Olivier Pognon: There's need to address Africa's looming debt crisis

Saturday June 01 2024

Olivier Pognon, CEO of the African Legal Support Facility (ALSF). PHOTO | COURTESY

By African Legal Support Facility

In an exclusive interview during the African Development Bank Annual Meetings 2024 in Nairobi, African Legal Support Facility (ALSF) CEO Olivier Pognon sheds light on the organisation's crucial role in protecting African countries from unforeseen financial liabilities and ensuring equitable negotiations with foreign investors.

This article delves into the ALSF's mission, its strategies for capacity building, and its ongoing projects such as the Sovereign Debt handbook aimed at fostering better debt management and governanceacrossAfrica.

Can you tell us about your background and what led you to the head of the ALSF?

I was born and raised in Benin and I'm a lawyer by training and profession. I’ve worked as a practice lawyer in business law and project finance. I’ve also worked as an inhouse lawyer in the telecom sector and I held multiple positions as head of legal, senior legal counsel, and general counsel. I was in the telecom sector for close to 12 years before moving back to the development world.

I joined ALSF as a Director and the CEO two and a half years ago and I’m leading the organisation to deliver on the mandate that it was granted by its governing council.

What is the main mission of the ALSF and how has this mission evolved since its creation?


ALSF is a United Nations recognised international organisation that was initiated and is still hosted by the African Development Bank.

At the inception of the ALSF, there was a realisation by the ministers of finance of the ADB that African countries were too often the prey of vulture funds.

With that realisation came the need to address this gap and ALSF was created as that instrument that would try to shield governments from trajectory activities of vulture funds, but also build the capacity that would prevent similar situations to occur.

So, the ALSF was created with that mandate to, firstly, advise African governments on disputes and, secondly, build capacity within government to enable public officials to be on the level playing field at the negotiation table in the sectors of energy infrastructure (By way of PPPs), extractive and natural resources, and sovereign debt. These are the four sectors that the ALSF covers.

So, we do two things, number one is to sit by the side of governments in complex commercial contracts negotiation situations, typically new mining concessions or an independent power purchasing producer agreement in a given country, or negotiation of the loan documentation for a given country.

The second aspect is training or capacity building. To do that, we have put in place a number of tools and instruments. So there's the handbook (Sovereign Debt handbook: Understanding Sovereign Debt in Africa: options and opportunities). We have a number of similar handbooks in the various sectors.

We have produced debt guides to provide a comprehensive overview of debt issues to debt management officers. We provide training toolkits, template contracts, so we try to have a holistic approach to what it takes to equip officials and governments across sectors to be able to deal with complex contracts negotiation situations.

Why is legal and technical support so crucial for African countries in these negotiations with foreign investors?

Well, because at the end of the day, if you think about it, the rule of law is at the center of everything. Any deal or transaction that happens is anchored around a contract, and a contract is just the translation of legal principles that govern a commercial arrangement.

After all is said and done at the table of negotiation and people leave, what remains is the contract and what will be tested over time is the solidity of that contract and if the contract is able to sustain the passing of time or change of certain minor circumstances.

The issue that many African contracts have faced over time is that contracts that underline either mining concessions, oil and gas transactions or even sovereign debts were not fair to African countries. There were situations where the terms were not fair because there may have been some factors or circumstances, foreseeable from an African standpoint, but that weren't factored into the contract. For instance, change of circumstances can call for a revision of the contract, all in good faith.

Then there were certain modes of contracting that were problematic. If you take resource backed loans, for instance, lending that is basically sitting on the appropriation of natural resources.These are the kind of debt contracting instruments that were problematic, that still remain problematic and for which African countries need to find ways to mitigate the negative impact.

That’s why the legal assistance from inception, right from the moment you start discussing with your private sector counterpart, is very important; to be supported and assisted so that the terms of the contract that you end up signing are fair, equitable, transparent.

We have a strong belief that a fair, equitable contract is much more likely to be mutually beneficial and much more likely to sustain the passing of time and prevent a situation where you've renegotiated the contract in the middle of its term because that is precisely what deteriorates and affects investors’ confidence and trust in your business environment.

What are the main projects or initiatives that the ALSF is currently working on?

We have transactions on going across the board in all four sectors. I wouldn't be able to give you the specific details about some of the work that we're doing, but I can tell you that last year 2023 we received 61 requests for assistance and that was the actually a record number in the history of the of the ALSF.

