FOCUS 24
J
INTO AFRICA Venturing
Considerations for Joint Ventures by MARK VAN GRONDELLE
Partner and UK Head of Joint Ventures
© 2014 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member fi rm of the KPMG network of independent member fi rms affi liated with KPMG International Cooperative, a Swiss entity. All rights reserved.
oint ventures (JVs) and Joint Venture-like arrangements such as Strategic Alliance and Risk Sharing Agreements, are becoming an ever more essential part of the business
landscape, with oil and gas companies typically tying up around 30 to 40 percent of their portfolios in (non-operated) JVs.
That fi gure will likely grow to some 70 to 80 percent over the next fi ve to eight years as companies enter new territories in the hope of securing resources, and are ever more dependent on local partners. Spreading risk, combining entities with differing asset and skill bases, and enabling parties to consolidate their core strategies can be very attractive benefi ts when entering unchartered territory.
This is particularly relevant in Africa, as international companies usually can’t access the vast resources available on the continent without fi nding a local partner. Most of the countries have heavily protectionist regimes and therefore laws favour (and often mandate) that local companies front or participate in major projects. This inherently means that the Western partner will have less control over the success or failure of the venture. Hence it is incumbent on companies to think carefully up front about who they will partner with, what their formal and informal agreements should look like and how they will govern the venture. Thinking through, and carefully mitigating, the barriers to successful implementation is also essential: without this up front planning there is limited likelihood of success.
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