International Law Firms Are Leaving South Africa: A Warning Sign for the Investment Climate?
A growing list of international law firms are scaling back or exiting South Africa. According to Peter Tshisevhe, director of TGR Attorneys, this should serve as a wake-up call for the country. Concerns about the regulatory environment, economic performance and investor confidence are increasingly shaping business decisions, and the legal sector is feeling it.
The recent changes
Several high-profile shifts have taken place:
- Webber Wentzel and Linklaters mutually agreed to end their alliance, which began in 2013. Webber Wentzel has since removed the Linklaters wording and pink branding from its identity.
- A&O Shearman closed its Johannesburg office after the mega-merger of London’s Allen & Overy and New York’s Shearman & Sterling. The closure was part of a global restructuring that included cutting the partnership by about 10% to address overcapacity. South African firm Bowmans then absorbed the entire local team: eight partners, four counsel and two directors.
- Norton Rose Fulbright South Africa became independent of its international parent and has returned to the name Deneys. The firm was formed in 2011 through a combination of Norton Rose, Canadian firm Ogilvy Renault and South Africa’s Deneys Reitz.
Tshisevhe says the departures reflect a broader shift in the global legal market, as well as the challenges of doing business in South Africa.
Why they came in the first place
International firms arrived in the wake of South Africa’s transition to democracy. After Nelson Mandela’s release and the opening of the country to global markets, foreign practices saw South Africa as an attractive base for expanding and accessing the wider African market.
Why the economics have changed
International law firms generally follow their major corporate clients, so their presence depends on large commercial projects and foreign investment. Tshisevhe points to several pressures:
- Regulatory uncertainty. Mining is a good example. If a firm is supporting clients on mining projects and sees obstacles in the regulatory regime, that factors into future decisions.
- BEE requirements. International law firms have exemptions from certain requirements and can use alternative arrangements to earn points, but that may not suit every international client.
- Less investment, less work. When foreign businesses delay or withhold investment, the law firms serving them lose potential work.
- Profitability. Fee structures are often linked to more expensive foreign currencies, and without enough large-scale transactions, keeping a South African office becomes hard to justify.
What is lost when they leave
South African lawyers will still do much of the work, but international transactions often need expertise in foreign jurisdictions. That matters most in banking and finance, where international financial institutions often prefer foreign law to govern transactions. Tshisevhe noted that most are not interested when syndicated deals are subject to South African law.
Local lawyers are responding by training as solicitors to give legal opinions on deals governed by foreign law.
The arbitration question
Tshisevhe also pointed to South Africa’s reliance on international arbitration for major commercial disputes. South African companies and state-owned entities have historically spent significant sums resolving disputes abroad, including in France and London, which means substantial legal fees flow to foreign lawyers and institutions.
Perception has consequences
For Tshisevhe, the departures highlight the need to address concerns about the investment climate, the regulatory framework and the commercial legal system. He warned that perceptions about the country’s ability to handle complex commercial disputes have real economic consequences, influencing not only where international businesses invest but also where they do their legal work.
A balanced view
Not every change here signals distress. A&O Shearman’s exit was driven by a global restructuring, and Norton Rose Fulbright’s move to independence kept the firm operating locally under its original name. Tshisevhe’s argument is about the broader trend and what it says about confidence.
The bottom line
The exits of international law firms may seem like an internal matter for the legal profession, but Tshisevhe sees them as an early signal. Large international firms follow big projects and investment, so when they leave, it’s worth asking what that says about the pipeline. Addressing regulatory certainty, investor confidence and the strength of the local commercial legal system would help keep both the work and the firms.
Source: Peter Tshisevhe, TGR Attorneys, as reported in the original article.
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