In 2021, FDI flows to Africa reached a record-breaking $83 billion – more than double the previous year.
Despite challenges such as poor infrastructure, limited transparency and complex legal frameworks, multinational companies recognise Africa as fertile ground for business growth. Although administrative barriers and legislative complexities may result in excessive costs, it is important to appropriately address these factors.
African governments demand absolute compliance from organisations, which comes at a significant cost when implementing frameworks across multiple jurisdictions. While it may be tempting to 'skip a few steps', the cost of non-compliance in African countries far outweighs those of compliance.
In 2017, Ponemon Institute and Globalscape studied 53 multinational organisations to determine compliance costs for privacy and data protection regulations. Compliance averaged $5.47 million, while non-compliance reached $14.82 million – almost triple the value. Non-compliance costs extend beyond financial losses and can also include:
- Employee malpractice: Uninformed employees unknowingly committing compliance-related infringements.
- Loss of investment: Degradation of stakeholder trust leads to reputational damage.
- Loss of productivity: Focused on tackling non-compliance issues instead of business development and strategic growth.
Investors should embrace compliance as the foundation for business success in Africa. To generate sustainable growth, organisations should design appropriate compliance strategies for their people, often regarded as the most important resource, including the following:
- Navigating the complexity of payroll compliance.
- Establishing compliance processes relating to onboarding employees.
- Being mindful of well-established customary norms.
- Keeping up to date with changes in legislation.
Mark du Preez, Head of Legal & Compliance at Africa HR Solutions, explained: "Organisations operating in Africa are continuously faced with the challenge of adapting to compliant best practice in-country in relation to payroll taxes and social security contributions.
"Increasingly, we see new legislation across the African continent that requires more from organisations and their employees to remain compliant. At Africa HR Solutions, we have the in-depth knowledge and expertise to guide our clients through this process and ensure unwavering compliance."
Over the past 13 years, AHR has been a trusted service provider and advisor to 400+ organisations operating across 20 different industries in Africa. We provide employer of record and payroll outsourcing services in 46 African countries to listed multinationals, PE & VC-backed start-ups, global NGOs, international non-profits and leading universities.