Why invest in Africa?

Africa is the world’s fastest growing continent and six of its countries are among the world’s fastest growing.

According to the Africa Intelligence Report (2021), the total estimated funding of startups stood at $4.9 billion, a 200% increase on the value raised in 2020. Also, the ambition to ease intra-trade has gained momentum with the African Continental Free Trade Area Agreement (AfCFTA) which will see the removal of tariffs on 90% of goods, establishment of Free Trade Zones, protection of Intellectual Property, and increased mobility of labour. Additionally, more governments are showing the political will to make economic reforms to facilitate the ease of doing business e.g. Rwanda and Kenya.

The bottom line here is that there is no better time to invest in African countries and foreign investors understand this.

The link between IP systems and investments

Between the United States and China, patents and trade marks have become fierce battlegrounds for two major reasons: the competition to develop next-generation technologies and the need to advance economic interests of businesses and the nation. For instance, China has seen a massive increase in the number of domestic and foreign applications for patents and trade marks and is now the world record holder of patent and trademark filings. This is mainly attributed to the Intellectual Property (IP) reforms led by the government on prosecution, commercialisation, post-grant proceedings, and enforcement.

The position above is not unconnected to studies which have shown that a reliable IP framework is necessary for attracting investment and this aligns with the economic growth seen in North America, China and Europe. It also drives home the point that investors need to understand the Intellectual Property regime in a target country if they hope to recover their capital and returns on investments.

Following the rise of various economies in Africa as a target destination for investors, it becomes crucial to chart an IP roadmap for investment and market entry. This short article is a taster on the subject.

·      Institutional outlook in African markets (patents, utility models, designs, and trade marks)

Similar to Europe, IP protection in Africa is both regional and organised on a national basis. However, there are two regional blocs – African Intellectual Property Organisation (OAPI) and the African Regional Intellectual Property Organization (ARIPO). Interestingly, the contracting states do not include Nigeria, South Africa, Egypt and other non-aligned countries.

Under the OAPI framework, which primarily covers French-speaking countries, applications for patents, utility models, designs and trade marks are supported under the Bangui Agreement. The advantage the OAPI system offers is its automatic protection in the 17 member states – a sharp contrast with the ARIPO framework where member states must be designated. The ARIPO system is similar to the European Patent Office (EPO), the Patent Cooperation Treaty (PCT), and Madrid Protocol frameworks.

Other countries not covered under the Bangui Agreement or Harare Protocol (the ARIPO Agreement on patents) must be filed on a national basis. For instance, patent, design and trademark applications in Africa’s largest economy (by Gross Domestic Ranking in 2021) – Nigeria - must be filed through its National IP Office. The position is also similar in South Africa.

Examination practices also vary across jurisdictions. For instance, trade marks are substantively examined in South Africa, but patents are not. In Egypt, patents are substantively examined and the inventions are also required to be practised or  will be subject to compulsory licensing.

One of the important factors to be considered by individual or institutional investors  is how the IP of the business will be protected, especially where the model relies on innovations, designs or trade marks e.g. telecommunications, computer manufacturing companies, Fast-Moving Consumer Goods (FMCG) companies, etc. As we will see below, the protection and sometimes, use, is critical to recouping investments from Africa and preventing or enforcing IP rights against infringers.  

·      Counterfeiting and infringement in formal and informal markets

It will not come as a surprise that many economies in Africa are bedevilled by activities of IP infringers, counterfeiters, parallel importers, reverse-engineers, and so on. Counterfeit trade is projected to rise to $991 billion in 2022, as reported by the International Chamber of Commerce. This is very unsettling, considering unreported or unknown cases.

Therefore, the best action plan would be both preventive and offensive. Preventive mechanisms include freedom-to-operate or clearance searches, IP audits and due diligence, IP prosecution, and so on. Offensive strategies will involve the use of law enforcement mechanisms to address local infringement, illegal importation, or outright government or political interference.

These mechanisms can be effectively deployed only through a combination of the IP filing systems (as discussed above), customs recordal systems, litigation, active participation in government policies, and collaboration with law enforcement agencies.

Nonetheless, there is no mistake to be made about it – IP enforcement is getting better in African countries especially South Africa and Kenya where recent case studies have shown the ability of the courts to go the extra mile to recognise the rights of IP owners (see the enactment of the Anti-Counterfeiting Act and Regulations update in Kenya and the court decision recognising the inventorship rights of Artificial Intelligence).

·      IP protection as a tool for safeguarding investments and best practices

One of the most important strategies for investment in any African country is the identification of its Silk Road i.e. the organisations’ trade and supply routes. Top destinations for investment between 2020 – 2021 have remained Nigeria, Egypt, South Africa and Kenya. Unfortunately, three of these countries (Nigeria, Egypt and South Africa) are outliers from the regional IP blocs and IP rights can be protected only through national filing.

However, if the business strategy favours Francophone countries, protection through the OAPI system is advisable. This can also be done via international systems such as the PCT and the Madrid Protocol. The ARIPO system also accepts PCT and Madrid applications whilst providing options in designating member states – a cost-effective choice.

 

Conclusion & further information

IP protection in Africa is like a strategic and complex game that demands knowledge and precision. The IP protection systems are still generally weak and pale in comparison to systems in the US and Europe.

Imperfect as they are, prospective investors must still appreciate the importance of investing in IP protection or risk losing it all. This brings to the fore the need to have a coordinating IP firm with the understanding of modern corporate needs and capabilities to handle the IP portfolio of the target business, whether it is a startup or an acquisition.

 

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