research and innovation base,

(2) Promote networking among research institutions, and

(3) Help LDCs access and utilize critical technologies.

Set to begin operations in 2018, the Technology Bank could present a window of opportunity to tap into and expand innovation in Africa.

Important for stakeholders, here are three key features of the Bank:

  1. Activities Are Rooted in Sustainable Development

Drawing from technology-driven growth objectives in the Istanbul Program of Action, U.N. Member States in the 2015 Addis Ababa Action Agenda, negotiated the Technology Bank as one of over one hundred concrete measures for implementing the sustainable development goals (SDGs).

Sustainable Development Goal 17 specifically envisions the Technology Bank as a means to build robust STI bases by improving technology access, acquisition, and utilization (SDG target 17.8).  The Bank would facilitate North-South, South-South, and triangular cooperation on and access to STI knowledge-sharing (SDG target 17.6).  Cooperation would also focus on the development, transfer, dissemination, and diffusion of environmentally sound technologies on favorable terms (SDG target 17.7).

The Technology Bank also advances collaboration to support other sustainable development goals, which include:

  • Ensuring access to affordable and clean energy (SDG 7),
  • Building industry, innovation, and infrastructure (SDG 9), and
  • Fostering sustainable cities and communities (SDG 11).

To achieve these goals, the Bank’s Charter allows organizations, firms, and other stakeholders to enter into agreements with the Bank (art. 4(c), 9(c)).  In this way, the Technology Bank is designed with an eye towards long-term collaboration and technological change.

  1. Structured to Provide Innovation Support and Reinforce Intellectual Property Rights

A) Innovation Support via STIM Unit

STIM, also known as the Science, Technology and Innovation Supporting and Enabling Mechanism, is the Banks’ first unit.  STIM aims to strengthen LDCs’ capacities, both to attract outside technology and to “generate homegrown research and innovation and take them to market.”  According to the 3-year Strategic Plan, STIM will promote the development and implementation of national and regional STI strategies.  It will also foster collaboration between LDC researchers, research institutions, and public entities.

B) Reinforced Intellectual Property Rights through IP Bank

The second unit, Intellectual Property Bank (IP Bank), is designed to assist LDCs in building national and regional capacities in the areas of IP rights and technology related regulations by helping LDCs:

  • Secure relevant IP at negotiated or concessionary rates,
  • Obtain technical assistance to identify appropriate technologies,
  • Protect IP for technologies facilitated by Technology Bank, and
  • Protect IP rights derived by LDC inventors.

C) Coordination though the Management Support, Partnerships and Coordination Unit

This third unit aims to ensure synergies and coherence across the different work streams of the Technology Bank, and coordinate with relevant stakeholders on Bank activities.

With effective management of IP rights through the IP Bank, there may be more opportunity for businesses in computer technology and pharmaceuticals, to engage with African entrepreneurs.  Meanwhile leveraging knowledge networks and facilitating technology transfer in STIM may present an opportunity to make technological building blocks more widely available, while supporting human and institutional capacity to innovate.  All three units are designed to work in concert to achieve the action items in the Strategic Plan.

  1. Resources Require Continued Investment

Initial resources for the Bank will come from the host country, Turkey.  As part of the host and contribution agreements, Turkey pledged to contribute approximately USD 2 million annually for five years, and provide personnel and offices for the premises in Gebze.  In January 2018, Norway invested approximately USD 1,070,550.  Under the Charter, these and other contributions will be kept in a Trust, subject to audit by the U.N. Board of Auditors.

Additional resources, however, require input from Member States.  According to U.N.- OHRLLS estimates, the Technology Bank would require an annual budget of USD 35-40 million.  Therefore, the overall sustainability of the Technology Bank, may be determined by stakeholder contribution.

It has been said that “the poorest countries in the world cannot eradicate poverty, achieve strong and sustainable development and build resilience without expanding their scientific and technological bases”  and that the pace of new knowledge creation is too rapid for any one country to attempt to go alone.  The Technology Bank, as it is envisaged, may have the potential to support Africa’s capacity to meet this challenge.  With the ability for stakeholders to participate in the Bank’s sustainable development activities, partner with African innovators, and contribute funds, entities now have another avenue to support new technologies in Africa.

