Monday, February 6, 2023

Growing Trends in Africa – The Rise of Cannabis

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By Darryl Bernstein, Partner, and Rui Lopes, Associate, Baker McKenzie Johannesburg


Many countries across the globe are in the process of decriminalising the medical and recreational use of Cannabis, and Africa is no exception to this growing trend. Governments across the continent are hoping that the decriminalisation of the plant will aid them in their quest to diversify their economies and generate transactions in hard currency. The Cannabis industry is one with a multi-billion-dollar footprint, and businesses are already benefiting from growing, distributing and exporting medicinal Cannabis. According to The Consumer Staples Report by Barclays, the global Cannabis market could be worth up to USD 272 billion in the coming years.

Africa is reported as being the world’s largest producer and consumer of Cannabis, albeit that the laws on medicinal use of the plant are still in their infancy. The African Cannabis Report, released by Prohibition Partners, noted that South Africa was capable of becoming one of Africa’s largest medicinal Cannabis markets, with an estimated potential industry value of over USD 1.7 billion by 2023. Further, the same report noted that Africa’s legal cannabis industry could be worth around USD 7.1 billion a year by 2023, if laws were introduced to govern the industry.

Currently, only three African countries permit the cultivation of medical Cannabis, namely South Africa, Zimbabwe and Lesotho, with Lesotho having been the first in 2017. Additionally, in September 2018, South Africa decriminalised the use and cultivation of Cannabis for private use. The governments of these countries are actively engaged in attempts to harness the potential of their respective Cannabis industries by establishing legal and regulatory frameworks that adequately provide for the cultivation, sale, transportation, manufacturing, processing and exportation of Cannabis products.

Two further African countries worth observing in the coming months are Swaziland and Uganda. This year, Swaziland is set to pass a law that aims to regulate the commercial production of Cannabis for medicinal and scientific purposes. Uganda is also in the process of crafting a regulatory framework on the topic; however, the cultivation or use of Cannabis remains an offence, punishable with up to five years in prison.

Despite the current perception surrounding the instability of African markets, the current trends in the Cannabis industry in Africa show that the continent is positioned to be a potential market leader, provided that favourable regulatory frameworks are introduced.

The proverbial “race to the bottom” in the Cannabis industry is expected to take place across those African countries who have legalised the cultivation of Cannabis. This will be brought about as businesses attempt to cut costs and to produce the product as cheaply as possible. Those companies that are able to outgrow their competitors will pre-empt the ever-changing markets and establish themselves in every level on the supply chain.

Leveraging AfCFTA to Drive Digital Trade in Africa

By Darryl Bernstein, Partner, Baker & McKenzie, Johannesburg


Digitization is disrupting global trade – the emergence of Industry 4.0, cloud computing, Internet of Things (IoT) and advanced technology has become relevant for 21st century trade in terms of both goods and services. The increasing impact of digitization reveals that African economies should be harnessing digital trade to encourage sector- wide economic development.

The potential for digital trade to drive economic development and transformation in Africa remains largely unexplored. With the African Continental Free Trade Area (AfCFTA), which came into effect on 30 May 2019, there is now wider scope to pursue regional strategies to develop Africa’s digital economy. AfCFTA presents itself as a “new dawn” for Africa and aims to bring together 55 African countries to create a single market with a combined GDP of USD 2.5 trillion covering market 1.2 billion people.

How Africa can benefit from Digital Trade

While e-commerce is thriving in some African countries, for example we have witnessed the money market boom in Kenya and the robust growth of e-commerce platforms in Nigeria, these good outcomes are often confined to the domestic market with limited regional success.

Essentially, digital trade, and its benefits for development can be derived in two ways. Firstly, through e-commerce, that is, the use of digital platforms to facilitate trade in goods and services capable of both physical and digital delivery. The opportunities for African economies comes through the increased connectivity of both local and foreign markets.

Growing internet use in Africa has been instrumental in providing an alternative route to market for SMEs and entrepreneurs who were previously hindered by the lack of connectivity, high transaction costs and information asymmetries. E- commerce offers firms and entrepreneurs visibility at a low cost and businesses are increasingly able to leverage social medial platforms to market their products and services. Increased connectivity also reduces the proximity barriers previously encountered when accessing new markets, especially for services capable of digital delivery.

Secondly, digital trade extends to the use of innovative technologies to enhance overall economic efficiency and productivity. The diffusion of digital technologies in sectors of prime importance for African countries, such as manufacturing and agriculture, could increase productivity and efficiency, making these sectors more competitive. For instance, the combination of IoT, big data and cloud computing for precision agriculture results in more accurate crop and weather monitoring.

It can provide data which can be analysed to inform farming processes and decisions. Further, productivity and efficiency in manufacturing can be increased by automation, robotics and 3D printing. And increased digitization in manufacturing will intensify the demand for ICT services and business services, which are intermediaries in the production process.

Digital Regulation

There has been eagerness amongst both developing and developed members of the World Trade Organization to create rules to regulate digital trade. However, there is limited direction on what digital trade entails or how it should be regulated. Given the challenges and realities faced by African countries, negotiations at a global level would be premature. Africa’s digital trade strategy should rather be focused on pulling together regional efforts to strengthen capabilities and build digital economies. In this regard, the AfCFTA provides an appropriate platform for negotiating rules on digital trade for Africa.

At the negotiating table, African countries must seek to develop and harmonize the regulatory and institutional framework required to integrate their digital economies. A sophisticated legal and regulatory framework that enables digital transactions is vital for full participation in global digital trade. Further, an adequate legal framework could tackle the issue of trust, which acts as a barrier to the participation of both consumers and suppliers in e-commerce transactions.

So far, only a few African countries have implemented legislation to regulate data and consumer protection, data transfer, cybersecurity and electronic transactions. Regulations that allow for the secure cross-border transfer of data, the protection of personal data and consumer rights on digital platform, the policing of cybercrime and the recognition of electronic transactions are essential for the digital economy.

Regulation would also need to be supported by efficient ICT infrastructure, which is the backbone of the digital economy. Infrastructure that ensures access to sophisticated networks and internet speed is critical to the sustainability of the digital market. A large number of consumers and businesses remain offline, and there is a substantial gap between African countries and the rest of the world in terms of internet connectivity, largely due to inefficient ICT infrastructure, lack of broadband access and the high cost associated with internet connectivity.

