Africa represents an immense opportunity, with its high growing young population and myriad of addressable challenges. The opportunity has been recognized and has led to larger consistent bets by investors into the African startup scene, with an influx of capital from local and international investors rising from $400 million in 2015 to an estimated $1.19 billion in the first half of 2021.
However, unlike other high population markets like China, India, and the US, Africa’s 1+ billion market opportunity is fragmented into 54 diverse markets. Businesses have to grapple with expansion to multiple markets, in order to expand and scale on the continent. At a time when startups are raising record investments, scaling across Africa’s diverse markets is a key concern for most African founders and foreign entrants.
As founders strategize to scale across Africa, one of the key challenges they face is the formation and management of business vehicles across several markets in Africa. The World Bank’s Ease of Doing Business Report 2020 ranks Sub-Saharan Africa as one of the weak-performing regions on the ease of doing business rankings with an average score of 51.8, well below the OECD high-income economy average of 78.4 and the global average of 63.0. In fact, the World Bank ranks only two African economies in the top 50 on the ease of doing business, and both are not countries that attract the most capital from investors.
This is a daunting challenge. The report indicates the timelines and cost of doing business across Africa is one of the most diverse in the world, ranging from 2 days to 2 weeks and from free formation to fees in excess of $2000 in some countries. It is not surprising that for most African startups who set up holding entities outside Africa, it is easier and cheaper to form a holding company in Delaware than in the majority of African markets.
Given the need to scale to capture more market share, Eunice Olopade believes that this is a key problem to solve to deepen the market, grow the ecosystem and help startups scale. Eunice, who is a co-founder and CEO of Sidebrief highlights that it is important for African founders to be able to launch a business in any market effortlessly as they can do on Stripe Atlas, at a fixed cost. Eunice, a graduate of Georgetown University, with experience working on the doing business project at the World Bank Group teamed up with 2 other founders to do just that – build Stripe Atlas for Africa.
She says Sidebrief has stealthily built, in beta, and extended operation covering several countries in Africa, including Nigeria, Ghana, Côte d’Ivoire, Kenya, Tanzania, Uganda, and Rwanda, and intends to cover more key markets like South Africa, Ethiopia, Senegal and Egypt over the coming months. The startup has worked with more than two hundred enterprise clients across the African market as it built a platform it is betting on to solve the problem of business formation in Africa. Though it has an ambitious plan to offer company formation across all of Africa’s 54 countries, the startup recognizes the uphill task ahead.
Another, perhaps more difficult challenge for businesses, is managing tax and business compliance across Africa’s markets. Due to several factors, local and cross-border tax and compliance management in one of the most notorious markets for regulatory volatility is a recurring headache for African startups. Very telling is the Doing Business Report finding that only about 17% of countries in Africa use electronic filing or payments, compared to 97% among high-income economies. Startups are left to straddle across several manual tax and business compliance processes as they scale in African markets.
Abdulwaheed “AW” Yusuf, a graduate of the London School of Business and Finance, the COO of Sidebrief, says Sidebrief is positioning to solve this problem as well, by building the continents first cross-border tax and business compliance maintenance platform. In mature markets, you use TurboTax or TaxJar to manage tax filings, returns or ensure transactional tax compliance, but Africa’s diverse market size and difficult regulatory terrain means that solutions like this are difficult and unsexy to build, AW says.
Nonetheless, Sidebrief has built a proprietary platform to help companies manage compliance, currently in private beta, which it will be rolling out in Q3 2021. Usman, CTO at Sidebrief does not think technology alone can solve Africa’s compliance problems but believes that businesses can better manage compliance processes, costs timelines and risks, with a platform like Sidebrief’s.
As the African market rapidly evolves, the challenges around the business formation and compliance will be a key recurring theme. Sidebrief is positioned to ensure that market entry and compliance across the continent is nothing but effortless while being managed from a dashboard. We are spearheading Compliance as a Service in Africa, one business at a time.