Easing The Transition Of Business Expansion Into Africa
Tax laws, human resource requirements and compliance of general business laws are common reasons why U.S. CEOs are afraid to expand into Africa, says a U.S.-based entrepreneur who helps companies do just that.
International expansion can be timely and frustrating for many businesses around the globe.
For years, many U.S. CEOs skipped over the thought of expanding in Africa because it was too difficult or risky.
But with the global business environment constantly evolving, Larry Harding thought a way to help streamline the process.
Harding is CEO of High Street Partners, a U.S. company based in Maryland that has helped dozens of businesses expand into more than 100 countries including South Africa.
High Street Partners helps simplify the management and control of existing operations as businesses plan international expansion. The company focuses on extending the capabilities of executives by handling international payroll processing, expense reimbursement, cash management, vendor payment, bookkeeping, quarterly and annual tax filing and local statutory compliance so the leaders of companies can focus on overseas growth.
Harding was motivated to create the business in 2003 after dealing with the frustrations of trying to internationally expand the company he was working for at the time. He became vice president of international finance and realized after several years that he wanted to branch off on his own.
“I found myself spending way too much time dealing with the process and realized it needed to be done better and more efficiently,” said Harding. “And I realized that there were many other companies that were in need of this kind of help with globalization.”
Harding said the complexities of understanding tax laws, human resource requirements, and compliance of general business laws are common reasons why American CEOs are afraid to move into the international market.
Harding added that the current benefits of expanding into South Africa right now are great.
“South Africa in my opinion is like what Brazil is to South America – the dominant economy in the continent,” Harding said. “(It) is more urbanized than some countries and there is a much larger market for goods and services.”
Harding said South Africa has a better support ecosystem of finance and technology compared to other places.
By 2035, Africa will have the world’s largest workforce with more than half the population currently under the age of 20, according to Ernst and Young’s Africa Attractiveness Survey.
The report also states that 27 African countries have already attained “middle income” status, and at current growth rates, as many as 40 – about 75 percent of countries on the continent – could reach that status by 2025.
“South Africa really has an impressively healthy, growing economy and that has been a big change over the past three years,” Harding said. “More and more businesses are looking to grow there.”
Harding said while it has become more straightforward to set up and operate in South Africa during the last few years, there are still difficulties that businesses experience.
Harding told AFKinsider that the country is not necessarily as streamlined as the U.K. – there is a red tape, bureaucracy and currency control.
“There are problems with poor infrastructure in some areas that can cause difficulties, but at times that can also be a benefit because of the ease of doing certain things,” Harding said.
But the biggest challenge Harding has seen is lack of people with experience to hire there.
“While it is a location that has piqued the consistent interest of our customers, it becomes challenging to find the right skills sets that our folks our looking for,” said Harding.
Piero Marigo is a managing director at Pelican Products, Inc. in South Africa. The company describes itself as a global leader in the design and manufacture of advanced lighting systems and virtually indestructible casings.
Marigo said that since being in South Africa, the company has not only grown in the double-digit range in terms of revenue but also, less tangibly, has increased drastically in terms of market knowledge and brand awareness.
“In general, communication across multiple time zones and basic cultural affinity are and have been the major hurdles,” Marigo told AFKInsider. “High Street Partners has been valuable in delivering some of the necessary services required to employ and maintain a commercial base in the country.”
Marigo added that his company would prefer to look for local outfits as a first choice of support.
“If a local partner is unavailable or lacking in the required expertise we would then consider U.S. or European service providers,” Marigo said. “Additionally, our parent company in the U.S. frequently offers guidance and references with regards to foreign affairs.”
Businesses that show flexibility will thrive in Africa, said Felix Ndeloa, senior manager of advisory services at High Street Partners, in a recent blog.
Consumer goods companies have found success offering smaller quantities of products such as soap at lower prices. Others have developed non-traditional distribution networks to accommodate informal economies, he said in the blog.
“If your business is ignoring opportunities in Africa, it risks falling behind — and ceding that growth to someone else,” Ndeloa said.