Further, the rise in use of digital platforms does not reduce the need for traditional means of delivery – trade logistics still matter for digital trade. Poor quality roads and inefficient custom procedures tend to lengthen the time for delivery and increase shipping costs, which in turn influences purchasing decisions.

Regional and cross-border investment in infrastructure is therefore critical. The African Union adopted the Action Plan for Boosting Intra-African Trade (BIAT) in January 2012, which seeks to develop and upgrade infrastructure for intra-African trade. BIAT prioritizes and builds on initiatives adopted by the AU, namely by calling for implementation of the Programme for Infrastructural Development in Africa (PIDA), multiple-country infrastructure projects and the creation of an enabling environment for public sector participation. Strong efforts and commitment to the realisation of the action plan is now required. In addition, at a domestic level, African countries need to maintain focus on attracting foreign investments into infrastructure.

Digital trade should also be truly inclusive in order increase economic development in Africa. This requires African countries to build local capability, eliminate the digital divide and develop home-grown skills. Digital trade is essentially skills biased and relies on an adequate supply of labour that is equipped with the right expertise, literacy and creativity to perform high level digital tasks. Digital trade also requires consumers and firms who are comfortable to use digital platforms and technologies.

If African countries do not embrace digital trade and begin to implement strategies to equip themselves to engage and compete with other digital economies, they will be left behind. With this in mind, the strategy going forward should be to place a strong focus on building capabilities on a regional level in Africa. These considerations should be addressed when further negotiations on AfCFTA take place in the next few months

Funding infrastructure development essential for inclusive growth in Africa

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The World Economic Forum for Africa, currently taking place in Cape Town, South Africa focuses  on the theme of shaping inclusive growth and shared futures in the Fourth Industrial Revolution. Key to this growth, and for African economies to make the most of their opportunities and streamline cross border trade, is the development of infrastructure across the continent. As a result, in jurisdictions across the continent, new laws are being implemented and alternative sources of infrastructure funding are being sought in order to kick-start direly needed infrastructure projects.

China has played a key role in providing alternative sources of financing to countries in Africa that have not been able to access funding in more traditional ways. The benefits have been numerous, but African countries are also concerned about their growing dependence on China. Research released in 2018 from Baker McKenzie and IJGlobal (research) with data drawn exclusively from fully financed projects and excluding recent announcements of government funding commitments, shows that the value of loans from Chinese financing of energy and infrastructure projects in Africa almost trebled between 2016 and 2017, from $3 billion to $8.8 billion..

“As China’s Belt and Road Initiative (BRI), a multi-billion dollar plan to link Asia, Europe and Africa, is actively being implemented, we expect this amount will increase even further,” says Wildu du Plessis, Head of Banking & Finance at Baker McKenzie in Johannesburg.

As one of South Africa’s largest trading partners, China plays an important role in infrastructure investment in this country too. At the BRICS Energy Summit in 2018, China pledged to invest USD 14.7bn in South Africa and to grant loans to state owned enterprises Eskom and Transnet.

Du Plessis notes that even though the South African infrastructure funding gap is not as severe as other countries in Africa, there is still a difficulty in mobilising funds for infrastructure development and related projects because traditional funders take time to decide on whether to get involved.

Shirley Wang, Partner in the Beijing Office of Baker McKenzie, notes, “As part of the mobilisation of different sources of funding to fill the infrastructure gap, there is a big bucket of Chinese funding that can be used for infrastructure projects in Africa. The increasing appetite from China for funding infrastructure projects as part of its BRI means they are happy to partner with local development finance institutions and other international funders. China’s investments toward BRI countries and regions will continue to be active in the future.”

“A key attraction of the BRI for both African governments and project sponsors is that it assists the speed of project implementation. Project stakeholders advise that the whole process is a lot quicker than other options.”

However, du Plessis says that there is also a rising concern amongst African sovereigns who are worried about the long-term effects on their dependence on China.

“This is even though China has reiterated that it wants to be considered a responsible investor in Africa. It remains to be seen whether this concern has an impact on Chinese involvement in the funding infrastructure projects in future years. African countries have also begun building capacity to correct the imbalance between borrowers and lenders in the negotiation phase so that more balanced agreements can be reached,” he explains.

When it comes to assessing the BRI’s impact on North African countries, Kamal Nasrollah, Partner and Head of Baker McKenzie in Casablanca, says that traditionally, the North African markets have been closely correlated with European (especially France, Spain, and Germany) and US markets, as well as some Asian markets (for example Japan). The BRI has allowed recipient countries to not have to depend on traditional investors and to benefit from China’s growth. Though limited for now, Chinese influence in North Africa may grow remarkably in the coming years, although some are concerned that the American and European relationships with the region will suffer as a result.

“While all North African nations are part of the BRI project, the benefits received from this initiative vary. In some countries, such as Tunisia, the BRI is still in study phase, while in some others, primarily Algeria and Morocco, some infrastructure projects have already been implemented.”

Nasrollah says that Algeria has perhaps the closest ties to China in the region. One of key infrastructure projects to be signed in Algeria recently is the US$ 6Bn project for the exploitation of phosphate in the eastern region of Algeria. In Morocco, Chinese companies financed and have been building the multi-billion Noor 2 and Noor 3 solar parks near Ouarzazate, which is 100km south-east of Marrakesh. Other initiatives include a US$ 10Bn Chinese-funded industrial city in Tangier, which is intended to give Beijing access to a tech hub next to one of Africa’s most dynamic ports.

 

 

 

 

 

 

 

 

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Public Procurement in Tanzania

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By Sadock D Magai, Managing Partner and Burure Ngocho, Partner, Immma Advocates


Legislative framework

Relevant legislationWhat is the relevant legislation regulating the award of public contracts?

In Tanzania, procurement is regulated by the Public Procurement Regulatory Authority (PPRA). The principal legislation is:

  • the Law Reform (Fatal Accidents and Miscellaneous Provisions) Act Cap 310 R.E 2002 (LRA);
  • the Law Reform (Fatal Accidents and Miscellaneous Provisions) (Judicial Review Procedure and Fees) Rules 2014 (JR Rules);
  • the Public Procurement Act, 2011 (PPA);
  • the Public Procurement (Amendment) Act 2016 (PPAA);
  • the Public Procurement Regulations 2013 (PR);
  • the Public Procurement (Amendments) Regulations 2016 (PRA);
  • the Public Private Partnership Act 2010 (PPP);
  • the Public Private Partnership Regulations 2011 (PPR); and
  • the Public Procurement Appeals Rules 2014 (PPAA Rules).

