Africa is an increasingly attractive business destination. Driven by ambitious objectives and the lure of new markets, more and more international companies are looking to expand into the continent. While the opportunities that await are real, there are a number of legal, operational and HR challenges that can make Africa a daunting destination. Contributor Rick Hammell, CEO – Elements Global Services.
There is plenty of growing demand for new products and services across the continent, so winning new customers isn’t necessarily going to be a big challenge. The real challenge is aligning your employment and day-to-day operation strategies with the rules and regulations of each new country. To overcome any potential pitfalls, it pays to know what to expect – and prepare your expansion strategy accordingly.
Why Africa is ripe for international business
Africa is often referred to as ‘a continent on the rise’. In the last decade or so, this has been evidenced by a number of developments. Modern shopping centres, for example, have sprung up in many African cities to cater to a growing middle class. This rise in consumer spending power signifies economic growth and retailers are moving in from around the world to capitalise on these new markets.
Critically for new businesses, there is a growing urban workforce. Rapid urbanisation combined with a young population has seen a surge in the demand for jobs, products and services. With more than half of the current population under the age of 18, McKinsey & Company estimates that Africa’s workforce will be 1.1 billion strong by 2034; larger than that of either China or India. There is no lack of local talent eager to learn, earn and develop their skills, which is an encouraging factor for international businesses in need of new staff.
The continent’s growth is triggering investment in both terrestrial and digital infrastructures. There is an urgent need to close the gap between people and places, enable faster connectivity and build reliable networks that support business growth. A digitally connected customer base offers agile businesses far wider reach in regions with relatively low competition. To help improve Africa’s technology and transport infrastructures as quickly as possible, international businesses can share their experience and knowledge from other markets and benefit from the improved networks as they develop.
The challenges of doing business in Africa
Some of the more pressing problems that companies need to be aware of are not ubiquitous to the continent as a whole, but do have a far-reaching business impact. Current road and rail infrastructure for example, is a challenge in many countries. While major investments are being made to improve these transport networks, businesses accustomed to operating in more developed regions of the world will need to adjust their expectations, as it could impact on worker mobility and supply chains.
Political and economic instability is certainly not something characteristic of Africa alone. Any company anywhere in the world needs to be aware of how national and international politics can affect its business. However, in some African countries, it is not unusual for political leadership to change abruptly and thus, for new legislation to be ratified almost overnight.
What’s more, getting hold of existing, let alone revised, tax and payroll regulations can be arduous as there are often only a few copies in circulation. The challenge here is staying in the know and not getting caught on the back foot. The more agile you can be in the face of instability, the better you can navigate changing economies and consumer demands.
It’s important to remember that Africa is powered by relationships. Yes, what you know is crucial to running a legitimate and successful business but who you know is just as vital. To build good business relationships, you need to respect local cultures. There is no one size fits all approach: Africa is a continent of 54 countries with many languages, customs, religions and cultures. If you don’t pay attention to these during your hiring and onboarding processes, you could damage your reputation and delay your expansion plans significantly. It’s vital that your HR department develops culturally and legally appropriate benefit schemes and employment contracts for all employees.
How to expand your business successfully
To enjoy all the advantages of expanding into Africa without any of the issues, your business needs knowledge, support and planning. An expansion plan is often complicated by the need to register the business locally and many companies invariably enter into a contract with a local provider in each and every country of operation.
This approach can take time and delay simple but vital steps to setting up a new office, like onboarding, managing and paying your employees in countries where you do not yet have a registered entity. Asking an Employer of Record (EOR) with knowledge of the African market to assume the responsibility for these activities can help you bypass the complications, as it removes the need to set up a legally registered entity. This means you can ‘test the waters’ in some potentially unpredictable countries without putting your business at risk. It’s can help get your business up and running quickly and efficiently, while simultaneously keeping your operations compliant with each country’s rules and regulations.
This direct approach to international employee management is far simpler and more cost-efficient than having to deal with a number of different third-party partners. It helps reduce unnecessary delays, eliminate any unexpected costs and crucially, overcome many of the major challenges associated with expanding a business into Africa – or any other region in the world.
Don’t let Africa’s challenges put you off from taking advantage of all its business benefits. With the right support onside, your company can expand successfully, while you take care of business.