Is Cryptocurrency a Viable Solution for the Unbanked in Africa?

When bitcoin entered the public’s eye for the first time in 2013, it was touted as one of the greatest inventions for the unbanked in Africa. The World Bank estimates that of the 2 billion people without access to the modern financial system, a third live in Sub-Saharan Africa. In recent months, bitcoin and cryptocurrency as whole have received much attention. Further, the underlying blockchain technology has gained mainstream acceptance. While the potential of such technology seems to be limitless, the question remains whether cryptocurrency is a viable solution for the unbanked in Sub-Saharan Africa.

On its face, Bitcoin appeared to be the front runner and ideal candidate for cross-border transactions, especially remittance payments.  However, the volatile nature of the cost associated with such transactions as well as the lack of a robust cryptocurrency ecosystem, has limited the effectiveness of Bitcoin on the African continent.

For many, the cost to send money into Africa through banks and wire services can be a challenge, with transaction fees usually in the range of at least 10 percent. Intra-African money transfer is even more expensive and the cost can rise to as high as 17 percent. Although Bitcoin was initially cheaper with the average transaction fee being only a few cents, in recent months, the transaction fee has proven to be extremely volatile. In December 2017, the average transaction fee climbed to as high as 50 USD, while in March 2018, it dropped to about 2 USD. Because the transaction fee within the bitcoin network does not depend on the amount of bitcoins being sent, for smaller transactions, the cost of transaction would be prohibitively high.

An additional problem lies in the cost of exchanging Bitcoin into local currency, and the lack of an ecosystem to support such exchanges. Because merchants do not universally accept Bitcoin as a means of payment, recipients of cryptocurrency must deal with the issue of converting into local currency. With low demand for bitcoin in sub-Saharan Africa, the ecosystem to support cryptocurrency is currently not robust enough to make the exchange market liquid.

New cryptocurrency platforms also face strong competition from existing fintech companies such as M-Pesa, the ubiquitous mobile money in Kenya. M-Pesa is supported by Safaricom, the biggest telecommunication company in the Kenya market with more than 70 percent of the market share. In 2015, Safaricom stopped its business with other Bitcoin payment processing companies, further limiting the ability of new cryptocurrency companies to break into the Kenyan market. Moreover, Kenya’s high court has held that Safaricom is not legally required to conduct business with such companies, giving the telecommunications company a semi-monopoly and adding further obstacles to the advancement of cryptocurrency technologies in Kenya.

The history of BitPesa, one of the oldest and best-funded blockchain companies in Africa, is illustrative of the difficulty in offering bitcoin remittance service in Africa, but also the potential the underlying technology has to solve banking issues on the continent. BitPesa initially aimed to provide a consumer level cross-border remittance service. However, when faced with the challenges highlighted above, BitPesa pivoted to provide a business-to-business (B2B) payment service instead. Currently, BitPesa is best used by entrepreneurs in Africa who utilize it as a foreign exchange and B2B cross-border payment system for large transactions. BitPesa has been gaining traction in recent time with over 6,000 customers across the continent, demonstrating that the future of cryptocurrency on the continent of Africa may be going in an upward trajectory.

As cryptocurrency and blockchain technology mature, and transaction costs are reduced, using cryptocurrency as a means of remittance may become a reality for many in Sub-Saharan Africa. Further, cryptocurrency and blockchain technology are gaining acceptance among African millennials who desire to not only use the technology but find ways to learn and innovate upon it. With the demand for cryptocurrency on the rise universally, and a growing base of millennials understanding the underpinnings of the technology, it is foreseeable that in the near future, cryptocurrency could very well be a solution for the unbanked in Sub-Saharan Africa.

For more information on the current state of blockchain technology including a synopsis of the use of cryptocurrency in various countries in Africa, please visit the Global Blockchain Business Council Annual Report located here.

Covington’s Africa Practice Will Be at SXSW

Covington’s Africa Practice is looking forward to being a sponsor of the first-ever Africa House at South By Southwest (SXSW) this year.