Sector-specific legislationIs there any sector-specific procurement legislation supplementing the general regime?

Under section 2 of the PPA, defence and national security organs man- age their procurement on a dual-list basis. The dual list covers items subject to open and restricted procurement or disposal methods respectively. The defence or national security organs can use single sourcing whenever they deem it is the most appropriate.

International legislationIn which respect does the relevant legislation supplement the EU procurement directives or the GPA?

Tanzania is not bound by the European Union (EU) procurement directives or the World Trade Organization Agreement on government Procurement (GPA), as it is not a member of the EU nor a signatory to the GPA and therefore the EU directives and the GPA have not been imported into the Tanzanian public procurement laws.

Proposed amendmentsAre there proposals to change the legislation?

There are no proposals to change the legislation as it has only recently undergone extensive overhauls.

Applicability of procurement law

Contracting authoritiesWhich, or what kinds of, entities have been ruled not to constitute contracting authorities?

All non-public bodies, or authorities and bodies that were not established and mandated by the government to carry out public functions, are not considered ‘contracting authorities’. Public bodies or public authorities include:

  • any ministry, department or agency of the government;
  • any body corporate or statutory body or authority established by the government;
  • any company registered under the Companies Act, being a company in which the government or an agency of the government, is in the position to influence the policy of the company; or
  • any local government authority.

‘Public funds’ are any monetary resources appropriated to contracting authorities through budgetary processes, including the consolidated funds, grants, loans and credits put at the disposal of the contracting authorities by local or foreign donors, and revenue generated by procuring entities.

Contract valueAre contracts under a certain value excluded from the scope of procurement law? What are these threshold values?

For the procurement of goods, works and non-consultancy services, guidance has been provided for different types of tendering processes.

The thresholds are as follows:

Goods Works Non-consultancy services Disposal of public assets
International competitive tendering No limit No limit No limit No limit
National competitive tendering Up to 5 billion Tanzanian shillings Up to 15 billion shillings Up to 5 billion shillings Up to 5 billion shillings
Restricted tendering No limit, but must be justified No limit, but must be justified No limit, but must be justified No limit, but must be justified
Competitive quotations (‘shopping method’, see question 13) Up to 120 million shillings Up to 200 million shillings Up to 100 million shillings n/a
Single-source procurement No limit, but must be justified No limit, but must be justified No limit, but must be justified n/a
Minor value procurement Up to 10 million shillings Up to 20 million shillings Up to 10 million shillings n/a
Micro value procurement 5 million shillings n/a n/a n/a
Force account n/a No limit, but must be justified n/a n/a
Direct from manufacturer, dealer or service provider procurement No limit, but must be justified No limit, but must be justified No limit, but must be justified n/a

In respect of consultancy services, the thresholds are:

  • International competitive selection: no limit.
  • National competitive selection: up to 1.5 billion shillings.
  • Restricted competitive selection: no limit, but must be justified.
  • Consultant qualifications: 200 million shillings.
  • Single-source selection: no limit, but must be justified.
  • Individual selection: up to 150 million.
  • Minor value procurement: up to 10 million shillings.

Amendment of concluded contractsDoes the legislation permit the amendment of a concluded contract without a new procurement procedure?

Amendments to concluded contracts are permitted, provided that they are necessary for the benefit of the contracting authority or if the alteration does not prejudice the contracting authority. In the event that the variation to the contract, such as additions or deductions, result in the alteration of the contract’s scope, extent or intention, they must be referred to the appropriate tender board for approval before instructions are issued to the tenderer.

Has there been any case law clarifying the application of the legislation in relation to amendments to concluded contracts?

There has been no case law clarifying the application of the current procurement laws in relation to concluded contracts.

PrivatisationIn which circumstances do privatisations require a procurement procedure?

The disposal of public assets, including privatisation, require the adoption of a procurement procedure under the procurement laws, provided that they meet the thresholds set out in question 6.

Public-private partnershipIn which circumstances does the setting up of a public-private partnership (PPP) require a procurement procedure?

Section 11(1) of the PPP provides that in all circumstances where there is an agreement between a public and a private entity, in which the private entity enters into an agreement with a public entity in order to perform one or more functions of the public entity, the procurement procedure must be followed.

Advertisement and selection

PublicationsIn which publications must regulated procurement contracts be advertised?

The first schedule of the PR, as amended by the PRA, provides for the types of publications that must be done in regulated procurement. These are as follows:

Prequalification or expression of interest

  • International competitive tendering or selection:
    • the Journal and Tender Portal;
    • the contracting authority’s website or noticeboard;
    • at least one local newspaper; and
    • one international newspaper.
  • National competitive tendering or selection:
    • the Journal and Tender Portal;
    • the contracting authority’s website or noticeboard; and
    • one local newspaper.

Tendering

  • International competitive tendering:
    • the Journal and Tender Portal;
    • the contracting authority’s website or noticeboard;
    • at least one local newspaper; and
    • one international newspaper.
  • National competitive tendering:
    • the Journal and Tender Portal;
    • the contracting authority’s website or noticeboard; and
    • one local newspaper.

Tender award disclosure information

  • All tenders, irrespective of the method used:
    • the Journal and Tender Portal; and
    • the contracting authority’s website or noticeboard.

With regards to PPPs, r.370 of the PR provides that advertisements must be placed in the Tanzania Procurement Journal issued by the PPRA and at least one newspaper of wide circulation in Tanzania. The contracting authority also has the option to place adverts in inter-national newspapers, technical magazines or trade publications, as directed by its tender board.

Participation criteriaAre there limitations on the ability of contracting authorities to set criteria or other conditions to assess whether an interested party is qualified to participate in a tender procedure?

Yes. Regulation 116(1) of the PR sets the criteria and qualifications that a contracting authority can impose. Regulation 116(4) of the PR states that a contracting authority must not impose any further criteria, requirements or procedure with respect to the qualifications of a party intending to participate in a tender procedure.

Is it possible to limit the number of bidders that can participate in a tender procedure?

