Business is how people create their livelihoods – their entrepreneurial spirits get economies going. Removing hurdles and oiling procedures are good for business. Every year, African countries make small but significant steps on the World Bank ranking of ‘Doing Business’, based on an extensive survey of 190 countries. The 300-page report offers a rich source of business enhancement steps that help boost economies on the continent.
Every year, the long-awaited publication of the ‘Doing Business’ ranking shows how countries on the continent perform in making life easier for business. In 2018, Africa’s frontrunners are Mauritius (ranked 25), Rwanda (41), Morocco (69), Kenya (80), Botswana (81), South Africa (82), Zambia (85). These are the countries that perform best based on what they do to enhance business activity and their actions (or absence thereof) that constrain it.
Actions that make a difference
But behind the ranking are the policies and the actions that make the difference. What is it that countries do that actually gets business going, that supports entrepreneurs to develop and manufacture and that motivates traders to move, buy and sell products?
The World Bank ‘Doing Business’ report measures that affect the life of a business, like starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting minority investors, paying taxes, trading across borders, enforcing contracts and resolving insolvency. It is in these areas that governments can strengthen the ability of the private sector to create jobs, lift people out of poverty and create more opportunities for the economy to prosper.
The report offers numerous examples, like improving infrastructure efficiency and trade logistics. Investing in that area brings real benefits to an economy’s balance of trade and individual traders. “However, delays in transit time can reduce exports: a study analysing the importance of trade logistics found that a 1-day increase in transit time reduces exports by an average of 7% in Sub-Saharan Africa.”
Some countries made remarkable jumps up the ladder of promoting business. Nigeria, Malawi and Zambia even made it to the list of 10 top improvers in 2016/17. According to the report, Nigeria made starting a business faster by introducing the electronic approval of registration documents. Nigeria also introduced new centralised electronic payment channels for the payment of all federal taxes. Malawi halved the fees charged by the city council and reduced the time to process building plan approvals. It also improved access to credit information by establishing a new credit bureau. Zambia made exporting and importing easier by implementing the ASYCUDA World data management system and made tax compliance easier by introducing an online platform for filing and paying taxes.
Simplifying registration requirements can also boost business. Several countries took action in this area:
- By eliminating the requirement that a woman must obtain her husband’s permission to operate a business, the Democratic Republic of Congo made it easier for women to register firms. And by combining multiple business registration procedures, this country also reduced the time required to start a business by nearly a business week.
- Equatorial Guinea made starting a business a lot easier last year, by abolishing the requirement to obtain an authorization of establishment from the Office of the Prime Minister to start a business. Previously, it took four months on average for each new business to obtain this authorization.
- Côte d’Ivoire established a one-stop shop for building permits and published deadlines, costs and procedures related to obtaining the urban planning certificate. As a result, Côte d’Ivoire reduced the number of required procedures by four and the time to process applications by no less than 210 days!
- Djibouti made starting a business more affordable by reducing the fees to register and publish the notice of commencement of activity.
Rwanda’s active approach
A good example of an African country that is constantly looking for ways to improve the business climate is Rwanda. The country is actively promoting itself as an attractive investment, based on its high Doing Business ranking. In a recent article on VenturesAfrica, Louise Kanyonga (Head of Strategy and Competitiveness Department at Rwanda Development Board) proudly announces reforms that further enhance the attractive business and investment climate. The reforms are to “reduce bureaucracy in the area of construction permits; cutting down the number of days for investors to connect to the national grid by 14 days and other getting electricity issues; saving exporters’ time spent at customs.”
This active approach towards streamlining business seems to pay off in this country that is one of the fastest growing economies in Africa with the International Monetary Fund projecting its growth at 7.2 percent and 7.8 percent for 2018 and 2019 respectively.