The European Union’s Artificial Intelligence Act (EU AI Act), which came into force on August 1, 2024, is the world’s first comprehensive legal framework regulating AI systems. While primarily targeting the EU market, its extraterritorial provisions mean that every AI system venture, including African tech and business ventures offering AI products or services accessible to EU users, must consider its implications while also ensuring compliance.

Why African Startups Should Pay Attention

African companies are increasingly integrating AI systems into their operations, while also making AI systems with far-reaching implications. From retail businesses deploying chatbots in customer service, to startups developing tools for recruitment agencies to screen résumés, the inception of AI across the continent is growing rapidly; with far-reaching implications for the global market.

However, with this expanded digital reach comes increased legal complexities, which call for greater awareness. African startups operating or offering AI-driven services beyond their borders must be cognizant of international AI Laws. Here are some of the key reasons why African businesses should pay attention the EU’s AI Act:

1. Extraterritorial Reach

The EU AI Act applies not only to companies within the EU but also to those outside the EU if their AI systems are used within the EU or affect EU citizens. In other words, the Act is not just about the physical location of a company operating or deploying AI systems, but rather It’s designed to regulate the EU market. An African startup with AI system output intended to be used within the EU, or one that provides, deploys, or places an AI system or general-purpose AI model on the EU market, will fall under its scope, regardless of their physical location.

2. Operational Efficiency

Having established that the EU AI Act has extraterritorial reach, integrating compliance by design from the outset, rather than retrofitting it later, is far more efficient and cost-effective for any business with aspirations of expanding into the EU. Ignoring the EU AI Act initially and then scrambling to comply when market opportunities arise can lead to significant delays, rework, and increased expenses.

3. Penalties for Infringement

For any AI startup with global ambitions, treating the EU AI Act as a blueprint for responsible and compliant AI development is fundamental in order to avoid penalties for non-compliance. African companies deploying or operating AI systems in the EU without proper compliance to the EU AI Act risk hefty fines plus additional penalties. As per the Act, fines can be as high as €35 million or 7% of a company’s total worldwide annual turnover from the preceding financial year, whichever amount is higher. Such severe fines can be catastrophic for a startup.

4. Foundational Compliance

The EU AI Act gives companies the platform to build a sustainable business profile in the rapidly evolving AI landscape. Through the classification of their AI system and compliance with the applicable policy requirements, businesses are able to continue operations without the worry of regulatory hurdles. For instance, if your AI system is classified as “high-risk” (which many business-critical AI applications are), the compliance requirements are substantial. These include implementing robust risk management systems, ensuring data quality and governance, providing detailed technical documentation, enabling human oversight, and undergoing conformity assessments. Having all these engrained in the business system from the offset saves the organization potential future pitfalls that would otherwise impede growth.

5. Ahead of the Curve

Finally, the EU AI Act is the first comprehensive AI regulation globally, and it’s expected to influence AI regulations in other jurisdictions. By proactively understanding and aligning with its principles, a startup can better prepare for future regulatory landscapes that may emerge in other countries. The African Union’s Continental AI Strategy, endorsed in July 2024, reflects similar principles, promoting ethical and responsible AI practices across the continent. By aligning with the EU’s standards, African startups can stay ahead of emerging local regulations.

African startups must assess their AI systems to determine the applicable risk category and adhere to corresponding obligations.

A plus: Competitive Advantage

Achieving compliance with the EU AI Act can serve as a quality stamp, enhancing trust among users and partners. This can open doors to new markets and collaborations, positioning African startups as trustworthy players in the global AI landscape.

 

In conclusion, by proactively addressing the requirements of the EU AI Act, African startups can not only mitigate compliance risks but also position themselves as leaders in ethical and responsible AI deployment, on the global stage. The EU is one of the world’s largest and wealthiest single markets. For many AI startups, gaining access to this market is a significant growth opportunity. Non-compliance with the AI Act would effectively bar an African firm’s AI product or service from this market, severely limiting their potential customer base and revenue.

C.T.A

Engaging qualified legal professionals in your AI business not only aids in compliance with the EU AI Act as well as emerging local regulations, but also offers strategic benefits.

Looking for professional legal expertise to help you navigate the EU AI Act and related laws without unnecessary stress?

Contact Us