The number of potential bidders can be limited under r.164(1) of the PR, where a contracting authority is procuring through the ‘shopping method’. In the shopping method, a contacting authority invites competition through requests for quotations at an international or national level. The contracting authority is required to obtain quotations from at least three bidders. This method can only be used if the goods to be procured are so diversified that it would be of no commercial interest for any single supplier to tender for them, the goods are readily available off-the shelf, or the goods are standard-specification commodities.

Regaining status following exclusionHow can a bidder that would have to be excluded from a tender procedure because of past irregularities regain the status of a suitable and reliable bidder? Is the concept of ‘self-cleaning’ an established and recognised way of regaining suitability and reliability?

Any bidder aggrieved by a decision to exclude it from a tender procedure because of past irregularities may appeal to the PPRA against the exclusion within 21 days of being notified of the exclusion. However, if that bidder is already debarred and blacklisted by the PPRA it would not have an appeals avenue. The concept of self-cleaning is not recognised under the Tanzania procurement legal framework. The blacklisted or debarred party would have to wait for the lapse of such debarment or blacklist period.

The procurement procedures

Fundamental principlesDoes the relevant legislation specifically state or restate the fundamental principles for tender procedures: equal treatment, transparency and competition?

Yes. Section 8 of the PPA provides that there should be equality, fair biding and every tenderer should be treated in an unbiased fashion.

Independence and impartialityDoes the relevant legislation or the case law require the contracting authority to be independent and impartial?

Section 41 of the PPA requires for the contracting authority to act independently.

Conflicts of interestHow are conflicts of interest dealt with?

Section 40(6) of the PPA states that members of the evaluation committee tasked with evaluating bids must declare if they have conflicts of interest. Where a member of the committee has a conflict of interest, section 40(5) of the PPA and regulation 226(4) of the PPR requires the contracting authority to, where necessary, engage an external evaluation committee to make a decision.

Bidder involvement in preparationHow is the involvement of a bidder in the preparation of a tender procedure dealt with?

In case of an unsolicited PPP, a potential bidder is typically involved in the preliminary steps leading to the tender procedure (ie, by conducting the feasibility study and submitting details of the intended project that the contracting authority will eventually advertise for the purpose of receiving bids). In such a case, the bidder is not prohibited from taking part in the tender process, and under section 80(2) the contracting authority may, upon consultation with the relevant authorities (ie, registrars), acknowledge the intellectual rights over the project idea of the original proponent and recognise the bid by such a bidder in the tendering process.

In all other methods of procurement, bidders would not be involved in the preparation of the bid documentation.

ProcedureWhat is the prevailing type of procurement procedure used by contracting authorities?

The prevailing type of procurement procedure used by contract- ing authorities is the Solicited Procurement for Goods and Services process. This is made up of the following steps:

  • requirement identification;
  • determining procurement method;
  • procurement planning and strategy development;
  • procurement requisition processing;
  • solicitation documents preparation and publication;
  • pre-bid or proposal meeting and site visit;
  • bid or proposal submission and opening;
  • bid or proposal evaluation;
  • contract award recommendation;
  • contract negotiations; and
  • contract award (signing).

Separate bids in one procedureCan related bidders submit separate bids in one procurement procedure?

The law is silent on this issue. However, the law allows for a contracting authority to disqualify a bid in the event of a conflict of interest. Contracting authorities typically include in the tender documents descriptions of bidders’ relationships that are deemed to be conflicts. In such cases, bids from the parties which are judged to have conflicts of interest would be disqualified.

Negotiations with biddersIs the use of procedures involving negotiations with bidders subject to any special conditions?

The terms of negotiations with bidders are provided under r.225 of the PR, as amended by the PRA. Negotiations are permitted, provided that they do not:

  • substantially change the specification or details of the requirement, including tasks or responsibilities of the tenderer;
  • materially alter the terms and conditions of contract stated in the solicitation document; and
  • substantially alter anything that formed a crucial or deciding factor in the evaluation of tender.

If the legislation provides for more than one procedure that permits negotiations with bidders, which one is used more regularly in practice and why?

The only procedure for negotiations proceedings with bidders in tendering proceedings is that provided under r.225 of the PR.

Framework agreementsWhat are the requirements for the conclusion of a framework agreement?

Subject to the procurement procedures provided set out above, a contracting authority is permitted to enter into a framework agreement, provided that the agreement is arranged by the Government Procurement Services Agency for procurement of common use items and services by contracting authorities, and will only run for between one and three years.

May a framework agreement with several suppliers be concluded?

Yes. Framework agreements with several suppliers may be concluded. In respect of open framework agreements (without an agreed price), the contracting authority, following receiving the approval of the tender board, may conduct a mini competition among the suppliers or service provided awarded.

Changing members of a bidding consortiumUnder which conditions may the members of a bidding consortium be changed in the course of a procurement procedure?

A tender, including a consortium’s members, may be modified at any time prior to the deadline for the submission of tenders. If a modification is made after the deadline for the submission of tenders, the tenderer would forfeit its tender security. The specific tender specification documents would set out the extent of the permitted changes post-submission (ie, clerical errors, etc).

Participation of small and medium-sized enterprisesAre there specific mechanisms to further the participation of small and medium-sized enterprises in the procurement procedure? Are there any rules on the division of a contract into lots? Are there rules or is there case law limiting the number of lots single bidders can be awarded?

There are no mechanisms in the procurement laws to further the participation of small and middle-sized enterprises. However, the r.40 of the PR contain provisions to increase the participation of local firms who are based and operate in the local authorities or regions of the contracting authority.

Variant bidsWhat are the requirements for the admissibility of variant bids?

Variant bids under the procurement laws are only permitted if the document soliciting for bids permits them. Where a bidder intends to submit a variant bid, they must provide a bid based on the tender advertised and a quote with the proposed alterations, as required under r.293 of the PR.

Must a contracting authority take variant bids into account?

If the solicitation documents allow for variant bids, then they must be taken into account.

Changes to tender specificationsWhat are the consequences if bidders change the tender specifications or submit their own standard terms of business?

Where variant bids are permitted, the alternate bid will be taken into consideration. If variant bids are not permitted, then the tender would be disqualified for having failed to submit a tender in line with the specifications set out in the solicitation documents.

