Thursday, September 27, 2007

Doing Business 2008: Ghana and Kenya Set Pace of Reform on Continent, Mauritius Is Region's Easiest Place to Do Business

Doing business has become easier in some parts of Africa, finds Doing Business 2008—the fifth in an annual series issued by the World Bank and IFC. In 2006/07, 24 African countries implemented 49 reforms. In the regional rankings on the pace of reform, however Africa fell from third place to fifth, overtaken by South Asia and by the Middle East and North Africa.

Ghana and Kenya both rank among the top 10 reformers worldwide this year, and made the most significant advance in the aggregate ease of doing business rankings amongst countries in Africa. Mauritius, with six reforms, tops the rankings in Africa on the ease of doing business and places 27th in the global rankings. Burkina Faso and Mozambique continue to become more business-friendly.

The top 10 reformers globally—including the two in Africa—are, in order, Egypt, Croatia, Ghana, FYR Macedonia, Georgia, Colombia, Saudi Arabia, Kenya, China, and Bulgaria. Another 11 countries, including three in Africa, had three or more reforms: Armenia, Bhutan, Burkina Faso, the Czech Republic, Guatemala, Honduras, Mauritius, Mozambique, Portugal, Tunisia, and Uzbekistan. Reformers made it simpler to start a business, strengthened property rights, enhanced investor protections, increased access to credit, eased tax burdens, and expedited trade while reducing costs. Worldwide, 200 reforms—in 98 economies—were introduced between April 2006 and June 2007.

The report finds that higher rankings on the ease of doing business are associated with higher percentages of women among entrepreneurs and employees. "The benefits of regulatory reform are especially large for women," said Sylvia Solf, an author of the report. "Women often face regulations that may be designed to protect them but that instead force them into the informal sector. There women have little job security and few social benefits," she added.

In the Democratic Republic of Congo, where women need their husbands' consent to start a business, they run only 18 percent of small businesses. In neighboring Rwanda, which has no such regulations, women run more than 41 percent of small businesses.

Top reformers in Africa in 2007

Ghana, a top 10 reformer for the second year running, continues to increase the efficiency of its public services. It cut bottlenecks in property registration, reducing delays from six months to one. Greater efficiency at the company registry and the environment agency cut the time for business start-up to 42 days. Changes in the port authority's operations sped up imports. New civil procedure rules and mandatory arbitration and mediation reduced the time it takes to enforce contracts.

Kenya, the region's other top 10 reformer, launched an ambitious licensing reform program. So far the program has eliminated 110 business licenses and simplified eight others. The changes have streamlined business start-up and cut both the time and cost of getting building permits. The program will eventually eliminate or simplify at least 900 more of the country's 1,300 licenses. Property registration is also faster now, thanks to the introduction of competition among land valuers. And the country's private credit bureau now collects a wider range of data.

Mauritius, already the region's most business-friendly country, made it even easier to do business, in part by simplifying taxes. A three-year program is harmonizing the tax system and ultimately will create a single corporate tax rate with few tax credits or tax holidays. Other reforms reduced the property registration fee to 5 percent of the property value and simplified construction permitting. A central database now links the company registry with tax, social security, and local authorities—shortening business start-up to just one week. A new risk management system accelerated customs clearance for low-risk importers. And a new law will help creditors recover their debt faster in bankruptcy cases.

Burkina Faso introduced specialized commercial chambers in the general courts and lowered the cost of enforcing a judgment by cutting the related registration tax from 4 to 2 percent of the judgment amount. The cost of property registration was reduced to 12.2 percent of the property value. And a one-stop shop for company registration cut the time for business start-up to 18 days.

Mozambique replaced legislation dating from 1888 with a new commercial code that introduces stricter corporate governance rules and strengthens the rights of minority shareholders. The new commercial code also modernizes the business registration process, cutting provisional registration and making notaries optional. Start-up time for new firms fell by almost three months. Specialized judges for commercial cases should improve court efficiency.

Burundi abolished its property registration tax. Benin and Guinea-Bissau reduced their rates for such taxes.

The Democratic Republic of Congo launched specialized commercial courts. New court rules set strict deadlines, for example, eight days to appeal judgments.

Côte d'Ivoire, Lesotho, Seychelles, and Sierra Leone reduced the tax burden on companies by simplifying tax structures and lowering rates.

allAfrica.com: Africa: Doing Business 2008: Ghana and Kenya Set Pace of Reform on Continent, Mauritius Is Region's Easiest Place to Do Business (Page 1 of 2)