Launched in 1987, with a mission to foster discussion and collaboration in the music and art scene, SXSW has morphed into the ultimate gathering place for creatives, innovators, and technologists. Held in Austin, Texas each year, the event now draws politicians, corporates, and others seeking to experience the latest digital trends, hear from rising talent in film and music, or discuss significant public policy issues. Last year, there were over 60,000 “South By” attendees from 100 different countries.

Africa House will showcase the region’s emerging status as a global player in technology, entrepreneurship, and design. At the house, participants will experience pitch competitions, workshops, immersive panels, performances, and networking opportunities for all things Africa.

Africa has become a hotbed of tech activity. Just as the continent skipped landlines and went directly to mobile phones, it is skipping traditional forms of banking, agricultural, and various other sectors by utilizing technology to spur economic growth.

At Africa House, a panel entitled: “Big Law & Africa: How Covington Is Supporting The Continent’s Technology Boom,” will cover how government policies and regulations impact the continent’s tech progress.

The panel will include Covington’s experience in helping aspiring companies tackle difficult regulatory and policy questions as they look to grow and expand. Covington seeks to ensure that entrepreneurs are well positioned to address complex topics such as privacy and data security, cybersecurity, and anti-corruption and anti-money laundering. Navigating the legal structures of the U.S., E.U., and various African markets is complicated. And, we will share our experience in advising emerging tech companies on how to comply with global best practices and ensure they have a strong foundation to succeed.

Africa House at SXSW will be open on March 10th and 11th at the Parker Jazz Club in Austin, Texas.

Ten Key Issues to Watch in Africa in 2018

In this blog, Covington’s Africa practice  highlights ten key issues to watch in Africa in 2018.