Award criteriaWhat are the award criteria provided for in the relevant legislation?

The award criteria used by the contracting authority must be outlined in the solicitation document, as required by section 72 of the PPA. The tender document is required to specify factors, in addition to price, which may be taken into account in evaluating a bid, as well as information as to how such factors may be quantified or otherwise evaluated.

The solicitation documents must also set out the criteria for evaluating variant bids where variant bids are acceptable.

Abnormally low bidsWhat constitutes an ‘abnormally low’ bid?

An ‘abnormally low’ bid is defined under r.17(6) of the PR as a tender that, in light of the contracting authority’s estimate and all the other tenders submitted, appears to not provide a margin for normal profit levels.

What is the required process for dealing with abnormally low bids?

The contracting authority may reject an abnormally low bid. Prior to rejecting an abnormally low bid, the contracting authority has an obligation to:

  • request an explanation of the tender or of those parts which it considers contribute to the tender being abnormally low;
  • take account of the evidence provided in response to a request in writing; and
  • subsequently verify the tender or parts of the tender as being abnormal.

The accounting officer of the contracting authority must seek approval of the PPRA, prior to rejecting an abnormally low bid.

Review proceedings

Relevant authoritiesWhich authorities may rule on review applications? Is it possible to appeal against review decisions and, if so, how?

The first authority that may rule on review applications is the accounting officer within the contracting authority. The accounting officer may constitute an independent review panel from within or outside the contracting authority to advise him or her on the appropriate actions to be taken. The decision of the accounting officer may be appealed to the Appeals Authority. The decision of the Appeals Authority may be subjected to a judicial review at the High Court. A decision of the High Court may be appealed to the Court of Appeal.

If more than one authority may rule on a review application, do these authorities have the power to grant different remedies?

Yes. The remedies that can be provided vary as set out below.

Complaints or disputes to the accounting officer

No remedies that can be provided by the accounting officer have been provided under the law.

Complaints or disputes to the Public Procurement Appeals authority (appeals authority)

The Appeals Authority has the power to dismiss, strike out or uphold a complaint or dispute. The Appeals Authority may also issue one or more of the following orders:

  • declare the legal rules or principles that govern the subject matter;
  • prohibit the contracting authority from acting or deciding unlawfully or from following an unlawful procedure;
  • require the contracting authority that has acted or proceeded in an unlawful manner, or reached an unlawful decision, to act or to proceed in a lawful manner or to reach a lawful decision;
  • annul, in whole or in part, an unlawful act or decision of the contracting authority;
  • revise an unlawful decision by the contracting authority or substitute its own decision for such a decision; or
  • require the payment of reasonable compensation to the tenderer submitting the complaint or dispute as a result of an unlawful act, decision or procedure followed by the contracting authority.

Judicial reviews by the High Court

In the application for judicial review, the High Court may grant the following orders:

  • prohibition – prohibit an act from being carried out;
  • mandamus – ordering a mandatory step be taken or consider a specific fact that may result a change in its final decision; or
  • certiorari – quashing a decision.

Court of Appeal

The Court of Appeal may vary, overturn or uphold a decision of the High Court.

Timeframe and admissibility requirementsHow long do administrative or judicial proceedings for the review of procurement decisions generally take?

The timelines for decision-making are as follows:

  • complaint to accounting officer of the contracting authority: within 14 days after the submission of the complaint, as provided under section 96(6) PPA;
  • Appeals Authority: within 45 days of receiving the complaint of a dispute, as provided under section 97(6) PPA;
  • judicial review: applications for leave to file an application for judicial review must be determined within 14 days, as provided under r.5(4) of the JR Rules. However, in our experience, a judicial review itself takes one to three years, but the law does not provide any timing; and
  • court of appeal: the law is silent on timing, but, in our experience, decisions follow one to six years from the date of filing a notice of appeal.

What are the admissibility requirements?

Complaints or disputes to the accounting officer

Under r.96(1) of the PR, the accounting officer at the contracting authority has the power to review any complaint or dispute between the contracting authority and bidders. No exhaustive list of issues has been provided. The only restriction is that the accounting officer cannot entertain any complaints or disputes after the procurement contract has entered into force. No format for the complaint or dispute is provided for under the law.

Complaints or disputes to the Public Procurement Appeals authority (appeals authority)

Under r.97 of the PR, a tenderer who is aggrieved by the decision of the accounting officer may appeal to the Appeals Authority. The Appeals Authority also has the power to hear the following complaints or disputes:

  • acceptance or disqualification of a tender;
  • award or proposed award of contract;
  • inclusion of unacceptable provisions in the tender documents;
  • unacceptable tender process or practice;
  • decision, act or omission of a contracting authority;
  • blacklisting of a tenderer;
  • rejection of all tenders; or
  • any other matter that the Appeals Authority may deem appealable.

An appeal is instituted by submitting a notice of appeal in the form PPAA Form No.1, as set out in the first schedule to the PPAA Rules, followed by a statement of appeal by submitting PPAA Form No. 2 (annexed to the same schedule of the PPAA Rules).

Judicial review to the High Court

The judicial review process is initiated by filing an application for leave to apply for administrative orders; namely, mandatory, prohibition or the quashing of a decision. Following leave being granted, the application for judicial review must be filed.

The application for leave must be in the format set out in Form A, as in the first schedule to the Review Rules.

Court of Appeal

The decision of the High Court can be appealed to the Court of Appeal if the decision from the High Court erred in the application or interpretation of law. The bidder cannot challenge issues of fact at the Court of Appeal. In order to appeal the decision of the High Court, the aggrieved bidder must follow the following steps:

  • file a notice of appeal within 14 days of the decision;
  • simultaneously file an application seeking leave to appeal within 14 days of the High Court decision; and
  • file the memorandum and record of appeal within 60 days of leave to appeal being granted.

What are the time limits in which applications for review of a procurement decision must be made?

The time limits for applications for instituting review or appeals are as follows.

Complaints or disputes between contracting authority and bidders, arising in respect of procurement proceedings, disposal of public assets by tender and awards of contracts, must be made within 28 days from the date of the tenderer submitting it became aware of the circumstances giving rise to the complaint or dispute, or when that tenderer should have become aware of those circumstances, whichever is earlier (s. 96(4) PPA).

