General
ESG Obligations Leading to Risk of Increased Litigation for African Businesses
By Darryl Bernstein
As African businesses begin to recover and build the resilience needed to successfully navigate COVID-19 disruption, a focus on Environmental Social and Governance (ESG) strategies is proving to be essential for long-term success.
In order to stay competitive, organisations based in Africa are engaging meaningfully with ESG to build robust sustainability strategies that meet stakeholder expectations and enable compliance with global and domestic mandatory and voluntary ESG standards and codes.
ESG encompasses a broad range of issues across the spectrum of Environmental (climate change, biodiversity, waste, water and resource use, pollution), Social (human rights, labour practices, HSE, diversity); and Governance (corporate governance, ethics, compliance) matters.
As climate change impacts become clearer and nearer, there is an increasing emphasis on the Environment aspect of ESG. After the pandemic, initiatives in Africa are expected to have a heightened focus on green, low-carbon and sustainable development, via, for example, clean energy production, community care initiatives, green transport and sustainable water projects, wildlife protection programmes and low-carbon development projects.
There is a major role for ESG policies to play in mitigating some of the effects of climate change, through planning and building for hotter temperatures, higher sea levels and more extreme weather conditions, for example.
Organisations are adopting new strategies that address climate change risk and identify the sustainable opportunities that arise from addressing climate concerns. To regulate this, there are likely to be developments from African regulators in the near future that address climate risk disclosure requirements for businesses operating on the continent.
Post-pandemic, the discussions around ESG are also resulting in an added emphasis on the Social aspect – which, among other things, focuses on protecting an organisation’s workers and the wider local populations in which these businesses are based.
Organisations are looking at ways to build better social programmes that are more resilient to future pandemics and ensure good business practice. A focus on issues such as enhancing considerations around the health and safety of employees and communities, implementing diverse and inclusive workplace cultures, and building good management teams that can pull employees together in all kinds of remote, physical workplace and hybrid settings, put companies in a strong position to move forward.
The Governance aspect has also been emphasized by the pandemic, with an increased focus on due diligence around compliance with regards to anti-bribery and corruption, data privacy and cyber security legislation, for example.
Some of the larger African jurisdictions have already implemented mandatory ESG and sustainability reporting frameworks and, going forward, more African regulators are expected to replace current voluntary frameworks with mandatory ones or to adopt new mandatory frameworks. In turn, organisations operating in Africa will seek guidance and more detail from corporate regulators on how they want to see ESG reported and the practices behind the reporting process.
In South Africa, there are many laws that govern ESG factors, including business and financial sector conduct, economic and social empowerment and environmental protection. Voluntary codes such as the King IV Code on corporate governance and the Code for Responsible Investing in South Africa also serve as a guide to businesses on ESG considerations.
Other examples include Kenya, where the Capital Markets Authority introduced Stewardship and Corporate Governance Codes in 2017 and Nigeria, where the Nigerian Code of Corporate Governance was introduced in 2019. Globally, in addition to numerous country-specific laws, there are a plethora of voluntary sustainability-focused codes and standards, including the UN Guiding Principles on Business and the Human Rights and UN Guiding Principles Reporting Framework.
ESG risk management has become a mainstream component of corporate due diligence programmes, and corporate boards are being held accountable for their ESG practices by their shareholders, stakeholders and management teams. Risks for non-compliance with the multitude of global and local laws, voluntary codes and best practices governing ESG factors range from criminal prosecution and hefty fines to reputational risk and business failure as a result of not fulfilling ESG commitments.
Actual and perceived non-compliance with ESG regulations and best practices have engendered activist shareholder protests and action against the parent companies of global groups. A key challenge for businesses is navigating where the laws end, and business strategy and market expectations begin. This is especially the case when navigating the major global issues of, for example, environmental standards and human rights responsibilities. Such issues often lead to activism, litigation and class actions if a business falls short of sustainability standards or appears to be breaking publicly made promises.