To give you a broad allocation, about 30 percent of our projects are in the energy sector; 15 percent in the sovereign debt sector, another 25 percent in natural resources, and the balance is infrastructure and PPPs. This gives a rough idea of how our product portfolio is balanced.

And then on an ongoing basis, we provide capacity building assistance to countries. We are demand driven, so whenever a government writes to us to seek assistance on a particular subject or project, we conduct due diligence on the project to see if it fits within the mandate of the ALSF, whether the proposed terms of the assistance are within the boundaries of what the ALSF can do, then we put a team in place that can advise the government; a team of a mixed of ALSF staff and external legal counsels.

ALSF recently updated its handbook on sovereign debt management in Africa “Sovereign Debt handbook: Understanding Sovereign Debt in Africa: Options and Opportunities”. Can you explain the importance of this handbook and how it helps public debt managers make informed decisions?

It's a handbook that we're particularly proud of because it's the second edition of our Sovereign debt handbook. Debt management has become a crucial topic, and it's pretty much multidimensional. There's the need to address the debt crisis that is not only looming, but actually very much current in a number of African countries. We need to find solutions in terms of debt restructuring, debt cancellation, reforming the global financial architecture to provide more concessional loans to countries. These solutions lie in the hands of debt specialists, financiers, and MDBs.

Looking forward, what needs to be thought of now is, in future, how are African governments going to go about contracting debt. Is it going to be on the same basis, on the same terms or is there a different view that needs to start prevailing in terms of precisely valuing the natural resources of the African continent, the potential of the African continent, and factoring those elements into the way we contract debt.

The sovereign debt handbook provides the debt management offices across the continent with tools and solutions to decide on an informed basis which kind of debt instrument needs to be utilized at what time. How can the contracting of debt match and align with the development agenda in terms of the energy transition, for instance. There are also new debt instruments that we will start using more. These include debt swaps and debt for nature. So the sovereign debt handbook captures all these new elements and provides debt management officers with an array of solutions that they can rely on for sustainable debt management.

How does the ALSF contribute to promoting sustainable and equitable governance in Africa?

Our belief is that good governance is anchored around the principles embedded in the rule of law and to the extent that the rule of law prevails in the way African governments negotiate, contract, restructure debts.There needs to be a clear understanding of how debt is contracted; is it at a ministerial level? Do you have to go through parliament? What are the authorization levels? As long as the right principles are followed, this cements trust in the agreements that are entered into.Poor governance is always detrimental not only to the investor, but also detrimental to governments. Poor governance and poor debt contracting may yield short term benefits but will never obtain medium term or long-term benefits.

What measures does the ALSF take to strengthen local capacities and ensure that skills remain in Africa?

Measuring the impact of what we do know is a very critical part of our approach and actually informs the way we continue tailoring our program. There are expectations that are expressed by governments in terms of the capabilities or the capacity that they would like to gain from the ALSF's intervention.For each and every advisory services and project that we undertake in any given country there is a capacity building component.

For example, if we advise a country on a new mining concession agreement negotiation, we make time after official negotiations to conduct capacity building and consolidate the learnings and ensure that the principles that prevailed during the negotiation are cemented in the government officials minds and practices,The second aspect of capacity building is that we want to make sure that the knowledge that we leave is captured in writing. People come and go in ministries, so what is important for us is to build knowledge at an institutional level and that's why we come with the type of handbooks, contract templates and toolkits.

What is your vision for the future of the ALSF and what goals do you hope to achieve in the coming years?

The potential is immense. I think we are barely scratching the surface. I said last year we received a record number of requests and the trend this year is basically similar. The awareness around the ALSF is increasing, so there's even more potential for receiving more requests from our member countries

In terms of membership, we are keen to create a network or ecosystem around the ALSF that is conducive. We've recently welcomed the Trade and Development Bank (TDB) as anew member.

We're a young organisation with quite a number of achievements already, but are still fairly young in terms of our trajectory and fully delivering on our mandate. We're making sure to build an ecosystem of goodwill, institutional support, financial support that we require to accelerate the delivery of our mandate.

As part of our medium  term strategy 2023 - 2027, our goal is to do better and do more of what we've been doing over the past 10 years and with the trust of our financial partners and the African Development Bank who've been supporting us since inception. I think we're on the right track.