Complaints or disputes regarding decisions of the accounting officer must be filed within 14 working days from the date of communication of the decision (s.97(2) PPA).

If a bidder is aggrieved by a decision of a contracting authority, but the contracting authority has already entered into a contract with the preferred bidder, the accounting officer within the contracting authority no longer holds a mandate to resolve any disputes arising from the bidding process. In such circumstances, an aggrieved bigger can refer their dispute directly to the Appeal Board. The appeal must be lodged within 14 days of the aggrieved bidder becoming aware of the events forming the grounds of his or her grievance.

Suspensive effectDoes an application for review have an automatic suspensive effect blocking the continuation of the procurement procedure or the conclusion of the contract?

Section 100 of the PPA provides that when a complaint or dispute has been received, the accounting officer must suspend the procurement process, pending determination of a complaint or appeal. No suspension shall occur if the contracting authority certifies to the PPRA that there is an urgent public-interest consideration that requires the procurement to proceed. The Appeals Authority also has the power to suspend the procurement procedure, except where there is a public- interest certificate in place.

Approximately what percentage of applications for the lifting of an automatic suspension are successful in a typical year?

In the system currently in place, when an automatic suspension is triggered it remains in force, unless there is a valid public-interest certificate in place. In our review of the decisions submitted to the Appeals Authority, there has been no successful lifting of a public- interest certificate issued by a contacting authority.

Notification of unsuccessful biddersMust unsuccessful bidders be notified before the contract with the successful bidder is concluded and, if so, when?

The only notification requirement is under r.235 of the PRA, which requires that unsuccessful bidders be notified with 30 days after communicating the award to the successful bidder.

Access to procurement fileIs access to the procurement file granted to an applicant?

No. An applicant is not given access to a procurement file. However, r.238 of the PR allows for requests of information by bidders. Where any bidder for a contract, on which a decision has been made, makes a written request for information, he or she must be given a written statement that lists the material issues of fact and the broad reasons for the decision, as recorded in tender board’s minutes. If a bidder has the low- est price but was passed over, written reasons for rejecting his or her bid must be provided. Any other request for information shall be considered on merit by the contracting authority and all other information shall be kept confidential between the tenderer and the contracting authority.

Disadvantaged biddersIs it customary for disadvantaged bidders to file review applications?

It is not very commonplace for disadvantaged bidders to file review applications. This may be because of the lack of knowledge of the procedure or the time and cost involved in following up on a review filed with the Appeals Authority. According to the Appeals Authority report for the year 2016/2017, there were 44 appeals filed and for the year 2017/2018 there have been 30 appeals filed.

Violations of procurement lawIf a violation of procurement law is established in review proceedings, can disadvantaged bidders claim damages?

No. The Appeals Authority only has the power to award compensation to a disadvantaged bidder under section 97(5)(f) of the PA for the expenses incurred because of the unlawful actions of the contracting authority. This position was provided in Appeal Case No. 35 of 2013-2014 M/s Kihelya Auto Tractor Parts Company Limited and Tanzania Ports Authority before the Public Procurement Appeals Authority.

May a concluded contract be cancelled or terminated following a review application of an unsuccessful bidder if the procurement procedure that led to its conclusion violated procurement law?

The Appeals Authority does not have the express power to cancel or terminate a concluded contract. The Appeals Authority has the power to annul, in whole or in part, an unlawful act or decision of the contracting authority. The Appeals Authority has used this power to nullify a tender process in respect of a concluded contract. This had the effect of terminating the agreement that was deemed to have been made illegally.

Legal protectionIs legal protection available to parties interested in the contract in case of an award without any procurement procedure?

Any bidder aggrieved with the decision of a contracting authority (ie, an illegal direct award or a de facto award), may proceed to appeal the decision to the Appeals Authority. If they remain dissatisfied with the decision of the Appeals Authority, they may file a judicial review with the High Court. From the High Court, a further appeal may be lodged with the Court of Appeal.

Typical costsWhat are the typical costs of making an application for the review of a procurement decision?

There are no fees for filing claims with the Accounting Officer. The fees for filing other claims and applications for appeals or judicial reviews are:

Appeal Board

  • Notice of appeal: 50,000 shillings; and
  • statement of appeal: 150,000 shillings.

High Court or Court of Appeal (leave to appeal)

  • High Court – main registry: 100,000 shillings; and
  • High Court – commercial division: 300,000 shillings.

Judicial reviews (leave to apply)

  • High Court – main registry: 100,000 shillings;
  • High Court – commercial division: 300,000 shillings;
  • Court of Appeal – notice of appeal: 8,000 shillings; and
  • Court of Appeal – record and memorandum of appeal: 165,000 shillings.

The fees set out above are filing fees alone, exclusive of counsel fees for representation. The filing fees for the High Court and Court of Appeal can vary depending on the volume of documents submitted.

* The content of this chapter is accurate as at April 2018.

Update and trends

Recent developmentsAre there any emerging trends or hot topics in public procurement regulation in your country? In particular, has the scope of applicability of public procurement law been broadened into areas not covered before (eg, sale of land) or on the contrary been restricted?

In July 2017, the Natural Wealth and Resources Contracts (Review and Re-negotiation of Unconscionable Terms) Act 2017 (UCA) was introduced. This law was enacted in order to protect Tanzania’s natural resources by ensuring any agreements made by the government of the United Republic of Tanzania in relation to the ownership, extraction, exploitation, acquisition and use of natural wealth and resources contain terms that are conscionable. A term that is unconscionable has been defined under section 3 of UCA as being any that is contrary to good conscience, and the enforceability of which jeopardises, or is likely to jeopardise, the interests of the people of the United Republic of Tanzania.

Examples of terms that shall automatically be deemed to be unconscionable have been provided under section 6(2) of the UCA. These include those:

  • aiming to restrict the right of the state to exercise full permanent sovereignty over its wealth, natural resources and economic activity;
  • restricting the right of the state to exercise authority over foreign investment within the country and in accordance with the laws of Tanzania;
  • that are inequitable and onerous to the state;
  • that restrict periodic reviews of arrangements or agreements that purport to last for a ‘lifetime’;
  • securing preferential treatment designed to create a separate legal regime to be applied discriminatorily for the benefit of a particular investor;
  • that restrict the right of the state to regulate activities of transnational corporations within the country, and to take measures to ensure that such activities comply with the laws of the land;
  • that deprive the people of Tanzania of the economic benefits derived from using natural wealth and resources to the benefit of the country;
  • that are by nature empowering transnational corporations to intervene in the internal affairs of Tanzania;
  • that are subjecting the state to the jurisdiction of foreign laws and fora;
  • that expressly or implicitly are undermining the effectiveness of state measures to protect the environment or the use of environment friendly technology; or
  • that aim at doing any other act the effect of which undermines or is injurious to welfare of the Tanzanian people or the nation’s economic prosperity.

