Africa's compliance landscape

In today’s increasingly dynamic business world, global mobility can set your company apart to give you that competitive edge. Expanding your business can open doors you never thought possible and broaden your organisational horizons.

Today, Africa is the third-fastest growing region in the world, and its collective GDP is equal to that of Brazil and Russia.

However, navigating the complex international compliance space can be a huge challenge for organisations, and non-compliance, even if accidental, often brings significant repercussions.

A ccording to Fast Company, in the last six months, 60% of African countries have gone through at least one level of legislative change, and governments are cracking down on non-compliance, with telecom giant MTN Nigeria recently being fined a record $5.2 billion for non-compliance,

Errors arising from inadequate research or preparation, or failure to stay abreast of rapidly evolving legislation, such as incorrect worker classification, tax adherence issues, or payroll administration non-compliance, can incur serious consequences, ranging from legal and financial, to reputational.

Let’s examine the key areas of compliance in which businesses often encounter difficulties.

Tax

Tax is a notoriously complicated area for people and businesses the world over – in fact, according to Afrobarometer, 54% of individuals across Africa struggle to ascertain how much tax they owe each year.

H owever, despite its complexity, ensuring your company is tax compliant is vital to its success and longevity. It is imperative that business leaders take tax seriously and are meticulous about understanding the regulations of the country or countries in which they are operating, in order to keep their business safe. For example, Uber is being sued in Kenya for failure to adhere to local tax laws.

It is important to note that some countries may have double tax treaties with your country of origin, meaning that you will be liable to pay tax in both countries.

African governments are increasing measures in order to tackle tax evasion – such as Ethiopia’s revised key tax laws. According to Afrobarometer, a 2015 report on Illicit Financial Flows from Africa by the High Level Panel, tax evasion is a key contributor to the approximately $30 to $60 billion a year that African governments lose to financial crime.

Environmental, Social, and Governance (ESG)

African countries are struggling with the impacts of climate change, with droughts, floods, and heatwaves impacting production. As a result, addressing sustainability and cutting carbon emissions has become a significant challenge for corporations in Africa, as governments introduce corresponding regulations.

Ensuring that your organisation is operating in adherence with any and all ESG regulations is key to full compliance. An example is Nigeria’s Companies and Allied Matters Act, 2020, which “imposes an ‘environmental obligation’ on directors of Nigerian corporations by mandating directors to, in discharging their duties as directors of the company, consider the impact of the company’s operations on the environment in the community where the company carries on business operations.”

Additionally, Sasol, a South African chemicals and energy company was fined $1.4 million for non-compliance with environmental regulations in 2020.

Employee classification

Misclassifying your workers as independent contractors when they are in fact full-time employees, or employing workers in a way that does not align with local regulation can incur fines, legal proceedings, and reputational damage.

Several African countries, including South Africa, have recently implemented stringent laws regarding the employment of temporary workers to deter “potentially abusive practices.”

Financial regulations

Financial crime is one of the largest issues facing businesses operating in Africa. For example, KPMG notes that, according to the FATF Mutual Evaluation of South Africa 2021, over 50% of all reported crime in South Africa were financial in nature. Nasdaq states that 63% of East African organisations also experienced one or more types of fraud.

As a result, governments across Africa are employing additional measures to deter financial crime, and these measures also apply to businesses handling transactions. So, it is crucial that companies remain up-to-date on the latest updates to requirements in the countries where they are trading. Conducting regular risk assessments, ensuring your team is trained on all aspects of compliance and employing technology to assist with security.

How to ensure compliance in Africa

When expanding into African countries, there is plenty of room for error. However, by taking the right steps on your global expansion journey, you can avoid the common pitfalls and areas of difficulty that often present challenges to companies seeking to expand.

Get familiar with local regulations

It’s crucial to ensure that you and your business team are familiar with all local law in the countries into which you’re expanding – including labour laws, tax regulations, environmental standards, data protection laws, and more. Staying informed regarding changes and updates to local policies is also key.

Strong governance practices

Ensure your company develops comprehensive compliance programmes that outline policies, procedures, and controls to ensure adherence to legal requirements.

You should also adopt corporate governance frameworks, such as the King IV Report in South Africa, to promote ethical business practices and accountability.

Utilise technology

Employing software solutions to support with the tracking of regulatory requirements, management of compliance tasks, and generation of reports can ensure consistent compliance. Cybersecurity can be utilised to ensure compliance with regulations such as data protection.

Engage legal and compliance experts

Mauve Group is an award-winning global employment solutions provider, equipped with over 28 years of experience. Our team of experts are ready and waiting to support you on your global expansion journey, with wholly owned entities and partners offering solutions across the African continent.

Compliance in Africa is a challenging and multifaceted field, crucial for ensuring legal and ethical standards across all sectors. Ongoing efforts to galvanise legislation and regulatory frameworks are making strides towards greater transparency and accountability on the continent.

By taking a proactive and comprehensive approach to compliance, businesses can mitigate risks, avoid costly penalties, and build trust with regulators, customers, and other stakeholders across Africa.

Speak to our experts today to find out how Mauve Group can help you to expand your business into Africa seamlessly and with 100% compliance guaranteed.