Sub-Saharan Africa sets new record of improving business climate

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Sub Saharan Africa set a new record for a third consecutive year, carrying out 107 reforms in the past year to improve the ease of doing business for domestic small and medium enterprises, says the World Bank Group’s Doing Business 2019: Training for Reform report, released on Wednesday.The latest reforms were a significant increase over the 83 reforms that were implemented in the region the previous year. In addition, this year also saw the highest number of economies carrying out reforms, with 40 of the region’s 48 economies implementing at least one reform, compared to the previous high of 37 economies two years ago.

Four of the region’s economies have earned coveted spots in this year’s global top improvers, Togo, Kenya, Côte d’Ivoire, and Rwanda. And, Mauritius regained a spot in the world’s top ranked economies, in 20th place.

Five reforms were carried out in Mauritius during the past year, including the elimination of a sole gender-based barrier. In the area of Starting a Business, Mauritius equalised the business registration process for men and women and further consolidating the registration process for all applicants.

Minority investor protections were strengthened by clarifying ownership and control structures and introducing greater corporate transparency. Reforms were also carried out in the areas of registering property, trading across borders and paying taxes.

Rwanda carried out the most reforms in the region in past year, with seven, and moved up to 29th rank globally. The latest improvements in Rwanda, which has carried out the most reforms since the inception of Doing Business 16 years ago, included making starting a business less costly by replacing electronic billing machines with free software for value added tax invoices.

In Registering Property, an area in which Rwanda is second only to New Zealand in the world, new land dispute resolution mechanisms made property registration easier. A new insolvency law strengthened access to credit, another area in which Rwanda excels, and made it easier to resolve insolvencies by making insolvency proceedings more accessible for creditors and granting them greater participation in the proceedings. Other reforms in Rwanda were in the areas of Trading Across Borders and Getting Electricity.

Kenya implemented five reforms, advancing to 61st rank. One reform included the introduction of a new law which helped further strengthen access to credit. This latest reform catapulted Kenya to 8th rank in the world in the area of Getting Credit. Kenya also made it easier for businesses to pay taxes by consolidating permits and utilizing the country’s iTax platform, while an online system helped make property registration easier. Other improvements strengthened minority investor protections and made it easier to resolve insolvencies.

Notable reforms in Côte d’Ivoire and Togo included the introduction of online systems for filing corporate income tax and value added tax returns, making it easier for businesses to pay their taxes. In Côte d’Ivoire, which carried out five reforms, access to credit and construction quality controls were also strengthened and business registration and enforcing contracts were made easier.

In Togo, which carried out six reforms, business registration was made easier with a reduction of minimum capital requirement and enforcing contracts was made easier with the adoption of a new law on mediation, among other reforms.

Nigeria carried out four reforms which included making Starting a Business easier in Kano and Lagos, the two cities covered by Doing Business. Getting Electricity and Trading Across Borders also saw reforms in the two cities. In addition, Lagos made Enforcing Contracts easier by issuing new rules of civil procedure for small claims courts, while Kano, in a negative move, made property registration less transparent by no longer publishing online the fee schedule and list of documents necessary to transfer a property.

Elsewhere in the region, Ethiopia carried out three reforms to make it easier to register a new business, enforce contracts and obtain construction permits, while two reforms in South Africa improved the monitoring and regulation of power outages and reduced the time needed to start a new business.

Regionally, much of the reform activity in the past year focused on improvements in the area of Enforcing Contracts, with the region’s 27 reforms accounting for more than half of the reforms recorded in this area globally.

The uptick was the result of reforms carried out by the 17-member states of the Organisation for the Harmonisation of Business Law in Africa (OHADA). The organization adopted a Uniform Act on Mediation in 2017, which introduced mediation as an amicable mode of dispute settlement.

Starting a Business saw 17 reforms, which largely focused on reducing the time to obtain a business license, by streamlining existing services or introducing new online solutions. Burundi, the region’s top-ranking economy in this area with a global rank of 17, further reduced the cost needed to register a new business.

“It is a year of records for Sub-Saharan Africa. The significant acceleration in the reform effort over the past year and spanning several years is a testament to the strong impetus for change in the region. A more efficient business environment, in which private enterprise thrives, is a fundamental building block for job-creation and growth,” said Santiago Croci Downes, Programme Manager of the Doing Business Unit.

The region’s economies perform best in the areas of Getting Credit and Starting a Business, with four economies — Kenya, Malawi, Rwanda and Zambia — ranked among the world’s top 10 in Getting Credit ranking. And, on average, it now takes 21 days and costs 39 percent of income per capita to start a new business in the region, compared with 61 days and 305 percent of income per capita in 2003, when Doing Business was first published. And the minimum capital requirement has been eliminated in a majority of economies and drastically reduced in others.

The region under-performs in the areas of Getting Electricity and Trading Across Borders.

For example, it costs on average 3456,5 percent of income per capita for a business to get connected to the electrical grid, compared to 1229 percent globally. And it takes 98 hours to comply with documentation requirements to import, compared with 61 hours globally.

This year, Doing Business collected data on training provided to both public officials and users of business and land registries.

A case study in the report, which analyses this data, finds that mandatory and annual training for relevant officials is associated with higher business land registry efficiency.

However, it finds that less than one-quarter of Sub-Saharan Africa economies provide such training. A second study finds that regular training for customs clearance officials and brokers results in lower border and documentary compliance times, easing the movement of goods across borders.

It finds that economies such as Angola, the Democratic Republic of Congo and Lesotho implemented trade reforms which benefited from effective communication and training. Angola and Lesotho have for example experienced reductions in the time to prepare documentation following training programs or pilot tests when implementing the Automated System for Customs Data (ASYCUDA) World, a customs data management system developed by UNCTAD. Two other case studies focus on the benefits of accrediting electricians and training of judges. — World Bank.

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