A difficult 2014 has done little to tarnish sub-Saharan Africa’s appeal as a business destination for South African companies looking to expand their businesses. But to succeed in this challenging and rewarding environment, companies must be willing to weather volatility and adapt the way that they do business.
That’s the word from Gerhard Hartman, Head of Department at Sage HR Africa. He says that with the IMF projecting growth in excess of 5% for the region as a whole in 2014 and 2015, sub-Saharan Africa continues to offer a range of exciting possibilities for businesses seeking to grow into new markets.
Yet as recent instability in countries like Nigeria and Kenya illustrates, companies cannot expect a completely smooth ride when they move into new African territories. They can expect to encounter obstacles as varied as high connectivity costs, bewildering bureaucracy, and a lack of electricity in some countries.
However, the environment is improving all the time, says Hartman, with governance and infrastructure rapidly improving through the continent. Though a battered oil price and lower demand for commodities may hurt some African economies, there is still plenty of growth as governments build out infrastructure such as roads and power generation and as African agricultural exports boom.
Less red tape
“From our perspective, we entered Africa several years ago, and we have seen the business environment mature at a rapid speed,” says Hartman. “Thanks to the efforts African governments have made to reduce red tape, it is easier and more attractive to do business here than ever before.”
Hartman says that to succeed in Africa, companies need to be attuned to the nuances in different regions and countries – a one-size-fits-all approach will not work. This means it’s important to have boots on the ground to serve customers – just as anywhere else in the world, businesses in Africa value face time and localised support.
“We believe that you need a mix of your own people on the ground to put your systems and processes in the place with local staff members and business partners who have the contacts and expertise to help you succeed,” Hartman says. “It’s important to have the humility to listen to them and accept their guidance.”
Mistakes to avoid
Common mistakes that companies make when expanding into Africa include not having sufficient knowledge of the country and a lack of operational planning. Preparation is essential as is a solid understanding of the local tax laws, exchange control regulations and company legislation. Finding trusted local partners and doing the necessary homework can help companies avoid costly mistakes, Hartman says.
It’s also important not to underestimate the time and money it takes to expand into Africa, says Hartman. For example, it’s expensive but essential to set up business systems, train local staff and resellers, and meet with customers and provide on the ground support.
From Sage HR’s perspective, it is growing into Africa off the back of the Sage Pastel and Sage VIP brands, which are both highly respected in South Africa. Africa is an irresistible growth opportunity since companies in Africa are starting to realise the importance of automating HR and payroll software. In addition, Sage HR’s South African clients expect the company to be able to support them wherever they do business in Africa, says Hartman.
“We are seeing more demand in Africa for software that helps companies improve record-keeping and decision making, become more efficient, and drive productivity. They also want to ensure compliance with stricter tax and labour laws,” he adds. “HR and payroll is becoming a priority because it is an essential part of any company’s strategic advantage.”
Thanks to mobile broadband prices falling and infrastructure improving, there is a big demand for cloud-based solutions that allow people to be mobile and productive, says Hartman. The cloud is helping African businesses to get up-and-running on the HR solutions they need at a rapid pace and with minimal upfront spending.