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Doing business in Africa is challenging and rewarding

A difficult 2014 has done little to tarnish sub-Saharan Africa’s appeal as a business destination for South African companies looking to expand their businesses. But to succeed in this challenging and rewarding environment, companies must be willing to weather volatility and adapt the way that they do business.

That’s the word from Gerhard Hartman, Head of Department at Sage HR Africa. He says that with the IMF projecting growth in excess of 5% for the region as a whole in 2014 and 2015, sub-Saharan Africa continues to offer a range of exciting possibilities for businesses seeking to grow into new markets.

Yet as recent instability in countries like Nigeria and Kenya illustrates, companies cannot expect a completely smooth ride when they move into new African territories. They can expect to encounter obstacles as varied as high connectivity costs, bewildering bureaucracy, and a lack of electricity in some countries.

However, the environment is improving all the time, says Hartman, with governance and infrastructure rapidly improving through the continent. Though a battered oil price and lower demand for commodities may hurt some African economies, there is still plenty of growth as governments build out infrastructure such as roads and power generation and as African agricultural exports boom.

Less red tape

“From our perspective, we entered Africa several years ago, and we have seen the business environment mature at a rapid speed,” says Hartman. “Thanks to the efforts African governments have made to reduce red tape, it is easier and more attractive to do business here than ever before.”

Hartman says that to succeed in Africa, companies need to be attuned to the nuances in different regions and countries – a one-size-fits-all approach will not work. This means it’s important to have boots on the ground to serve customers – just as anywhere else in the world, businesses in Africa value face time and localised support.

“We believe that you need a mix of your own people on the ground to put your systems and processes in the place with local staff members and business partners who have the contacts and expertise to help you succeed,” Hartman says. “It’s important to have the humility to listen to them and accept their guidance.”  

Mistakes to avoid

Common mistakes that companies make when expanding into Africa include not having sufficient knowledge of the country and a lack of operational planning. Preparation is essential as is a solid understanding of the local tax laws, exchange control regulations and company legislation. Finding trusted local partners and doing the necessary homework can help companies avoid costly mistakes, Hartman says.

It’s also important not to underestimate the time and money it takes to expand into Africa, says Hartman. For example, it’s expensive but essential to set up business systems, train local staff and resellers, and meet with customers and provide on the ground support.

From Sage HR’s perspective, it is growing into Africa off the back of the Sage Pastel and Sage VIP brands, which are both highly respected in South Africa. Africa is an irresistible growth opportunity since companies in Africa are starting to realise the importance of automating HR and payroll software. In addition, Sage HR’s South African clients expect the company to be able to support them wherever they do business in Africa, says Hartman.

“We are seeing more demand in Africa for software that helps companies improve record-keeping and decision making, become more efficient, and drive productivity. They also want to ensure compliance with stricter tax and labour laws,” he adds. “HR and payroll is becoming a priority because it is an essential part of any company’s strategic advantage.”

Thanks to mobile broadband prices falling and infrastructure improving, there is a big demand for cloud-based solutions that allow people to be mobile and productive, says Hartman. The cloud is helping African businesses to get up-and-running on the HR solutions they need at a rapid pace and with minimal upfront spending.

Gerhard Hartman is Head of Department at Sage HR Africa

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Botswana on high red alert as AML joins Covid-19 to plague mankind

21st September 2020

This century is always looking at improving new super high speed technology to make life easier. On the other hand, beckoning as an emerging fierce reversal force to equally match or dominate this life enhancing super new tech, comes swift human adversaries which seem to have come to make living on earth even more difficult.

The recent discovery of a pandemic, Covid-19, which moves at a pace of unimaginable and unpredictable proportions; locking people inside homes and barring human interactions with its dreaded death threat, is currently being felt.

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Finance Committee cautions Gov’t against imprudent raising of debt levels

21st September 2020
Finance Committe Chairman: Thapelo Letsholo

Member of Parliament for Kanye North, Thapelo Letsholo has cautioned Government against excessive borrowing and poorly managed debt levels.

He was speaking in  Parliament on Tuesday delivering  Parliament’s Finance Committee report after assessing a  motion that sought to raise Government Bond program ceiling to P30 billion, a big jump from the initial P15 Billion.

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Gov’t Investment Account drying up fast!  

