July 23, 2014
Hruby on Business Risk in Africa
Does it makes sense to talk about Africa as one place, or does each country have to be considered on its own merits?
Ms. Hruby: You have 54 different countries with different regulatory regimes, so even though there are some common risks across the borders, each country has to be considered individually. It often is useful to have a conversation about doing business risk in Africa because of the commonalities, but when it comes to executing specific projects you do have to do a country-risk exercise.
How do U.S. laws impede efforts by companies to expand into Africa?
Ms. Hruby: U.S. companies are subject to the Foreign Corrupt Practices Act. The FCPA and other international anti-corruption acts are there to ensure people don't make bribes. U.S. companies governed by FCPA generally are compliant with the U.K. Bribery Act, and though the intent of both laws is good, their implementation often hinders American companies' competitiveness. General counsels tend to play more of a role in market decisions when it comes to Africa than in other places, and there still is a general stereotype that African countries are very corrupt, though if you look at the Transparency International rankings, many other countries rank higher than African countries in terms of their level of corruption.
The TI Index for 2013 shows eight African countries rank higher than Brazil, 11 rank higher than China, 19 rank higher than India and 31 rank higher than Russia. That means 31 African countries are less corrupt than Russia. However, when you have a conversation with companies about African markets, anti-corruption and compliance always dominates. Also, according to the FCPA, you cannot employ a local consultant that has family in government. The definition of family is very loose and many African families are quite large and extended, and in some of the smaller markets this eliminates hiring some of the best and brightest.