  1. U.S. Policy: The derogatory remarks that President Trump made about Africans and Haitians, which he denies having said, create a negative image for the U.S. across the region as the year begins. Nevertheless, the administration will push forward on several fronts. Commerce Secretary, Wilbur Ross, is expected to visit Sub-Saharan Africa in the first quarter of 2018 along with members of the Presidential Advisory Committee on Doing Business in Africa (PAC-BIA), an Obama-era initiative continued under Trump. Secretary of State, Rex Tillerson, may also visit the region. As we analyze here, the Administration’s National Security Strategy focuses on combatting corruption in Africa, moving toward more reciprocal trade relationships and modernizing development finance tools. On January 17, 2018 the House passed the African Growth and Opportunity Act (AGOA) and Millennium Challenge Account (MCA) Modernization Act. The bill will provide technical assistance to help eligible partners fully utilize AGOA and, perhaps most significantly, enable the Millennium Challenge Corporation to enter into concurrent, regionally-focused compacts to promote trade among eligible partner countries. The bill is now in the Senate and will likely be passed later in the year.
  1. Anti-Corruption: Next week the African Union will meet for its 30th Summit, with the theme “Winning the Fight Against Corruption: A Sustainable Path to Africa’s Transformation.” Consistent with this focus, anti-corruption initiatives are on the rise throughout the continent. For example, Angola’s new president, João Lourenço has taken swift and decisive actions to root out nepotism and corruption. In December 2017, he changed the leadership of nine public utilities and companies, including oil and gas producer Sonangol and the diamond mining company Endiama.  The election of Cyril Ramaphosa as president of the African National Congress and the prospective state prosecution of companies involved in the sprawling “state capture” investigation are likely harbingers of a continued focus on anti-corruption enforcement in South Africa in 2018. The extraterritorial application of the Foreign Corrupt Practices Act (“FCPA”), as well as other foreign anti-corruption laws such as the U.K. Bribery Act, is well-established. The extent to which the effort of African governments to fight graft will result in an increase in FCPA enforcement activity related to the continent is something to watch over the course of the year.  Against this backdrop, corporates would be well-served to focus on developing and maintaining anti-corruption compliance programs.
  1. Project Finance: Project Finance projects in Africa are likely to increase in 2018, especially in energy/power and transport sectors. For example, spending on electricity production and distribution in Sub-Saharan Africa is expected to reach $5 billion by 2025. The Power Africa initiative launched by former President Obama, and continued by the Trump Administration, is expected to contribute significantly to increased investment in infrastructure projects. The initiative’s 150 public and private sector partners have already mobilized $14 billion in actual investment in the 85 Power Africa projects that have reached final close, which will add more than 7,000 megawatts of new power generation. Additional finance is expected from China, India, and Japan. Sub-Saharan Africa’s wealth of natural resources, particularly in the oil and gas sector, will continue to attract investors. Infrastructure spending for petroleum and natural gas extraction is expected to grow at an average annual rate of 7.1 percent between now and 2025, resulting in a total investment of $8 billion over that time period. Notably, funding models are changing in Africa, and models such as public-private partnerships (PPPs) are to become more prevalent. However, in the energy sector, the preferred model of funding remains privately financed Independent Power Producers. Larger state-owned companies in South Africa have made progress in issuing bonds to raise capital, but with South Africa’s sovereign credit rating under pressure, debt capital raising by smaller State Owned Enterprises (SOEs) may prove challenging.. The African Development Bank is expected to continue to provide a platform for bridging finance, direct loans and loan guarantees supporting infrastructure financing. Southern Africa will account for the largest share of infrastructure spend and capital project activity on the continent, and most of the activity is likely to occur in the South African energy sector. Other important investment destinations include Angola, Ghana, Nigeria, and Mozambique.
  1. South Africa: There is a palpable sense in South Africa that the country has turned a critical corner in the fight against government corruption with the election of Cyril Ramaphosa as president of the ANC. Ramaphosa’s 2018 agenda is significant: root out the corruption tied to President Zuma by prosecuting individuals and entities implicated by Guptagate, restore the reputation of the ANC as a genuine party of the people, and revive South Africa’s economy. Ramaphosa must also prepare for a decisive election in 2019 while delivering on job creation and managing the tension between market-based land reform and expropriation. An early indicator of Zuma’s fate will be whether he delivers the February 8 State of the Nation address to Parliament; the expectation is that Zuma will be forced out of office over the near-term. It’s more a question of when, not if.  Analysts will also be watching to see how Ramaphosa will revitalise the State Owned Enterprises (SOEs) and whether he will act against executives in the country’s key SOEs, who have become widely regarded as having facilitated “state capture.”   
  1. Angola: President João Lourenço continues to move forward on the reforms he initiated immediately upon assuming the presidency. The government has announced plans to tap the Eurobond market, probably by June, and it announced that it will repay contractors $5 billion of arrears by 2019. The government has also published a mid-term national development plan (2018-2022) that identifies 88 actions it will take to reform the economy. Key actions include strengthening the financial sector and assessing the vulnerability “of every and any” commercial bank. Whether the government seeks a deal with the IMF to support its reform efforts will be an important issue to watch in 2018.
  1. Zimbabwe: One of the most pressing questions facing the new government in Zimbabwe is whether it can hold “free, credible, fair and indisputable” elections, as President Emmerson Mnangagwa has promised. Mnangagwa has said electoral observers from the EU, the Commonwealth and the UN would be invited to monitor the polls, a welcome departure from Mugabe’s refusal to allow international election observers. Whether the more than 3 million Zimbabweans in diaspora will be able to vote will be important to the credibility of the elections. The success of the elections will have an important bearing on whether the international community is willing to support an economic reform package, which the government needs desperately. Finance Minister Patrick Chinamasa has announced a bold economic reform program which he hopes will lead to 4.5 percent growth in 2018; how he deals with government spending, the country’s $1.8 billion to the IMF, agricultural and civil service reforms will be key early challenges.
  1. Nigeria: With presidential elections scheduled for early 2019, political jockeying will intensify in 2018 with a prime focal point being on President Buhari’s health and whether he will stand for reelection. Elections for governorships in Ekiti (July) and Osun (September) will be important indicators of the preparedness of the Independent National Electoral Commission (INEC) to manage next year’s presidential elections. The government’s action on the enduring challenges of corruption, petroleum shortages, and unreliable access to power will continue to dominate the political debate. Economic growth is expected to accelerate to 2.5 percent (it was 1 percent last year). This growth will be spurred by improving oil prices and reforms in the financial, manufacturing, and other sectors.
  1. Kenya: Warning that “lingering political uncertainty can further undermine business confidence and stunt a robust recovery,” the World Bank has downgraded its 2018 growth forecasts for Kenya from 5.5 percent to 4.9 percent. Political turmoil during the 2017 elections caused corporations to take a cautious approach to Kenya and delay investments. Healing the ethnic divisions that divide Kenya, rooting out endemic corruption, and addressing drought that has caused food prices to spike are just a few of the challenges facing President Uhuru Kenyatta. Initiatives to foster lasting reconciliation among Kenyans and regaining the confidence of investors will be key challenges for Kenyatta in 2018.
  2. Mobile Money: Mobile money will continue to grow throughout 2018 as a significant engine of economic growth and inclusion, perhaps faster in Africa than in any other region. Currently, there are 277 million mobile money accounts and 177 million bank accounts in Africa and 30 countries have enacted mobile money enabling regulation in Sub-Saharan Africa. Since 2011, there has been a ten-fold increase in the number of mobile money agents reaching approximately 1.5 million, creating a range of opportunities for small and medium enterprises.
  3. Business and Human Rights: Companies with operations in Africa should track the following legal developments in 2018. Legislative proposals in states including Australia, Netherlands, and Hong Kong may, if passed, impose additional modern slavery and child labor reporting and due diligence obligations on relevant companies with respect to their global operations and supply chains, including on the African continent. Also, coinciding with the increased promotion of “access to remedy“—the third pillar of the UN Guiding Principles on Business and Human Rights—recent judgments in the UK and Canadian courts have seen claims allowed to proceed against UK/ Canadian headquartered companies in respect of alleged human rights offences connected to their foreign subsidiaries in Zambia and Ethiopia. Judgments on the merits are pending. Companies should consider appropriate risk mitigation strategies and measures.


