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:
- 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?