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Red tape, bribes strangle growth


Red tape, bribes strangle growth

When John Endres, CEO of Good Governance Africa, presents his views on the state of Africa to international audiences, he illustrates his talk with three maps.

The first covers the initial wave of liberation from colonial rule.

“You can see the green colour spreading out from the north.”

The second wave occurred when people liberated themselves from the liberators. A map of the continent from 1989 shows mostly the red of one-party state rule and the yellow of military rule. “Green? There weren’t that many examples,” he says.

Today, all but two of Africa’s countries are multiparty democracies in name, if not in practice. The two exceptions are Eritrea and Swaziland.

What has since occurred is Africa’s “third liberation”, he says borrowing the title of the book by Jeff Herbst and Greg Mills. “The third wave is liberation from bad governance. There we see the least progress,” he says.

Mr Endres has just released Good Governance Africa’s mammoth 421-page Africa Survey, which contains just about any statistical measurement of society, business and economics on the continent.

Instead of looking for African countries that tick all the boxes – there are precious few – Mr Endres says it is more useful to look at those who are improving their governance scores.

Or not. As in the case of South Africa, which has a deteriorating score. South Africa is viewed as a “young, but pretty much stable democracy”, though Mr Endres says: “I’m not so sure.”

It is being hurt by perceptions of corruption and of decreasing economic freedom, which includes the freedom of citizens to engage in trade, the availability of money, the ability to trade internationally and the enforceability of contracts.

South Africa is starting to fall short on indices that measure “how easy it is to do business”.

South Africa’s herd of state-owned enterprises, the propensity of its ministers to want to meddle in business transactions or labour disputes, the many official compliance requirements from BEE to tax and labour laws, are all starting to take the fizz out of the global perceptions of South Africa.

“The complexity of regulations reduces the flexibility of the labour market,” says Mr Endres.

To illustrate his point, he contrasts two web pages. The first is from the British government’s website. It lists six simple things that must be done to employ someone.

The second is a web page from South Africa’s department of labour.

It lists no fewer than 162 “basic guides” covering everything from employment equity to sectoral rules on annual leave, child labour, closed-shop agreements, employment contacts and minimum wage determinations.

The World Bank also calculated the time needed to obtain a business operating licence.

South Africa’s most recent measurement from 2007 is an astounding 36.2 days. Competitors for investment, such as Nigeria (12.1 days) and Ghana (6.4 days), beat South Africa hands down.

What South Africa appears to lack is “a single-minded focus on economic growth”.

Nigeria has that sense of urgency, as if it has set itself the goal of overtaking South Africa as the continents number one economy, as soon as possible.

South Africa’s stagnation is illustrated by the World Bank’s calculation of GDP per person employed.

In the 23 years from 1990 to 2013, South Africa’s figure declined 8% while Nigeria’s grew 61%.

The South African total is still higher than Nigeria’s, but the gap is closing rapidly.

Nigeria is often stereotyped as corrupt, but no fewer than 17% of firms identify corruption in South Africa as a “major constraint”.

Nigeria is not that much worse at 25%. About 15% of companies say they are “expected to give gifts to public officials to get things done” in South Africa, a percentage more than twice that in Zimbabwe and Rwanda.

Source: http://www.bdlive.co.za/africa/africanbusiness/2014/02/02/red-tape-bribes-strangle-growth


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