21st September 2020
Dr Matsheka

Government Investment Account (GIA) which forms part of the Pula fund has been significantly drawn down to finance Botswana’s budget deficits since 2008/09 Global financial crises.

The 2009 global economic recession triggered the collapse of financial markets in the United States, sending waves of shock across world economies, eroding business sentiment, and causing financiers of trade to excise heightened caution and hold onto their cash.

The ripple effects of this economic catastrophe were mostly felt by low to middle income resource based economies, amplifying their vulnerability to external shocks. The diamond industry which forms the gist of Botswana’s economic make up collapsed to zero trade levels across the entire value chain.

The Upstream, where Botswana gathers much of its diamond revenue was adversely impacted by muted demand in the Midstream. The situation was exacerbated by zero appetite of polished goods by jewelry manufacturers and retail outlets due to lowered tail end consumer demand.

This resulted in sharp decline of Government revenue, ballooned budget deficits and suspension of some developmental projects. To finance the deficit and some prioritized national development projects, government had to dip into cash balances, foreign reserves and borrow both externally and locally.

Much of drawing was from Government Investment Account as opposed to drawing from foreign reserve component of the Pula Fund; the latter was spared as a fiscal buffer for the worst rainy days.

Consequently this resulted in significant decline in funds held in the Government Investment Account (GIA). The account serves as Government’s main savings depository and fund for national policy objectives.

However as the world emerged from the 2009 recession government revenue graph picked up to pre recession levels before going down again around 2016/17 owing to challenges in the diamond industry.

Due to a number of budget surpluses from 2012/13 financial year the Government Investment Account started expanding back to P30 billion levels before a series of budget deficits in the National Development Plan 11 pushed it back to decline a decline wave.

When the National Development Plan 11 commenced three (3) financial years ago, government announced that the first half of the NDP would run at budget deficits.

This  as explained by Minister of Finance in 2017 would be occasioned by decline in diamond revenue mainly due to government forfeiting some of its dividend from Debswana to fund mine expansion projects.

Cumulatively since 2017/18 to 2019/20 financial year the budget deficit totaled to over P16 billion, of which was financed by both external and domestic borrowing and drawing down from government cash balances. Drawing down from government cash balances meant significant withdrawals from the Government Investment Account.

The Government Investment Account (GIA) was established in accordance with Section 35 of the Bank of Botswana Act Cap. 55:01. The Account represents Government’s share of the Botswana‘s foreign exchange reserves, its investment and management strategies are aligned to the Bank of Botswana’s foreign exchange reserves management and investment guidelines.

Government Investment Account, comprises of Pula denominated deposits at the Bank of Botswana and held in the Pula Fund, which is the long-term investment tranche of the foreign exchange reserves.

In June 2017 while answering a question from Bogolo Kenewendo, the then Minister of Finance & Economic Development Kenneth Mathambo told parliament that as of June 30, 2017, the total assets in the Pula Fund was P56.818 billion, of which the balance in the GIA was P30.832 billion.

Kenewendo was still a back bench specially elected Member of Parliament before ascending to cabinet post in 2018. Last week Minister of Finance & Economic Development, Dr Thapelo Matsheka, when presenting a motion to raise government local borrowing ceiling from P15 billion to P30 Billion told parliament that as of December 2019 Government Investment Account amounted to P18.3 billion.

Dr Matsheka further told parliament that prior to financial crisis of 2008/9 the account amounted to P30.5 billion (41 % of GDP) in December of 2008 while as at December 2019 it stood at P18.3 billion (only 9 % of GDP) mirroring a total decline by P11 billion in the entire 11 years.

Back in 2017 Parliament was also told that the Government Investment Account may be drawn-down or added to, in line with actuations in the Government’s expenditure and revenue outturns. “This is intended to provide the Government with appropriate funds to execute its functions and responsibilities effectively and efficiently” said Mathambo, then Minister of Finance.

Acknowledging the need to draw down from GIA no more, current Minister of Finance   Dr Matsheka said “It is under this background that it would be advisable to avoid excessive draw down from this account to preserve it as a financial buffer”

He further cautioned “The danger with substantially reduced financial buffers is that when an economic shock occurs or a disaster descends upon us and adversely affects our economy it becomes very difficult for the country to manage such a shock”

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