Doing Business inThe East African Community 2012

Bujumbura, BurundiApril 11, 2012

Alfred Ombudo K’Ombudo

Coordinator, EAC Investment Climate Program

World Bank Group

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What does Doing Business measure?

Doing Business indicators:

Focus on regulations relevant to the life cycle of a small to medium-sized domestic business.

Are built on standardized case scenarios.

Are measured for the most populous city in each country.

Are focused on the formal sector.

DO NOT measure all aspects of the business environment such as macroeconomic stability, corruption, level of labor skills, proximity to markets, or of regulation specific to foreign investment or financial markets.

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Doing Business indicators – 11 areas of business regulation

Start-up Expansion Operations Insolvency Starting a

business

Minimum capital requirement,

procedures, time and cost

Registering property

Procedures, time and cost

Getting credit

Credit information systems

Movable collateral laws

Protecting investors

Disclosure and liability in related party transactions

Enforcing contracts

Procedures, time and cost to resolve a commercial dispute

Dealing with construction permits

Procedures, time and cost

Paying taxes

Payments, time and Total Tax Rate

Trading across borders

Documents, time and cost

Getting electricity

Procedures, time and cost

Employing workers (annex)

Resolving insolvency (formerly Closing a business)

Time, cost and recovery rate

Property rightsInvestor protectionAccess to credit

Entry Administrative burden Flexibility in hiring

Recovery rateReallocation of assets

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All 5 EAC economies reformed their business regulations in 2010/11

A record number of economies in Sub-Saharan Africa reformed business regulations in 2010/11

170

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Eastern Europe & Central Asia

OECD high income

Sub-Saharan Africa

Latin America & Caribbean

East Asia & Pacific

South Asia

Middle East & North Africa

Economic Community of Central African States:

Angola, Burundi, Cameroon, Central African Republic, Chad, the Democratic Republic of Congo, the Republic of Congo,

Equatorial Guinea, Gabon, São Tomé and Príncipe

East African Community:Burundi, Kenya, Rwanda, Tanzania, Uganda

Economic Community of West African States:

Benin, Burkina Faso, Cape Verde, Côte d’Ivoire, The Gambia, Ghana, Guinea, Guinea-Bissau, Liberia, Mali,

Niger, Nigeria, Senegal, Sierra Leone, Togo

Southern African Development Community:Angola, Botswana, the Democratic Republic of Congo, Lesotho,

Madagascar, Malawi, Mauritius, Mozambique, Namibia, Seychelles, South Africa, Swaziland, Tanzania, Zambia, Zimbabwe

EAC economies rank on average higher than the regional average in SSA in the ease of doing business

EAC economies improve in Starting A Business, but regional solutions still few for cross-border businesses

• Today, starting a business in the EAC takes on average 23 days and costs 55% of income per capita.

•Since establishment of the customs union, intra-EAC trade rose from $2.2bn to $4.1bn in 2010

•This growth points to need for standardization and exchange of company information to facilitate EAC companies seeking to establish operations in other EAC member states.

How do East African Community economies rank on the ease of getting electricity?

In EAC it takes an average of 4 procedures, 116 days and $24,450 to get a new electricity connection for a warehouse.

Long wait and high cost associated with purchase of dedicated distribution transformers.

Increased transparency of connection costs and processes will significantly improve ease of getting electricity.

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DB2011 DB2012

ADOPTING A NEW COMPANY LAW YIELDS BIG RESULTS IN BURUNDI

Burundi is the economy that most improved in the area of investor protection in 2010/11

introduction of new requirements for the approval of transactions between interested parties requirement for greater corporate disclosure to the board of directors and in annual reports made it easier to sue directors in cases of prejudicial transactions between interested parties

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46Rank DB2011

Rank DB2012

IMPROVEMENT IN PROTECTING INVESTORS

Kenya the only economy in 2010/11 to improve its judicial system

4 out of the 5 EAC economies— Burundi, Kenya, Rwanda and Uganda—have implemented a total of 7 improvements in their judicial systems since 2005.

Kenya, the only economy in 2010/11 to improve its judicial system:a “case track” system—categorizing cases as “small claims,” “fast track” or “multi-track” was implemented.

Global good practice: specialized commercial courts are very common in the EAC

• Uganda stands out as the easiest place to resolve insolvency in the EAC.

Best Practice Highlight: -Uganda’s insolvency procedure has a going concern outcome.

- Uganda has good provisions for creditors' committees.

Where is resolving insolvency easy – and where not?

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EAC economies have a high degree of variability among the different areas of regulation

Rwanda BOTTOM 3 rankings:•Dealing with construction permits: 84•Trading across borders: 155•Resolving insolvency: 165

The average rank in 11 areas of business regulation in Rwanda is 45, but in fact performance varies significantly across indicators

Rwanda TOP 3 rankings•Starting a Business: 8•Getting Credit: 8•Paying Taxes: 19

Best practices from across the EAC region

If each East African country were to adopt the region’s best practice for each Doing Business indicator, East Africa would rank 19th instead of 115th bringing the community closer to the global top performers such as Germany.

Key findings in Doing Business in the East African Community 2012

Thank you. For more information:www.doingbusiness.org

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