A strategic guide for successfully expanding a UK business in Africa

Africa has a burgeoning consumer base and vast, often untapped resources, and is set to remain the
second-fastest growing region after Asia, according to the African Development Bank’s
Macroeconomic Performance and Outlook (MEO) report. The same report states that Africa’s real
GDP is expected to average around 3.8% this year and 4.2% next year - higher than the projected
global averages of 2.9% and 3.2% respectively.

All of which has made African markets ripe for investment, especially in comparison with more
developed regions that have struggled to rebound post pandemic.

But that doesn’t mean investing in Africa is necessarily straightforward. With over 50 countries, it’s a
massively diverse continent, and each nation has its own specific economic and political landscape,
bringing extra layers of complexity. To expand successfully here you’ll need to carry out plenty of
market research, develop a solid entry strategy, and operate with the agility to overcome a range of
unique challenges.

While there are several issues UK businesses may encounter when venturing into Africa, let’s look at
a few of the main considerations, including regulatory compliance, cross-border payments and
currency risks.

Get across regulatory and compliance requirements
Each African country has its own set of business laws and regulations, so it’s vital you’re familiar with
local laws and customs. The best way to do this is to employ local legal experts who can help you
and your business navigate the nuances of local laws and remain compliant. As an example, you’ll
need to be fully cognisant of foreign-ownership laws, intellectual-property rights, taxation, and local
labour laws

You’ll also need to have a full understanding of both UK and international trade laws when operating
overseas so you’re in compliance with customs laws, export control regulations, and anti-bribery and
corruption laws.
It’s also important to be mindful of data protection laws, such as South Africa’s Protection of
Personal Information Act (POPIA). If you’re operating in a jurisdiction that has these laws in place,
you will need to take measures to safeguard personal data. Non-compliance can result in heavy
penalties.

Set up a framework for navigating cross-border payments
One of the major challenges UK businesses often face when expanding in Africa is the high cost
associated with cross-border transactions. Traditional banks often charge exorbitant fees for
currency conversion and international transfers – up to 5-7% on cross-border fees on average. This
can cut into your profits and leave you with far less to reinvest in your businesses.
You’re also likely to find the FX rates offered by traditional banks are often unfavourably high –
around 2-5% higher than market rates – which can lead you to making significant losses in currency
conversion.
Fintech solutions have emerged as a way of dealing with these cross-border payment challenges.
They offer a wide range of currencies, faster settlement times, and real-time transaction visibility,
helping to simplify a complex financial landscape. And by using a fintech that can integrate with your
existing business systems, you’ll also be able to streamline operations and improve efficiency.

Beware the turbulence of African currencies
Regardless of location, expanding into new markets always involves risk. It’s vital you identify what
these risks could be and develop strategies to mitigate them.
A big one when expanding in Africa is currency risk, or exchange rate risk. This occurs when there are
large fluctuations in the exchange rate of one currency against another. If your business operates
internationally, these shifts can have significant repercussions – and lead to heavy losses.
In Africa, these risks are magnified by a range of factors, including political instability, economic
volatility and evolving regulations.
To effectively manage currency risks, you need to stay agile and use a blend of forecasting, hedging,
and diversification.
You can do this most effectively by employing legitimate fintech platforms, which can mitigate risk
by allowing businesses to lock in exchange rates.

Follow best practices for success in Africa
Expanding into Africa can be a rewarding endeavour for UK businesses. As I’ve already touched on,
the continent is an ideal place for investment thanks to a list of favourable conditions, including its
large customer base and growing middle class.
Of course, there are still multiple hurdles that can hinder success in this dynamic market – but it’s
important to note that these hurdles aren’t insurmountable. With wise planning, the right
understanding of the market, a strategic approach, a willingness to stay agile, and the adoption of
appropriate tools, you can discover just how rich and rewarding African markets can be.