Contractual liabilities around ESG must be carefully considered, as contracts that stipulate compliance with certain standards can trigger a breach of contract claim if there is seen to be any violation of the terms. It would be better for businesses to ensure in advance that they can fulfil specific ESG obligations before agreeing to them contractually. Limitations of liability should also be agreed upon to mitigate the risks.
Further, if companies have made public promises regarding their ESG obligations and they are seen to be not fulfilling such obligations, they could be vulnerable to the threat of class actions that are brought by consumers and shareholder activists. Companies should identify what ESG goals can be properly measured, and what goals should be clearly defined as being aspirational and ensure that this is accurately communicated in the public domain. Reputational damage from ESG non-compliance escalates quickly and can be difficult to recover from.
For African organisations, maintaining a long-term sustainability strategy ensures sound financial performance, full compliance with local and global laws and frameworks, and substantially increased resilience in a challenging post-pandemic environment. In the current global environment, ESG is no longer just about doing the right thing, the dial has shifted and having a legally sound and comprehensive approach to ESG considerations is a prerequisite for business success.
Darryl Bernstein is a Partner and Head of the Dispute Resolution Practice at Baker McKenzie in Johannesburg
General
Supreme Court Empowers Tinubu to Declare Emergency Rule, Suspend Elected Officials
By Adedapo Adesanya
The Supreme Court has upheld the power of the President to declare a state of emergency in any state to prevent a breakdown of law and order or degeneration into a state of chaos or anarchy.
In a split decision of six-to-one, the apex court held that the President, during a state of emergency, can suspend elected officials, but within a limited period.
In the lead majority judgment, Justice Mohammed Idris held that Section 305 of the Constitution empowers the President to deploy extraordinary measures to restore normalcy where emergency rule is declared.
Justice Mohammed Idris noted Section 305 was not specific on the nature of the extraordinary measures, thereby granting the President the discretion on how to go about it.
The judgment was on the suit filed by Adamawa State and 10 other Peoples Democratic Party-led states challenging the propriety of the state of emergency declared by President Bola Tinubu in Rivers State, during which elected state officials, including Governor Siminalayi Fubara, were suspended for six months.
On March 18, President Tinubu declared a state of emergency in Rivers State following a reported attack on crude oil pipelines; and in the same breath, suspended the sitting governor and his deputy, Mrs Ngozi Odu. He then put in place a sole administrator.
This was challenged at the apex court by some states.
Justice Idris, in the earlier part of the judgment, upheld the preliminary objections raised by the two defendants against the competence of the suit.
In upholding the objections raised by the Attorney General of the Federation (AGF) and the National Assembly (the defendants), Justice Idris held that the plaintiffs (the 11 PDP states) failed to establish any cause of action capable of activating the original jurisdiction of the apex court.
He struck out the suit for want of jurisdiction, proceeded to also determine the case on the merits, and dismissed it.
However, Justice Obande Ogbuinya dissented and held that the case succeeded in part.
Among others, Justice Ogbuinya held that although the President could declare a state of emergency, he cannot use such powers as a tool to suspend elected state officials, including governors, deputy governors, and members of parliament.
General
AI in Agriculture, Retail Sectors May Lead to Double Digit Growth by 2035
By Adedapo Adesanya
High-impact sectors, including agriculture, wholesale and retail, will see double digit increases with the integration of artificial intelligence (AI) across Africa by 2035.
This is according to a new report by the African Development Bank (AfDB) developed under the G20 Digital Transformation Working Group, Africa’s AI Productivity Gain: Pathways to Labour Efficiency, Economic Growth and Inclusive Transformation, which establishes a strategic roadmap for unlocking the economic and social potential of AI across the continent.
The study, carried out by consulting firm Bazara Tech, finds that inclusive AI deployment could generate up to $1 trillion in additional GDP by 2035 equivalent to nearly one-third of the continent’s current economic output.
