NS4301 Summer Term 2015

Doing Business in Africa

Introduction• Government’s in SSA are making it easier for firms to do

business• 39 of 48 countries have been reducing the complexity and cost

of regulatory processes – World Bank, Doing Business 2015• Still a long way to go before region catches up with emerging

market peers• Doing business seeks to assess regulations affecting crucial

aspects of a business such as

• Ease of starting an operation

• Dealing with contraction permits

• Obtaining electricity

• Getting Credit

• Paying taxes

• Registering property etc.

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Doing Business I• Progress is defined by the distance to frontier (DFT) which

shows the gap between an individual economy’s performance and the best performance on each of the indicators

• Zero represents the lowest performance • 100 represents the frontier• Score of 75 means country is 25 percentage points away from

the frontier• Top ranked countries out of 189 have DFT scores over 80 with

Singapore ranked first at 88.27• Highest ranked SSA country is Mauritius, 28th place with a DFT

core of 74.81 ahead of countries such as Japan, France and Spain

• South Africa ranks 43rd with a DFT score of 71.08, followed by Rwanda (46th)

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Doing Business II

• Other African countries with scores above 60 are:

• Ghana, Botswana, Seychelles and Namibia.

• At the other end of the scale Eritrea is at the bottom of all countries world-wide – score of 33.16

• Countries with scores less than 40 include:

• CAR, South Sudan and Chad

• Largest block of countries is clustered between 40 and 50 on the DFT scale and includes:

• Nigeria, and a number of oil and gas exporters:

• Angola, Congo, Mauritania, Equatorial Guinea and Sudan

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Doing Business III

• Most SSA countries have made some positive reforms

• Five of the ten countries to improve the most were:

• Benin, Cote d’Ivoire, DRC, Senegal and Togo

• One third on the 30 countries to improve in reducing the distance-to-frontier were SSA.

• Investors are more concerned about resource endowments than business environment

• Doing Business ranking not a reliable guide to FDI decisions.

• Two countries with poor Doing Business scores were: Nigeria (ranked 170) and Mozambique (127)

• Ranked among the region’s top FDI locations in 2013 with US$6billion and US$5.8bn respectively

• Business conditions likely to have a more decisive impact on FDI decisions when comes to smaller, low income, resource poor countries. 5

Doing Business IV

• However close correlation between those economies with high Doing Business scores and those in the World Economic Forum’s competitiveness scores

• Suggest high Doing Business rankings boost competitiveness and vice versa

• Top three SSA counties Mauritius, South Africa and Rwanda hold the same position in competitiveness rankings

• The gas exporters including Angola, Chad, Mauritania and Nigeria score poorly on both.

• Doing Business scores should be used by governments to design reforms to improve productivity

• SSA countries still have substantial work to do to catch up with their emerging market peers.

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