Knowledge and collaboration key to lowering African business risk

July 2010

In an ironic reversal of fortunes, business people in Africa should be giving thanks to the recent recession, which has fundamentally shifted the attractiveness of doing business in Africa.  The continent is now growing much more rapidly than OECD nations and an improved policy and regulatory environment has significantly lowered business risk. 

A recent McKinsey & Company series of reports has focussed on doing business in Africa. The general consensus from the authors was that the continent was now one of the most attractive investment regions.

Even though Africa could not avoid the global financial and economic crisis, and growth slowed in 2009, to 2.5 percent, on the whole McKinsey says the continent has avoided the recession. The impact of the crisis was less severe than expected – allowing for a faster recovery – and has encouraged investors to critically assess the continent as an investment region over the next few years.

That said, companies wishing to move into the continent need to choose their partners with care. Setting up operations outside of South Africa still carries some risk. Regulatory and compliance frameworks remain different for each country and this can lead to added administrative and legal costs.

By choosing the right partners, companies can ensure that their operations meet individual country legislative requirements at the outset.

“CRS Technologies has earmarked Africa as a key growth region. We have spent a significant amount of time looking at individual markets and assessing the regulatory regimes in each. This is no small feat considering we have to build individual requirements into our products from the kernel up,” explains James McKerrell, CEO of CRS Technologies.

“We are sharing information with many companies and have even been called upon to collaborate with some of the largest multinationals, which are looking for insights into various regions,” he adds.

However, McKerrell says a key risk is assuming that because a company has effectively operated in one region, it can merely duplicate the operations in another.

“HR and payroll lay at the heart of business operations. Ensuring country-specific compliance at the outset can mean the difference between a flourishing operation or extended legal wrangles and hold-ups.”

CRS has partnered with companies who share its interest in the continent. This collaborative approach has allowed it access to vast quantities of data and insight which would take an individual company years to acquire.

“There is still risk in operating Africa, but we remain committed to developing our IP collateral for many of the African countries. We hold with what the great Irish poet, William Butler Yeats said: Do not wait to strike till the iron is hot; but make it hot by striking,” McKerrell concludes.