Is West Africa in Your Company’s Future? A Few Considerations Before Expanding
Your business has done well and you have great relationships with your clients. Things are going great! Then, one of them calls asking you to work with them in West Africa. Sounds amazing, right? You think it over, give them a price -- 3 times what you charge them for equivalent services in West Texas -- and they agree. Celebrations ensue. So, now what?
Before committing to the project, the number one thing to consider:
Is this a one-time project-specific contract or is the company making a long-term commitment to international expansion into West Africa?
If this a one-time deal the first thing to discern is whether or not you can contract for the services directly from your US headquarters. If you cannot contract from outside the local country the cost in time and money of setting up to do business for a single contract is most likely going to be prohibitive. For example, it can take up to a year for a company to be approved to legally operate in Angola. That is a lot of time and energy spent for a specific, one-time project.
Should you be fortunate enough to be paid directly you will still need to establish a business presence in-country that will be responsible for local expenses. This requires registering in the local country to do business, understanding which tax regimes are applicable to your operations and establishing banking relationships. Sounds like a real headache, doesn’t it?
Oh, you will also need to have an understanding of the local employment law as it can not only impact the cost of your local labor but also any expatriates that you have working in country.
If you determine that all or a portion of the service contract with your client will have to be executed in-country and this will be a long-term commitment to the expansion into West Africa then you have a whole host of other things to consider.
For example, are you going to organize a local company? If so how is it to be structured? Who is going to be the local partner? What do I need to be looking for in a local partner? How long is it going to take to get company registered in and approved to do business? Is there a minimum capital contribution required to set up a local company? What are the various taxes that will apply to our operations? How stable are the tax laws? Will the business require any credit? If so will the business be able to obtain financing for the operations outside of the local country? If not what is the banking environment in the local country? What will be the cost of obtaining local financing? And the most important question is are there any currency restrictions on exchanging the local currency to another currency such as US dollars Euros?
Are you starting to sweat? Don’t let these choices overwhelm you. Lots of companies operate profitably in West Africa because they understand the culture, the work environment and their cost structure. Make sure your company does also by working with a Trusted Business Advisor with experience on the ground.
So, what should you look for in a Most Trusted Business Advisor as you Expand into West Africa? Find out here.
