The Managing Director of a Kenyan company with operations across East Africa explained to me that “Rwanda is embracing investors. They have an organized, one-stop process. We were done with registration within a week.” Her experience doing business in Burundi was completely different. “The laws are not publicized and they change overnight”, she said. “Half the time you aren’t really sure whether you’re there legally or not. It feels like you’re fumbling in the dark.”
This experience reflects the differences in the administrative and regulatory environments in African countries – even in countries from the same economic grouping! A look at the Ease of Doing Business Index illuminates just how different sub-Saharan countries are in this respect. The index ranks countries in terms of how conducive their regulatory environments are to starting a business in Africa locally and operating there.
As reference points:
- Singapore (rank number 1) is the country with the most conducive regulatory system for doing business, and Eritrea (rank 189) the least;
- the US ranks 7, and Spain 33;
- BRIC rankings: Russia 62, China 90, Brazil 120, India 142.
A look at SSA countries by region:
Doing business in Central Africa is challenging from a regulatory point of view, no matter which country! Some quick thoughts:
- Some claim that South Africa is not Africa but Europe. If we take it out, the next highest-ranked country in the Southern region is Botswana (74) – this puts the region in the range of the BRIC countries
East and West Africa are quite heterogeneous. Mauritius and Ghana are best ranked in their respective regions for ease of doing business, even if not top in all areas:
- Mauritius is top for getting electricity, protecting minority investors, paying taxes, trading across borders, enforcing contracts, and resolving insolvency.
- Ghana is top for getting electricity, registering property, getting credit, and protecting minority investors.
Something that grabs my attention is that neither Kenya nor Nigeria – the engines of their respective regions – appear better than the regional tops in any of the regulatory aspects considered (with the exception of Kenya’s construction permits). And yet, Nigeria is the largest economy in Africa, and Kenya is # 11 (#6 in SSA) – even if excluding the informal economy from official counts! What would it be like if these countries improved their regulations making it easier for companies to bloom and do business in Africa in ways that are beneficial to all stakeholders?
One of the pitfalls that have many African countries for foreign investors is the legal regulations. If these countries would improve their regulations making it easier for companies to bloom and do business would attract without any doubt more investors.
Africa has still many other barriers such as Government failures (non-competitive, corruption, ethnic servility), regional conflicts, health weaknesses, terrorism, but Africa is also plenty of positive aspects. Nowadays, 40% of countries have governments democratically elected. The women and the States in Africa have been transformed very importantly. In the century XXl the women have achieved a very important role in the African society. In many countries the women associations are the greatest organized sector of the population. They dominate the associations in favour of human rights and religions. Women have also participated drawing-up new Constitutions. As result of this, South Africa and Namibia have one of the most progressive Constitutions related to women protection all over the world.
A continent with such level of natural resources has an extreme importance in the world development. Private and foreign investors with the complicity of the governments must attract the investments in agriculture, banking, consumer goods, infrastructure, mining, oil and gas, and telecommunications. Africa differs not only country by country but sector by sector. So the behavior of those sectors was very different and can be analyzed one by one. Only as mere example, agriculture is the largest economic sector but communications is thriving in voice and data services and drove the Africa’s economic growth in the last five years.
Education, quality and hygiene controls and vaccination for some diseases are going to be critical for the political stability in the different countries. But there is a big challenge with the HIV prevention and treatment. Antiretroviral therapies and medicines will reduce mortality and the quality of live will improve giving to the governments a much better possibility to plan work force capacity.
Africa is politically, economically and religiously diverse so there is no one solution. But at the end there is a big opportunity to participate in the development and building Africa. Political sustainability, education, rational investments can be the success keys.
Jose Pedro, thanks for your thorough and positive overview of the various aspects that can help boost the sosioeconomic developement of Africa.
Btw, some news that I think have not travelled much out of Africa is that Liberia reached the zero-Ebola stage in March.