About Covington’s Africa Practice

 In November, Covington celebrated the opening of its office in Johannesburg, South Africa. With a leading  project finance team in Johannesburg, London, and Dubai, Covington is positioned to service companies’ project finance needs throughout the continent. Through its Global Problem Solving capability, Covington’s Africa practice advises clients on matters related to political and regulatory risks. Covington has also developed a special suite of services for financial institutions, banks and non-bank financial institutions across the continent. This set of services includes a focus on six key compliance areas: (1) anti-corruption (including compliance with the U.S. Foreign Corrupt Practices Act (FCPA) and UK Bribery Act); (2) export controls and economic sanctions; (3) anti-money laundering; (4) privacy and data protection; (5) cybersecurity; and (6) competition, including cartel enforcement. If you have questions about your company’s operations in Africa, please contact Witney Schneidman at

What Next for Trump and Africa?

In late December, the Trump Administration released the “National Security Strategy of the United States of America.” The nearly 70 page document lays out the foreign policy priorities of the current Administration in both thematic and regional approaches. At the time of its release, the press focused on the strategy’s emphasis on Russia and China, and the proposed policies towards these “revisionist powers.” But, there was minimal coverage on what this strategy had to say about Africa.

Nevertheless, President Trump’s recent derogatory remarks about Africans and Haitians, which he denies making, has sparked a controversy that has overshadowed the strategy as it pertains to Africa. The question is whether the Trump administration will be able to pursue aspects of the National Security Strategy (NSS) as it relates to Africa in hopes of reconstituting a “respectful engagement” that is elemental to advancing U.S. interests in the region. As the Administration contemplates its next steps in Africa, it is worth considering what the NSS suggests as it relates to the key issues of trade, corruption, and development finance and the timing of its implementation.


On the trade front, there is a clear theme in the strategy of “promot[ing] reciprocal economic relationships” (emphasis added) throughout the strategy. While there is no mention of how this strategy will be applied to Africa specifically, the current non-reciprocal trade framework of the African Growth and Opportunity Act (AGOA) was not designed to be permanent. It is unclear what is next when AGOA expires in 2025, but establishing a reciprocal trade framework is a logical progression and in line with the strategy’s goals. The Administration could transition to reciprocal trade agreements with individual countries and/or regional bodies that take into account capacity and socioeconomic levels by putting the eligible tariffs lines on a sliding scale and increasing the number of lines in which there would be reciprocity over time. This new framework would enhance the ability of the U.S. to compete against the various European Partnership Agreements in place throughout the continent. The strategy outlines that “fair and reciprocal trade, investments, and exchanges of knowledge…are necessary to succeed in today’s competitive geopolitical environment.” If the U.S. pursues a two-way trade platform between the U.S. and  African markets, it will surely help American companies down the road.

