Washington, DC — Kenya and Ghana are among the world's top 10 business reformers, and Mauritius is Africa's easiest place to do business, according to a new report from the World Bank released today.
However, across the continent as a whole business reforms have slowed, setting sub-Saharan Africa behind South Asia, the Middle East, and North Africa in ratings of government regulation of business in 178 countries.
The report, "Doing Business 2008" – issued by the World Bank and the International Finance Corporation - mostly assesses legal changes aimed at making it simpler to start a business, gain access to credit, and ease tax burdens.
In an interview with allAfrica, Sylvia Solf, a World Bank private sector development specialist and main author of the report, said reforms in Africa – especially those in Mauritius – can "set examples for peers" worldwide.
According to Solf, small, informal businesses benefit most from reforms like cutting fees payable to authorities, limiting the time it takes to process applications, and reducing taxes.
"In Mauritania, if I were to pay all the taxes that I have to pay as a small or medium-sized entrepreneur, I would pay 130 percent of my income," Solf said, noting the lack of incentive for such entrepreneurs to formalize their businesses. Entrepreneurs in the black market have difficulty gaining access to credit, and their employees are denied access to national labour benefit programs, Solf added.
Government regulations can "hurt the groups they intend to protect," said Solf. "In the Democratic Republic of Congo, a female entrepreneur must obtain her husband's formal permission before opening a business.
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"It's not surprising that only 18 percent of businesses run by women are formally registered in the DRC, while in Rwanda, where you don't have these regulations… you have 41 percent of female entrepreneurs running formal businesses." Many informal businesses in Africa are headed by women.
The proliferation of informal enterprises across the continent makes it difficult for many governments to collect revenue to fund the kind of health, education, and infrastructure development associated with healthy economies. "If regulations were simpler and property rights were more protected," some countries could "gain overall economic growth," Solf noted.
"In the countries that are reforming the most, the returns on investments – in this case, equity investments – are higher," she added. "If a country implements reforms over three or four years, it sends a very strong message to investors, both local and foreign."
The report did not directly address corruption, one factor which prevents entrepreneurs from formalizing their business. However, the bank is working on a new indicator to assess the problem. "It won't be a perception index," she said, but "a complimentary index to others like that of Transparency International, for example."
