Improving business climate is key challenge – Africa improves

Some African governments are making it easier to do business in their countries, but it remains a key challenge. Excessive and unhelpful regulation put off local and foreign investors all over Africa and growth and development is held back by governments that lack interest and capacity to foster private sector growth which brings jobs, improvements to currency flows and tax revenues. Many African economies could score at low outlay by finding ways to streamline and improve business regulations, including systems to prune and get rid of old or contradictory laws, and by improving capacity at business licencing, tax and other government departments.

The business environment is rising higher on the agenda of African governments and more progress is being made, but there are still major issues. A leading report is the Doing Business report series by the International Finance Corporation and the World Bank of which the 2013 edition was published on 23 October. Two weeks earlier, on 15 October, the Mo Ibrahim Foundation published its latest Ibrahim Index on African Governance (IIAG). Since 2006, the categories Sustainable Economic Opportunity and Human Development have scored the strongest performances but there have been improvements in all of the sub-categories and over the last decade governance has improved across the continent.

The World Bank and IFC report, Doing Business 2013: Smarter Regulations for Small and Medium-Size Enterprises found that from June 2011 to June 2012, 28 of 46 sub-Saharan African governments implemented at least 1 regulatory reform making it easier to do business—a total of 44 reforms. Mauritius and South Africa are the only African economies among the top 40 in the global ranking. Sub-Saharan Africa is home to 17 out of the 50 economies which have made the most improvement in business regulation for domestic firms since 2005. Over the life of the report – this is the 10th edition – Africa has consistently recorded a high number of reforms and is increasingly competitive as a place to do business with other parts of the world.

Rwanda is a particular star of Doing Business, as having consistently improved since 2005 and a case study in this year’s report shows that it has implemented 26 regulatory reforms since then. In the past year Burundi has made 4 reforms and ranked among the 10 economies worldwide that improved the most across 3 or more areas measured by Doing Business—the only low-income economy on the list. The report says Sierra Leone is a major improver and adds that Liberia has been the 4th fastest improving country since 2007, with advances this year in electricity infrastructure and contract enforcement

Augusto Lopez-Claros, Director, Global Indicators and Analysis, World Bank Group, said in a press release: “Doing Business is about smart business regulations, not necessarily fewer regulations,” said. “We are very encouraged that so many economies in Africa are among the 50 that have made the most improvement since 2005 as captured by the Doing Business indicators.” African economies that have improved the most since then include Rwanda, Burkina Faso, Mali, Sierra Leone, Ghana, Burundi, Guinea-Bissau, Senegal, Angola, Mauritius, Madagascar, Mozambique, Côte d’Ivoire, Togo, Niger, Nigeria, São Tomé and Príncipe.

Singapore has been top of the global ranking on the ease of doing business for 7 years. The top 10 for business-friendly regulation were Hong Kong SAR, China; New Zealand; the United States; Denmark; Norway; the United Kingdom; the Republic of Korea; Georgia; and Australia.

Top 3 of the Mo Ibrahim IIAG are Mauritius, Cape Verde and Botswana, while Tanzania is highlighted as an improver and joined the top ten. Rising stars include Liberia which makes impressive development progress and scores major improvements over the past 5 years in safety and the rule of law (up 17.5 points) and in sustainable economic opportunity (a 10.5 point rise). Liberia has moved up 13 places in the rankings to number 34. Guinea has made progress on sustainable economic opportunity, participation and human rights since 2010 and climbed to 42. Sierra Leone has also improved its overall score with advances in safety and the rule of law with its score improving by 16.5 points in 5 years to number 30 in the index, up 10 places since 2006.

There is an excellent and brief report here on the top 10 African countries written by Ryan Hoover, of the highly recommended www.investinginafrica.net.

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