Trade and Commerce in West Africa and How it Influences IP Rights
To do business in Africa, it is important to understand how African countries conduct trade and commerce among themselves and with the rest of the world.
Specifically, IP right holders navigating the continent would be better served by an informed economic roadmap into the continent. A proper understanding of the business terrain and IP regimes becomes important for global brands looking to pitch their tent in Africa.
This article focuses on West Africa and will inform international investors and global brands about the market and the interplay between trade, commerce and IP. It also proffers solutions to key concerns that can derail the commercial interest in the region.
The West Africa Trade Terrain
Geography and Influences
West Africa forms one-third of the African continent, with 16 countries and with English and French as its dominant languages. The region consists of both common law and civil law jurisdictions depending on the colonial history of each country. While colonialism is now a thing of the past in West Africa, the region’s trade choices, taste, values, and culture have been significantly influenced by this colonial history. Hence, it would not be out of place to find French influences in Francophone countries and British/American influences in Anglophone countries. This is also reflected in the trade and consumption patterns in the region. This influences the sources of origin for goods consumed and imported into these regions, with products from the United Kingdom largely consumed in Nigeria and products from France being heavily imported in regions like Benin Republic and Togo.
West African countries also have two other trade factors in common: they are import-driven economies with a very young population. The import-driven nature is largely due to its vast population, lack of local infrastructure and consumer loyalty to foreign brands. The region’s high birth rate also accounts for its young population, with the World Bank estimating the median African age to be 19. This demographic is largely influenced by pop culture from the west and this, in turn, translates into trade decisions.
It is important to note that retail in this region is predominantly informal. Ninety percent of the retail markets are conducted informally at local markets, serving consumers from all over the region. The region also has porous borders, which leads to a lot of counterfeiting and further makes the regulation of counterfeiting difficult. It is, however, important to note that e-commerce platforms are gaining popularity and slowly thriving in the West African retail market. We find that retail structures on these platforms mirror the physical retail space, involving thousands of third-party sellers migrating from their physical stores to the e-commerce platforms.
Regional and National IP Organisations
Regarding IP, since a large percentage of West-Africa is composed of francophone countries, the Organisation Africaine de la Propriété Intellectuelle (OAPI) is a very important organization in IP registration. An OAPI registration grants covers all 17 member countries and also has a fast registration system. On the other hand, a number of the anglophone countries (such as Nigeria, The Gambia, Sierra Leona and South Africa) continue to maintain their IP through their national IP offices.
Impact on IP Rights in the Region
Foreign Brands are at a High Risk
A high thirst for foreign products, especially among the younger population, means that foreign brands that are yet to directly enter the market are at risk of counterfeiting by local traders, who often source the products themselves, or produce counterfeit versions of the products. These issues are further compounded by the informal market structure, which makes it difficult to track the primary source of products distributed across the region. The sale of counterfeit products therefore becomes common place.
Trademark Squatting is Commonplace
In order to meet the demand of the exposed market in West Africa, it is common to find traders and manufacturers using the trademarks of well-known foreign brands to push their own products. These manufacturers are fully aware of the influence the western world has on consumers and they exploit this influence to their benefit.
It is therefore common to find—in Nigeria, for instance—importers and manufacturers attempting to register the trademarks of foreign brands in order to legitimize their business ventures. West Africa is therefore not a region to sleep on trademark rights, as trademark squatters will exploit such laxities at the expense of the brand owners.
Counterfeiting Thrives on the Informal Market Structure
Based on the common traits in the trade cultures in West Africa, counterfeits are a major challenge in the trade industry. This practice thrives significantly due to the informal retail market structure in West Africa. The sources of goods passed through this market structure are difficult to track and usually brand owners with interests in West Africa often have their work cut of for them. There are unfortunate cases where the rightful brand owners have lost the battle to counterfeiters who have deeply infiltrated the market years before they directly enter the market.
Balancing Market Opportunities and IP Risk in West Africa
Crafting the Right Strategy
From the foregoing, it is clear that doing business in Africa comes with a lot of systemic risks, which brand owners must weigh, against the potential returns expected from such business endeavors. While different strategies are considered when approaching the West African market, the three main strategies that stand out as preferred options for foreign brand owners are: Exportation, Contract Entry Models and Direct Investments.
Whether through direct or indirect exportation of goods (and services), brand owners must ensure they own the relevant IP rights in the territory to which the products are being exported. Ideally, this should be done well before the exportation begins, given the time it takes for registration to take place. An IP strategy is thus pertinent to determine what sort of IP protection is most suitable, the breadth of the protection to be sought, as well as the nature and extent of enforcement activities to employ should the need arise.
The Contract Entry Model
The contractual entry model offers a different route into the market. This model is executed through IP contracts such as licensing, franchising or contract manufacturing agreements. The key differentiator of this strategy is the fact that the foreign brand entrusts its IP with a local partner. Hence, the contract between the foreign brand and the local partner must sufficiently protect the IP of the foreign brand while clearly defining the terms binding both sides.
Direct investment approaches like joint ventures and acquisitions raise IP ownership questions. There is no “one size fits all” approach to answering this question, as ownership of IP is decided based concerns around flexibility and practicability. Hence, parties must decide according to the peculiarities of their specific arrangement.
Whichever strategy is pursued, the following are crucial: crafting an appropriate IP strategy, conducting market search/intelligence for conflicting IP, considering obtaining registration in neighboring countries, and paying attention to cultural cues within the local market. Proper evaluation of these keys issues is vital to the success of the business venture.
Brand Protection: Litigation, Trademark Opposition and Anticounterfeiting
Having the Right Approach
Brand protection is an important strategy to develop, especially when operating in an informal West African market. Hence, foreign brands must hatch a multijurisdictional plan to protect their brands. However, due to financial constraints, it might also be important to prioritize high-risk jurisdictions and focus brand protection efforts in those jurisdictions. Irrespective of the jurisdictional focus, brand owners can employ litigation, opposition and anticounterfeiting actions to protect their brands.
Litigation actions cover a wide range of IP enforcement actions, which are largely civil actions based on statutory provisions and tortious breaches. An opposition proceeding, on the other hand, is particular to the trademark registration procedure and it seeks to stop the registration of an offending trademark application. Finally, anticounterfeiting actions involve coordinated efforts with several regulatory agencies to stop the free flow of counterfeit products into local markets.
With respect to adopting the right brand protection strategy for West Africa, it is extremely important to model the strategy in line with current market realities in the region, which are significantly peculiar and different to other regions. For instance, a brand protection strategy that does not take into consideration the informal market structure in the region is most likely to fail, as 90% of the market structure in West Africa is informal. It is also important to be guided by market investigations before making decisions on what or where to invest in IP registrations. Such market investigations offer the brand owners a clear picture of where their products are being used or likely to be used. We have found, from experience, that brand owners are often shocked at how much their products have heavily infiltrated the market without their direct influence.
Importance of Local Knowledge
While there are several options available to brands with respect to protection, certain local realities make enforcement difficult. These realities include instability in local laws, bureaucratic bottlenecks, inadequate storage facilities for seizures, inadequate provisions in local laws, etc. However, with the help of local counsel who understand the terrain, these problems become easier to navigate for foreign brands.
The Strategy for Success
The West African market is ripe with business potential and opportunities. In harnessing this potential, the importance of local partners cannot be overstated in protecting and enforcing IP rights. Many of the jurisdictional issues highlighted above can be avoided where foreign brands employ the services of local legal representation whose understanding of the terrain provides the much-needed support for crafting the most suitable strategies for successful business outcomes.
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