Byline: Erica Bester, Managing Director
Executives responsible for international expansion face a significant task. Not only is it vital to price and position their product for a new market, but they must also navigate and comply with local regulations, manage tax and exchange control reporting, and localise payment processing.
These challenges are amplified in emerging markets, where regulation is often opaque, infrastructure is nascent, markets are fragmented, currencies are volatile, and payment cultures are hyper-local with lower adoption of card-based methods.
All in, expanding into Africa is tough.
Connecting the problem to an effective, compliant solution
The Novo42 story begins at Precium, a South African payments platform built for enterprises.
The true nature of the challenge of expansion into Africa was crystallised by Precium’s engagement with global merchants, their payment partners, and local regulators. Each engagement demonstrated a distinct appetite for expansion into South Africa but the barriers to entry for global businesses were deeply disincentivising.
While Precium could offer advanced local payment processing solutions, there was an operational gap that needed to be filled: addressing the complexities of operating in South Africa as a global merchant.
This led to an exploration on how we could fill the gap to both enable growth for global businesses and increase investment in African markets.
How global businesses have operated in the past
Historically, there have been two options for global businesses seeking to sell in South Africa:
- Operate internationally using international card rails
- Establish a local entity to manage operations and accept local payment methods
Processing international card payments is costly, largely due to higher interchange and lower success rates. International transactions are deemed riskier by local issuing banks and additional international payment fees are charged to consumers, which result in higher dispute rates and chargebacks. Ultimately the cost of this is paid by consumers in the country, through higher prices.
In addition, consumers who do not have access to a card that can transact online, or who are uncomfortable using their card online due to rising fraud rates, are excluded from participating in global commerce. This in turn limits the number of consumers a global business can reach.
Incorporating locally requires significant upfront cost and investment before it is possible for global companies to accurately assess the return on investment of entering South Africa.
Navigating unfamiliar regulation, tax law, and exchange control is complex, and global executives worry about currency depreciation and an inability to remit funds to their global headquarters.
For many executives, this cost and risk is too significant and thus deters expansion into local markets.
These barriers directly impact foreign direct investment in South Africa.
Introducing Novo42
Novo42 is a localisation platform that supports global merchants to compliantly operate in African markets. Our core mission is to increase investment in Africa.
Our vision is to be the single partner that unlocks Africa’s potential, by simplifying and streamlining the entry of global businesses into local markets.
We do this by offering tailored localisation advisory and services, such as handling distribution, local payment partnerships, regulatory compliance, and tax obligations. As a team of compliance, finance, and payment experts based in South Africa, we are uniquely placed to support global merchants to compliantly operate in local markets – in turn unlocking the commerce potential of the region.
Global merchants benefit from:
- Streamlined operations with support from in-country experts.
- Access to local payment partners that convert more customers and increase ROI for our merchants.
- Reduced compliance and operational risk in unfamiliar markets.
- Risk mitigation through localised advisory, tax management, and compliance assurance.
Who we work with
Right now, Novo42 serves:
- Global SaaS businesses offering digital services and seeking to localise sales for South African consumers.
- Digital product and app developers offering digital goods that are sold via digital downloads, subscriptions, or in-app purchases.
We will soon expand our service to e-commerce platforms and marketplaces looking to sell physical goods directly to South African consumers.
How we work with global businesses
Our services include:
- Localisation advisory including regulation compliance, payment processing rules, and incorporation.
- Regulatory compliance and reporting including ensuring adherence to local laws, consumer protection, data privacy regulations, and exchange control.
- Distribution of goods and services to local consumers.
- Back-office and risk management support including fraud prevention, chargeback management, and dispute management and resolution.
- Payment processing partnerships and reconciliation, ensuring the highest payment success rates across multiple payment methods.
- Tax compliance including management of Value-Added Tax, customs and import duties, and filing of required tax documents, if required.
- Reporting including detailed financial reporting and analytics for local operations.
- Cross-border payments in preferred currencies.
Novo42 is already supporting pilot customers to expand their reach in South Africa with a demonstrated ability to fast-track market entry, increase customer conversion, and reduce operating costs.
Get in touch here to explore how we can support your global expansion and effortlessly tap into Africa’s potential.
