Outbound Activity in Turkey: The Presence of Turkish Investors in Africa
To say that the Turkish lira has depreciated would be an understatement and to say Turkey is progressively moving out of its inflation bubble would be an overstatement. Chambers’ research has identified a trend in the increase of outbound activity in the Turkish legal market, read more to find out.
The devaluation of the Turkish lira
Last October, Turkey’s low interest-rate monetary policies brought about soaring inflation rates at 85%, leaving economists to forecast Turkey’s economic situation as a race to the bottom. The devaluation of the Turkish lira has affected the country’s corporate M&A sector and more interestingly, it has shaped the behaviour of Turkish investors. Turkish investors are strategically looking to place investments in other jurisdictions such as the US and the EU. More recently, our research has observed Turkish investors shifting their presence to the African continent.
“I think because of the economic situation in Turkey, the Turkish investors over the past 6 years also shifted their focus from Turkish investment in Turkey to outside of Turkey to mitigate the risk they're taking in one jurisdiction, so we see more increase in outbound activity in Turkey and the Turkish investors are looking to invest in the US and EU.” M&A Lawyer
Turkish investors shifting their presence to Africa
Based on our interviews with Turkish law firms, a decent proportion of their outbound work focuses on Turkish companies in African countries within the projects and energy sector.
Concentrating on North Africa and certain parts of Sub-Sahara Africa, Turkish law firms have provided advice on major infrastructure projects which have exceeded a total value of 70 billion USD. This includes the development of oil and gas facilities; pipeline reconstruction; sports arenas; railways; and international airports.
To better facilitate the increasing volume of outbound investment activities between Turkey and African nations, several Turkish law firms have established an Africa desk. This has enabled law firms to build and enhance their international contacts in the region to ease their clients’ entry into the African market or assist in expanding their businesses.
“It’s a new development and now the core of what we do, it's developing because of the political instability which has pushed the larger Turkish conglomerates to diversity and abroad, like in the construction sector in Africa.” M&A Lawyer
Growth in Turkish projects and energy sector in West Africa
The projects and energy sector has been particularly lucrative as numerous Turkish firms are assisting companies in establishing power plants and hydropower projects in West African countries.
Law firms are mainly advising on the contractual phases of these projects and leading negotiations with project sponsors, whilst also supporting the creation of joint ventures and financing models. Lawyers have observed the success of Turkish companies’ entry into the African legal market, as they are now experiencing fierce competition with investment from China, which has had the strongest commercial presence on the continent in recent years.
As an emerging rival, Turkish investors are presenting themselves as an attractive alternative to Chinese and Middle-Eastern investors. For example, earlier this year, the Ugandan government terminated a contract with a Chinese company and has now turned to a major Turkish construction firm to finance a 2.2 billion USD rail link.
“Our clients, Turkish clients, there is a trend in entering the African market […] we have active in their operations in Ghana and Congo.” Projects & Energy Lawyer
“Turkish investors have a lot of experience in African countries and this trend will also develop, in Africa and also in EU countries.” Projects & Energy Lawyer
Our conversations with Turkish practitioners suggest that the presence of Turkish companies in Africa will continue to be an evolving trend. Although we are currently witnessing the growth and success of Turkish firms in Africa in the projects sector, we should not forget that an increasing volume of investments welcomes an array of potential disputes.
In the coming years, it will be interesting to observe a developing trend in the disputes arena which may see a rise in arbitrations between Turkish investors and African States.
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