FOCUS 27 four
CULTURE: One often overlooked facet of working in Africa is the fact that countries, and even regions within countries, can differ vastly.
Cultures, governments and working practices can vary signifi cantly, particularly in relation to public and group meetings where personal and corporate status has elevated importance. It is often advisable to have “back-channel” support for negotiations with the respective governments to gain an accurate and realistic view of the way key decision-makers are leaning; so any venture that crosses borders will need to evaluate the behaviours prevailing in each country separately. For example, management teams may fi nd themselves facing diffi culties when ‘local hires’ question the work-attendance-level, as this is likely to be greater than those hires expected.
fi ve
CORRUPTION: Levels can be higher than in Western countries, with better safeguards required.
What one jurisdiction regards as unacceptable, for example in relation to separation of authority between business and the state, can be acceptable in another. Governance and controls can be put into place to mitigate against this but investors would be wise to assess the potential impacts (and likelihood) of corruption up front. Read more about anti-bribery and corruption in the “Protecting your business from ABC” article on page 29.
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MANAGEMENT OF OFF-PLAN PERFORMANCE: Plans should consider a healthy level of downside risk in case things go wrong (e.g. contractor default, CapEx overruns, delays, non-delivery of infrastructure).
Corporate governance should be designed to ensure the presence of formal mechanisms to determine and manage effective remedial action. Drilling, exploration and development are extremely capital intensive activities. Projects often run to tens of billions of dollars. Successful ventures can be highly profi table for stakeholders, but assessment of real-world, practical risk at the outset is essential, both in terms of the planned operation and the ability of the various parties to cooperate. If a joint venture is to have any chance of success, it needs strong, practical foundations.
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CASH: Cash can become trapped in the country with no clear repatriation route.
Equally, basic fi nancial and cash management practices are frequently not adhered to. All too often we see our clients fail when trying to embed their more sophisticated ‘Western’ fi nancial discipline and cash management protocols within the fi nance function. CapEx and OpEx cost recovery is also, increasingly, a negotiation intensive activity where substantial value can be lost.
WHETHER YOU ARE DEALING WITH GOVERNMENTS, NOCS OR CORPORATIONS, IT IS ESSENTIAL TO UNDERSTAND THE MOTIVATION OF JOINT VENTURE PARTNERS.
© 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.
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