The report added that this is underpinned by Africa’s growing digital capacity, favorable demographics, and ongoing sectoral reforms, making it one of the most promising regions for AI-driven growth globally.
According to the report the AI dividend is expected to be concentrated in select high-impact sectors, rather than spread evenly across Africa’s economy. Analysis identified five priority sectors—agriculture (20 per cent), wholesale and retail (14 per cent), manufacturing and Industry 4.0 (9 per cent), finance and inclusion (8 per cent), and health and life sciences (7 per cent)—which together are projected to capture 58 per cent of the total AI gains, or approximately $580 billion by 2035. These sectors combine economic size, readiness to adopt AI, and strong potential to deliver inclusive development outcomes.
“We have set out the key actions in this report, identifying the areas where initial implementation should be focused,” said Mr Nicholas Williams, Manager of the ICT Operations Division at AfDB.
“The bank is ready to release investment to support these actions. We expect the private sector and the government to utilize this investment to ensure we achieve the identified productivity gains and create quality jobs,” he added.
The report also revealed that realising the potential of AI depends on five interlinked enablers: data, compute, skills, trust, and capital. Reliable and interoperable data forms the foundation for AI insights, while scalable compute infrastructure ensures solutions can be deployed efficiently across the continent.
It noted that a skilled workforce is essential to develop, implement, and maintain AI systems, and trust built through governance, and regulatory frameworks underpins adoption.
The report also noted that the enablers, together with adequate capital investment to de-risk innovation and accelerate deployment, would “foster a cycle of AI-driven growth.”
The report also outlines a three-phase roadmap toward Africa’s AI readiness: ignition (2025-27), consolidation (2028-31) and scale (2032-35).
“Achieving early milestones by 2026 will set Africa’s AI flywheel in motion,” said Mr Ousmane Fall, Director of Industrial and Trade Development at the bank. “Africa’s challenge is no longer what to do — it is doing it on time.”
General
Crude Oil Tanker Seized Near Venezuela Not Registered in Nigeria—NIMASA
By Adedapo Adesanya
The Nigerian Maritime Administration and Safety Agency (NIMASA) has clarified that the crude oil vessel, MV Skipper, intercepted by the United States Coast Guard, in collaboration with the US Navy for its alleged involvement in crude oil theft and other transnational crimes is not registered in Nigeria.
NIMASA said the Very Large Crude Carrier (VLCC) SKIPPER with IMO Number 9304667 is not a Nigerian-flagged vessel, and its purported owners, Thomarose Global Ventures Limited, are not registered with NIMASA as a shipping company.
An analysis of the vessel’s movement carried out NIMASA through its Command, Control, Communication, Computers and Intelligence (C4i) Centre showed that the facility was last sighted on Nigerian waters on July 1, 2024.
“After departing Nigerian waters, the vessel continued on its international voyage pattern and was tracked operating in the Arabian Sea (Asia) and later in the Caribbean region, where the US interdiction eventually took place.
“Records indicate that SKIPPER, which was formerly owned by Triton Navigation Corp, has undergone multiple name changes over time.
The Director General of NIMASA, Mr Dayo Mobereola, reaffirmed the agency’s commitment to collaborate with all relevant stakeholders, including US authorities, in the ongoing investigations, noting that in a statement that criminality will not be tolerated on Nigerian waters.
Last week, US forces seized an oil tanker carrying a Panama flag believed to be the VLCC Skipper, after satellite imagery showed the vessel secretly loading over 1.8 million barrels of sanctioned Merey crude at Venezuela’s José Terminal.
The vessel had been transmitting falsified AIS positions during the operation, a tactic increasingly used by “dark fleet” tankers tied to Venezuelan and Iranian trades. It was later revealed that the seized tanker Skipper, was carrying crude contracted by Cubametales, Cuba’s state-run oil trading firm.
The seizure of the sanctioned oil tanker has sharply escalated tensions between the US and Venezuela. The US government also said it is preparing to intercept more ships transporting Venezuelan oil.
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