Under the UCA, all new agreements with the government pertaining to natural resources must be reported to the National Assembly. If the National Assembly is of the view that any of the terms in the reported agreement are unconscionable, it may resolve and advise the government to renegotiate the unconscionable terms.

The National Assembly has the power to also call for review any agreements that had been concluded prior to the UCA coming into effect and resolving for amendments to those agreements. The effect of the UCA is that where there is an agreement with the government pertaining to the ownership, extraction, exploitation, acquisition and use of natural wealth and resources, in addition to compliance with the public procurement laws, such an agreement must also be reported to the National Assembly to be checked to ensure that none of the terms are unconscionable.

Amendments to the Tanzania Shipping Agencies Act 2017

By Peter KasandaTenda MsinjiliMichaela Maranda and Jasper Dymoke, Clyde & Co LLP 


In this update, we review the amendments to the Tanzania Shipping Agencies Act 2017 (the Act), as implemented by the Written Laws (Miscellaneous Amendments) (No.3) Act 2019.

This updater should be read in conjunction with our updater of 11 January 2019 (the Previous Updater) in which we reviewed the Tanzania Shipping Agencies Regulations of 2018. Our Previous Updater can be found here.

Highlights of Amendments to the Act

  • The application of the Act has been widened. It will apply to all matters of maritime administration, maritime environment, safety and security and maritime transport services, not just those “at sea ports and inland waterways ports”.
  • A number of additional definitions have been added to the Act, extending the mandate of the Tanzania Shipping Agencies Corporation (TASAC). Its command is now more far reaching, covering airports, ports and pipelines.
  • The objectives of TASAC have been restricted. For example, TASAC will no longer aim to enter into contractual obligations for the provision of shipping agencies services in order to delegate its own functions. Further, the objective of promoting competition within the shipping agency business has also been removed and substituted with the objective of promoting competition in the maritime transport services. Whether this marks a shift towards state monopolisation of shipping agencies services remains to be seen.
  • The exclusivity of TASAC’s mandate to implement clearing and forwarding functions has been extended to cover the import and export of fertilizers, industrial sugar, domestic sugar, edible cooking oil, wheat, oil products, gas, liquidified gas and chemicals or any other liquid related products. By encapsulating “any other liquid related products”, the amendment has certainly broadened the functions of TASAC in this realm, handing it clearing and forwarding control over a number of key industrial goods.
  • Further, exclusivity will extend to cover an array of shipping agency functions in relation to a broad collective of goods, including tanker ships and pure car carriers vessels; and minerals, mineral concentrates and any equipment related to minerals and petroleum. The Act also reserves the right for the Minister of Maritime Transport to add further goods to this list.
  • Minor amendments regarding the regulation of the maritime sector have seen TASAC’s regulatory control extend to cover prevention of pollution from ships and maritime activities. This appears to be environmentally incentivised.
  • Restrictions on the award of shipping agency licences have been tightened to encompass the shareholders of restricted applicants, rather than just the applicants themselves. The restricted applicants are ship owners, ship operators, ship charterers, dry port operators and clearing and forwarding agents.
  • The Act has expanded the powers of entry and inspection to include any regulated service, not just the businesses of shipping agencies, as was previously laid down in the Act. This is for the purpose of ensuring compliance with the Act. It is not clear whether notice would be required before such an inspection could be carried out. Based on current drafting, it would appear that notice is not necessary. The Act permits inspection of any records relating to the regulated service.

The amendments to the Act will inevitably see TASAC in greater competition with the private sector but how TASAC’s broadened mandate will be managed in practice is difficult to assess at this stage.

It is vital to note the reforms discussed herein relate to the marine and maritime transport sector only.

Employment law considerations during mergers

By Ebele Ikpeoyi , Associate at Bloomfield Law, Lagos, Nigeria


Introduction

Mergers are one way in which companies can increase their revenue and expand their business. However, along with thNigeriaese benefits, there are a number of risks associated with the merger of two or more businesses, including:

  • a loss of customers and key employees; and
  • business interruptions.

Further, during a merger, employees may be poached by competitors due to uncertainty surrounding their role and benefits. Mergers have also failed because of various HR issues, such as:

  • incompatible cultures or management styles of the merging parties;
  • the loss of key talent;
  • uncertainty over employees’ long-term goals; and
  • a lack of trust in new management.

These risks are real and should be taken seriously. This article discusses the challenges and practical realities of managing employees during a merger.

Legal framework

Section 92(1)(a) of the Federal Competition and Consumer Protection Act 2018 (FCCPA) defines a ‘merger’ as a transaction in which one or more undertakings directly or indirectly acquire or establish direct or indirect control over all or part of the business of another undertaking. The FCCPA establishes the Federal Competition and Consumer Protection Commission (FCCPC), which is expected to make rules and regulations regarding merger regulation in Nigeria. Currently, Section 94(4) of the FCCPA contains the act’s sole reference to labour, stating as follows:

In determining whether a merger or a proposed merger can or cannot be justified on public interest, the FCCPA shall consider the effect that the merger or the proposed merger will have on (a) a particular industrial sector or region; (b) employment; (c) the ability of national industries to compete in international markets; and (d) the ability of small and medium scale enterprises to become competitive.

Despite this section, it is unclear what the FCCPC looks for when considering whether a merger’s effects on employees can be justified based on public interest.

The FCCPA’s predecessor, the Investment and Securities Act 2007 (ISA), established the Nigerian Securities and Exchange Commission, which issued rules and regulations to further explain the ISA’s merger provisions. Under the Nigerian Securities and Exchange Rules 2013, in an intermediate or large merger,(1) the merging companies must:

forward the merger notification to any registered trade union that represents a substantial number of its employees; or the employees concerned or representatives of the employees concerned, if there are no such registered trade unions.