Importantly, the NSS discusses “economic integration” in Africa, a priority that the continent’s leaders and regional bodies have been trying to address for some time. In comparison to other regions, Africa has the lowest level of intra-regional trade, at just 18% (Europe, 69%; Asia, 52%; North America, 50%). There are efforts underway, via the Continental Free Trade Agreement (CFTA) and the Tripartite Free Trade Area (TFTA), that could bolster intra-Africa trade. A cost-effective action the Trump Administration could take to support Africa’s economic integration would be providing trade facilitation assistance to the continent’s regional bodies as they attempt to address the intra-regional trade gap.


Combatting corruption is mentioned both thematically and in the Africa section of the strategy. The Administration asserts that tackling corruption around the world will help American companies “compete fairly in transparent business climates.” Tackling corruption in Africa would be a boon for the continent’s economies as well. Estimates put the annual global cost of bribery at around $1.5 to $2 trillion – roughly 2% of global GDP.

Opaque business environments and outsized political and corruption risks have depressed African markets’ full economic potential. Facing stiff competition from emerging markets in Latin America and South East Asia, African governments must make sure their commercial climate remains attractive.

The Administration appears willing to put some muscle behind addressing graft and supporting governments looking to counter it. The strategy states that “using our economic and diplomatic tools, the United States will continue to target corrupt foreign officials and work with countries to improve their ability to fight corruption.” Trend lines indicate that some African governments and their electorates are not only recognizing the adverse impacts of corruption, but are willing to support policies and candidates that seek to tackle it head on – Angola and South Africa are recent examples of this trend. African governments looking to counter corruption should recognize the Trump Administration’s heightened interest in this issue and solicit readily available capacity building programs housed primarily in the State Department’s Office of Anti-Crime Programs and the International Unit of the Department of Justice’s Money Laundering and Asset Recovery Section.

Development Finance

The National Security Strategy states that “the United States will modernize its development finance tools so that U.S. companies have incentives to capitalize on opportunities in developing countries.” In Congress, the Senate and the House are currently both drafting legislation to revamp the legislative authorities for development finance. “Modernize” is the latest catchphrase for consolidation.

The development finance tools of the U.S. government are dispersed across numerous agencies, including the Overseas Private Investment Corporation (OPIC), USAID’s Development Credit Authority, USAID’s enterprise funds, USTDA assistance, and other smaller, regionally-focused agencies. Streamlining these agencies and dedicating more resources to one central body appears to be a policy proposal that is gaining momentum in Washington.

This proposal could ultimately help address Africa’s infrastructure deficit. From energy access and transportation, to ICT systems and water, Africa’s infrastructure woes are hindering the continent’s economic growth. Closing Africa’s infrastructure quantity and quality gap relative to the developing world and the best performers in the world could increase growth of GDP per capita by 1.7% and 2.6%, respectively. With limited new public expenditures for these capital intensive projects, African governments are relying on alternative forms of financing. A key form of financing for this effort going forward will be development finance.

The idea of establishing a single U.S. development finance institution would benefit American foreign policy and help Africa address its infrastructure deficit. Indeed, such a development would be consistent with the strategy which states: “the United States will not be left behind as other states use investment and project finance to extend their influence.” An appropriately resourced American development finance agency could be a source of much needed financing for African infrastructure projects. With Africa being a stated regional priority for the new leadership of OPIC, the continent could see increased financing activity in the near to medium term.

There are indications that Commerce Secretary Wilbur Ross and Secretary of State Rex Tillerson will visit Africa in the coming months. A robust commercial strategy will be important if there is to be strong U.S.-Africa relations given the recent controversy.

Ramaphosa’s Victory: Progress or Paralysis?

