Building capacity to help Africa trade better

Is doing business in Sub-Saharan Africa becoming more challenging?


Is doing business in Sub-Saharan Africa becoming more challenging?

Willemien Viljoen, tralac Researcher, comments on sub-Saharan Africa’s performance in the 2017 Doing Business Report

At the end of October 2016 the World Bank released their latest Doing Business Report. The report presents a review of aspects of regulation which enable or hamper businesses from starting, operating and expanding in 190 countries. This is done by using the following 11 specified indicators: starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting minority investors, paying taxes, trading across borders, enforcing contracts, resolving insolvency and labour market regulations. The countries identified as being the easiest to do business with are New Zealand, Singapore and Denmark, while the countries posing the most challenges for businesses are Libya, Eritrea and Somalia. In the ease of doing business rankings the African countries which ranked the highest include Mauritius (ranked 49 out of 190), Rwanda (ranked 56), Morocco (ranked 68), Botswana (ranked 71) and South Africa (ranked 74). According to the report countries in Sub-Saharan Africa (SSA), are, on average, the economies with the least business-friendly regulations. The majority of African countries are ranked in the bottom half of the ease of doing business rankings. However, SSA countries have shown the most improvement over the last year; on average the improvement in SSA countries was almost three times as high as the average improvement for OECD high income countries.

In general, the report finds that doing business has improved in:

  • Starting a business in Angola (eliminating paid-in minimum capital requirements), Benin (eliminating the need to notarise company bylaws to activate a bank account after incorporation), Madagascar (decrease in procedures to register a company), Rwanda (improving online registration process), South Africa (online portal to search for a company name), Kenya and Malawi.

  • Paying taxes in Angola and Burundi.

  • Restoring insolvency in Benin, Cameroon and Kenya.

  • Getting electricity in Kenya by reducing the time and interactions needed to obtain an electricity connection.

  • Dealing with construction permits in Botswana (no rate clearance certificate necessary to obtain a building permit), Madagascar (an increase in transparency by publishing building regulations online) and Zimbabwe (streamlining the building permit approval process).

  • Getting credit in the Ivory Coast, Lesotho and Malawi.

  • Trading across borders in Ghana (removing mandatory pre-arrival assessment inspections at origin for imports), Madagascar (simplifying and streamlining customs procedures and implementing an electronic data interchange system), Morocco (decrease in time for border compliance by developing the single window system) and Uganda (construction of the Malaba One-Stop Border Post to reduce border times).

However, it has also become more difficult to conduct business in the following areas:

  • Paying taxes in Cameroon (costlier due to an increase in the minimum tax rate for companies) and South Africa (an increase in the rate of vehicle and property tax).

  • Registering property in the DRC and South Africa both due to increases in property transfer taxes.

  • Starting a business in Mozambique due to increasing registration and notary fees.

  • Dealing with construction permits in Rwanda (new requirements to obtain a building permit) and Zambia (an increase in the cost for submitting a brief to the environmental agency).

  • Trading across borders in Egypt (more complex process for obtaining and processing documents and the imposition of a cap on foreign exchange deposits and withdrawals for imports) and Zimbabwe (mandatory pre-shipment inspections for imports).

Analysing the SSA-specific data of the report shows that the majority of SSA countries have lost positions in the overall doing business rankings. Of the 47 SSA countries included in the report 23 countries moved down the overall rankings; thus doing business in the majority of SSA countries has become more challenging. The countries where doing business has become more difficult include Mauritius (slipped 7 positions although still the top ranked SSA country) and Zimbabwe, Zambia, Sudan, Namibia, Cabo Verde and Burkina Faso (each losing 4 positions in the overall rankings). Six of the SSA countries remained in the same position (Togo, DRC, Seychelles, Liberia, Ethiopia and Eritrea). The remaining 18 countries have all showed improvement in rankings. The countries which have showed the most improvement in rankings are Kenya (climbing 21 positions), Tanzania and Lesotho (improving by 12 positions each) and Niger and Malawi improving 8 ranked positions each.

The data specific to the ease of trading across borders shows that the majority of the SSA countries has showed no change in ranking over the last year. Sixteen of the countries have lost positions, thus trading across borders has become more problematic. The main areas where difficulty has been experienced pertains to the cost and time associated with border procedures and documentation requirements for imports. Trading across borders with Zimbabwe has become the most problematic over the year (Zimbabwe lost 45 positions in the ranking). This is mainly due to an increase in the time required for imports to comply with border measures and the associated costs. Over the last year the time it takes for importers to comply with border measures increased from 60 hours to 228 hours, while the associated cost increased from US$ 212 to US$ 562.

Eleven SSA countries actually made it easier for businesses to trade across borders. The countries with the most significant improvement are Rwanda (ranked 44 positions higher), Niger (ranked 16 positions higher) and Ghana (improving 13 positions). Rwanda and Niger both showed dramatic reductions in the time and costs associated with border compliance for imports, while Ghana’s improvement in rankings is attributed to a significant reduction in the hours required to comply with import documentation (from 282 hours spent on import documentation to 76 hours).

The data shows a worrisome trend regarding domestic regulations in SSA countries. Doing business in the majority of SSA countries is becoming increasingly more difficult and problematic. For all but one of the measures used for the analyses the majority of SSA countries performed worse than the previous year. In terms of regulations pertaining to obtaining credit 79 percent of the SSA countries performed worse; also regulations pertaining to paying taxes (74% of all SSA countries), construction permits (70% of all SSA countries) and starting a business (64 % of all SSA countries) are becoming increasingly problematic in the region. The only measure in which there was an overall improvement (although by a narrow margin) pertains to regulations relating to getting electricity.

If domestic regulations in SSA countries are becoming more problematic for local and foreign businesses to conduct business and trade in the region it does not bode well for investment, economic growth, employment, trade and competitiveness in the region.



Doing Business Report 2017 and Doing Business Historical Data (http://www.doingbusiness.org)


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