The rationale behind this rule may be to ensure that employees are notified of merging companies’ intentions regarding their employees and force such companies to consider their workforce when implementing the merger. However, there are no known instances of the above situation occurring in practice and the rules do not require merging entities to prove compliance with this rule to the Nigerian Securities and Exchange Commission.

As a post-approval requirement, merged companies must file a report on the arrangements that they have made with regard to the acquired company’s employees.

Challenges of managing employees during mergers

As mentioned above, a potential consequence of a merger is that the employees of the merging entities may have mixed feelings about their future, which may be uncertain under the new combined entity. How a company deals with these mixed feelings before, during and after a merger will affect its success. Some challenges that exist in this regard include:

  • trying to maintain an internal status quo;
  • communicating with employees at every step in the merger process, while maintaining appropriate levels of disclosure and confidentiality;
  • proactively avoiding employment law violations; and
  • responding to lawsuits that are brought as a result of the merger.

Clashing HR policies
The parties to a merger may have different cultures and HR policies. For example, Company A (the target and the weaker bargaining power in the merger) may have an employment policy provides that male staff with three months’ paid paternity leave. Meanwhile, Company B (the stronger party looking to merge with Company A), would have no provision for paternity leave in its employment policies. In this example, both Company A and Company B may need to consider whether the merger would lead to the resignation of key male staff. Another example of how the HR policies of merging companies may clash and affect a merger is if one company has an existing employee share option scheme or its employees have accrued claims. In a merger transaction, shareholders of one merging company usually have a share swap as consideration for giving up their shares during the merger. If the aim of the merger is to retain one company and dissolve the one with the share option scheme, shareholders in the latter company will be given shares in the new company based on the value of said company. Where the employee share option scheme provides that employees will be offered shares in the company if they meet certain key performance indices, the merging companies must consider whether:

  • the share option scheme will be apply under the new company;
  • the employees entitled to the share option scheme can exercise their right under the new company; and
  • the shareholders of the new company are willing to dilute their shares or provide employees with shareholder rights.

These are some of the key questions that merging parties must answer before proceeding with a merger.

Accrued employee claims
Another relevant issue is accrued employee claims. Mergers will often occur when one company is on the verge of liquidation. Such company may have policies that reward employee performance with commission or bonuses, and employees’ claims to these benefits may have accrued and remain unpaid if the company is making a loss. In a merger, these claims need to be ascertained, as this may affect the value placed on the company’s shares or even halt the transaction if the employees’ claims are significant.

Transfer of employment contracts
Another issue to consider is the transfer of employment agreements from one company to another. Depending on the company that emerges from the merger, some employees’ contracts will likely need to be amended. This is a problem. Employees may join a company for a number of reasons beyond its remuneration package, including management, reputation and location. Amending an employee’s contract may affect the core reasons why they accepted the role. In addition, the employment contracts of key employees often have non-compete clauses and other restrictive covenants. If a merger is horizontal and the employee has a non-compete clause in their letter of employment, this will have to be amended to reflect the new employer.

Collective bargaining (trade unions)
Another main challenge of managing employees in a merger is the role of registered trade unions. Employees may join trade unions for multiple reasons, including:

  • to negotiate agreements with employers regarding pay and working conditions;
  • to discuss major changes to the workplace, such as large-scale redundancies;
  • to discuss concerns with their employer;
  • to receive assistance in disciplinary and grievance meetings;
  • to receive legal and financial advice; and
  • to receive further education or certain consumer benefits, such as discounted insurance.

Under Nigerian law, registered trade unions can request and engage in negotiations with employers on matters affecting their members, including wages, working conditions and other employment benefits. As such, it is not unusual for employees of merging parties to join trade unions in a bid to further their social and economic interests.

During a merger, employees’ social and economic interests may be at risk. As retaining employees is of primary importance to merging entities, the relevant trade unions must be duly notified before the merger commences. Section 96(3) of the FCCPA provides that in the case of a large merger, the primary acquiring company and the primary target must each provide a copy of the notice of that merger in the prescribed manner and form to:

  • any registered trade union that represents a substantial number of their respective employees; or
  • the employees concerned or their representatives, where no such registered trade union exists.

Merging entities may also have collective bargaining agreements with registered trade unions regarding the social and economic welfare of their members. These agreements are between the trade union and the employer and usually contain provisions on the calculation of severance payments and other benefits in the event of redundancy, among others. During a merger, questions may arise as to previously negotiated collective bargaining agreements – for example:

  • Are they automatically transferred to the new entity or are they renegotiated?
  • What happens where the merged entity refuses to accept the terms of the collective bargaining agreement?

Merging entities must renegotiate all prior collective bargaining agreements as, under Nigerian law, registered trade unions can request and engage in negotiations with employers. Where the merging entities fail to renegotiate previous collective bargaining agreements, the relevant unions may exercise their statutory powers by engaging in a peaceful picketing or industrial strike action, which often disrupts the operations of the newly formed entity.

Hence, merging entities must notify the necessary trade unions and renegotiate all existing collective bargaining agreements, which would then be between the trade unions and the new entity.

Despite the challenges that merging entities may face in dealing with their employees, they must work to keep their employees and simultaneously prepare for the loss of key talent. To do so, merging companies should:

  • close the merger transaction quickly;
  • retain key employees and let others go; and
  • continuously communicate with employees.

This is probably why the Nigerian Securities and Exchange Commission Rules and the FCCPA mandate merging entities to forward the merger notification to employees.

Comment

The importance of employees to a company’s bottom line cannot be overemphasised and their treatment during a merger can make all the difference to the merged entity’s success. Luckily, there are a number of measures that merging entities can take to get the best out of a merger and, at the same time, retain the loyalty of key employees.

For further information on this topic please contact Ebele Ikpeoyi at Bloomfield Law by telephone (+234 1 454 2130) or email ([email protected]). The Bloomfield Law website can be accessed at www.bloomfield-law.com.

Endnotes

(1) Rule 427 of the Nigerian Securities and Exchange Commission Rules provides the following thresholds:

  • Lower threshold for small mergers – less than N1 billion in either combined assets or turnover of the merging companies.
  • Intermediate threshold – between N1 billion and N5 billion in either combined assets or turnover of the merging companies.
  • Upper threshold – more than 5 billion in either combined assets or turnover of the merging companies