Afirca’s business climate has remained generally stable, with some notable improvements by key performers, according to the annual Doing Business report, but much more improvement is needed across the board if the continent is to make a real impact.
The World Bank’s annual Doing Business report has revealed that while much progress is being made to improve the climate for businesses across Africa, further improvement is needed, and at a faster pace, if the continent is to close the gap.
There were no African states in the top 10 of the report and only two, Mauritius at 13 and Rwanda at 38, in the top 50. Conversely, 27 of the lowest-ranked 40 and seven of the bottom 10 are African nations. Overall progress has slowed and there were less reforms made across the continent than last year.
Despite this, there was plenty of room for optimism in the report. Togo and Nigeria were in the top 10 most improved performers and the Middle East and North African (MENA) was among the best regions for business reforms.
Mauritius was up seven places from 2018, having improved its insolvency and contract enforcement provisions, while Rwanda was down nine, but still one of the best countries for access to credit, alongside Kenya and Zambia. Otherwise the report was a largely similar performance to last year, albeit that it found that progress had been made in a number of small ways.
Stephen Akinsanya, a barrister with Great James Street in London, who has worked regularly on cases involving African states, and a former chair of the British Nigeria Lawyers Forum, tells ALB the business climate is improving.
“Across the African continent people are waking up to the idea very quickly that it is a great place to do business,” he says. “What has always let Africa down as a continent has been structure and regulatory practice, which has not instilled confidence in the way people wish to seek to invest and do business.”
The 17th edition of the report ranked 190 economies, measuring 12 business regulatory criteria for the 12 months ending 30 April 2019. The criteria fell into five categories: opening a business, getting a location, accessing finance, dealing with day-to-day operations and operating in a secure environment.
The report analysed factors including employment, construction, access to credit, paying tax, cross-border trade, contracting with governments, enforcing contracts and resolving insolvency.
In a statement, World Bank Group president David Malpass said: “Governments can foster market-oriented development and broad-based growth by creating rules that help businesses launch, hire, and expand.”
He added: “Removing barriers facing entrepreneurs generates better jobs, more tax revenues, and higher incomes, all of which are necessary to reduce poverty and raise living standards.”
UPSIDES
It was the second year in a row, and the third year in five, that Togo has been in the most-improved countries, which the report attributed to a series of business regulation reforms, including to construction and property registration.
Akinsanya notes that Togo has looked across the continent to East Africa, modelling many of its business reforms on those in Rwanda.
Nigeria benefitted from reforms which made it easier to enforce contracts and improved judicial process. Akinsanya points to the work of The Presidential Enabling Business Environment Council, which has promoted economic recovery and growth, with a clear objective to be in the world’s top 70 economies by 2023, through measures including the 2018 Companies and Allied Matters Act and the new Finance Bill.
“So when you look at the legislation and the current administration, everything is driven towards improving Nigeria’s standing on the world stage to do business and the place to do business in,” he says, particularly after this year’s re-election of President Muhammadu Buhari.
Akinsanya also suggests that the rise of alternative dispute resolution, particularly arbitration and mediation have also helped here: “Companies and businesses are far more comfortable going in, because there is a clear pattern of how disputes can be resolved, and also clear rules and regulations as to how one engages with particular companies or businesses in Nigeria, to facilitate successful deals being done.”
“All-round one is looking at structured process in terms of the very start of setting up a business, right through to the conclusion of a deal, things are made far easier now, there are less hoops to jump through and less red tape,” he adds.
Elsewhere, Niger and Senegal were among other countries to experience improvement thanks to reform. This despite the fact the Sub-Saharan region is performing poorly overall, with an average Doing Business score of 51.8 – lower than 149th ranked Benin, which scored 52.4. By contrast, MENA’s average score had increased from last year.
There were 10 African nations in the top 100 overall, Morocco, Kenya, Tunisia, South Africa, Zambia, Botswana and Seychelles the others. Morocco was another to make significant reforms, as did Egypt.
With the logistics of setting up a business important, Nigeria, along with Ghana, had also improved electricity connection times and the level of power cuts in Sub-Saharan Africa has declined, although it remains high overall.
Other countries which took positive steps included Djibouti, which was one of a handful of countries to create new registries, while Kenya added capabilities to its existing registry services, and Nigeria, Senegal and Togo all allowed greater credit agency data collection.
Mauritania was one country which has improved fast-track dispute resolution, while other positives included the spread of credit bureaus and agencies across Sub-Saharan Africa over the past decade, to 92% of countries in the region.
DOWNSIDES
Sudan, ranked just 171st, was one country where political changes led to legislative failures which set back credit, investment protection and insolvency provisions.
Chad, Democratic Republic of Congo, Central African Republic, South Sudan and Libya were all in the bottom 10, with Eritrea and Somalia second-last and last, respectively.
Last month the World Bank agreed to provide Cameroon with USD 200 million in credit for economic growth and measures against poverty, while PwC’s annual Global CEO Survey, released in January, revealed rising pessimism among African businesses about global economic trends.