The election of Cyril Ramaphosa as president of the African National Congress (ANC), and now the leading contender to become South Africa’s next president, was hailed as a “humbling rebuke” of South Africa’s President Jacob Zuma and a stark rejection of his policies, which have led to anemic economic growth, widespread corruption, and rising frustration in one of Africa’s most significant economies.

Indeed, the markets responded quickly as the South African rand initially surged by more than 4 percent on the news of Ramaphosa’s election, reaching its highest level against the dollar in six months, but were flat a day later.

Ramaphosa’s victory represents an important win for those in South Africa who reject the capture of state institutions and crony capitalism that defined Zuma’s leadership. There were widespread concerns that Nkosana Dlamini-Zuma, Ramaphosa’s rival for the leadership position, would perpetuate many of these policies and shield her ex-husband from legal prosecution for the 783 counts of corruption, fraud, racketeering, and money laundering he is facing. The process of restoring South Africa to the ideals espoused by the late Nelson Mandela and putting the nation’s economy on a sound footing will not be easy, however.


Ramaphosa’s electoral victory over Dlamini-Zuma, a former minister of health and foreign affairs and chair of the African Union, was razor thin. His margin was 179 ballots cast by 4,708 delegates—the slimmest margin of victory in any ANC leadership race in the 105-year-old history of the organization. These results indicate that the ANC is evenly divided between the reformist Ramaphosa faction and the populist Zuma one.

In addition, only three of the candidates Ramaphosa supported won spots among the top six positions in the ANC: Ramaphosa himself, Gwede Mantashe as the ANC chairperson, and Paul Mashatile as the treasurer-general. The other three positions were won by Zuma supporters: David Mabuza as the party’s deputy president (who also won the most votes of all candidates), Ace Magashule as the secretary-general, and party stalwart Jessie Duarte as the deputy secretary-general. The margin of victory in these leadership races ranged from 339 to 24.

Ramaphosa did not fare any better in the vote for membership on the powerful National Executive Committee—the ANC’s chief executive body. Zuma supporters appear to constitute the majority of the 86-member committee.

The narrowness of Ramaphosa’s victory will have significant ramifications. There were those who expected that a victory by the reform wing of the party would lead to Jacob Zuma’s exit from the presidency prior to the May 2019 elections. While he will step down as party leader within a week, it is unclear whether Ramaphosa will be able to cajole or force Zuma into early retirement.

A second challenge will be economic policy. Ramaphosa has promised a “new deal” for South Africa based on an “uncompromising” rejection of waste, cronyism, and corruption. He has targeted 5 percent growth (up from the current rate of 0.7 percent), the creation of 1 million jobs within five years, and the restoration of investor confidence. The difficulty of delivering on these promises was underscored on the last day of the party congress when the ANC resolved to amend the constitution to nationalize the South African Reserve Bank and expropriate land without compensation, policies that could undermine Ramaphosa’s agenda.


Perhaps the first indication of Ramaphosa’s ability to chart a new direction for the ANC will be the appointment of a national director of public prosecutions, the government office that will oversee the prosecution of Jacob Zuma on corruption charges. The high court in Pretoria earlier this month declared Zuma’s selection of Shaun Abrahams for that position “invalid,” ruling that Zuma could not appoint the person who might prosecute him. The deputy president, Ramaphosa, was given 60 days to appoint a new director of public prosecutions. Zuma’s legal team has appealed this ruling.

One of Ramaphosa’s most pressing priorities will be to retool the ANC’s message going into the 2019 elections. In last year’s municipal elections, where the ANC lost control of Johannesburg, Pretoria, and Mandela Bay to the opposition Democratic Alliance (DA), the party’s support was 54 percent, the lowest since the first democratic elections in 1994 when Nelson Mandela led the party to a victory with 62 percent of the vote. In the 2016 elections, the DA campaigned on a platform of effective service delivery while the ANC was perceived by many to be a party of self-enrichment and detached from the priorities of the majority of South Africans, namely alleviating poverty, creating jobs and restoring the country’s economic health. Reaching voters and restoring the ANC’s image as the genuine party of the people will be an uphill task for the new party president.


This blog was cross-posted on Brookings’ Africa in Focus.