It’s no secret that businesses in sub-Saharan Africa face several barriers when it comes to ease of doing business, despite some of the fastest growing economies in the world being located in this region. According to the Doing Business 2017 World Bank Fact Sheet for the region, Mauritius has the highest ranking at 49, while large economies like Kenya, Uganda and Nigeria rank 92, 115 and 169 respectively.
Of course that comes as no real surprise to anyone. The ‘Doing Business’ ranking assesses how easy or difficult it is for small to medium-size businesses to start and run in line with relevant regulations. Changes in regulations around 11 key areas in the life cycle of a business are monitored and measured: starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting minority investors, paying taxes, trading across borders, enforcing contracts, resolving insolvency (bankruptcy) and labour market regulation. For example, economies with better bankruptcy laws as measured by Doing Business tend to have more credit (access to finance) available to the private sector.
For the region to continue to make significant strides in its socio-economic transformation, ease of doing business is a key area of focus. Key barriers such as corruption, government economic policies, poor infrastructure, regional conflicts and terrorism need to be addressed, and thoroughly. I think it may even help if many African governments formed regulatory reform committees that focus solely on improving performance in the Doing Business rankings, as a measure of competitiveness. This will put righteous pressure on African governments to sit up in this regard.
The Shining Light
Mauritius casts a shining light across Africa in this regard. It ranks top in terms of access to electricity, protecting minority investors, cross-border trade, enforcing contracts, resolving insolvency and tax payment. For example, it takes 152 hours to pay taxes in Mauritius, compared to 261 hours globally.
Indeed it is no wonder that Mauritius is much more attractive as a place to live than most other African countries. A brief comparison of data for Mauritius versus Uganda shows that:
- Mauritius has a GDP per capita of US$20,500 while Uganda has a GDP per capita of $2,100, meaning that a person would make 89.8% less money each year in Uganda.
- In Mauritius, 8% of people are below the poverty line. In Uganda, 19.7% are. That means one would be 2.5 times more likely to be below the poverty line.
- In Mauritius, 99.9% of people have access to clean drinking water. In Uganda, it’s just 79%.
- In Mauritius, life expectancy is approximately 75.6 years, while in Uganda the average is 55.4.
For most of the sub-Saharan African region, the areas most in need of improvement are access to electricity, cross-border trading and paying taxes. In getting electricity for example, it takes an average of 120 days to obtain a permanent electricity connection to the grid, compared to the global average of 93 days. If the region can prioritize ease of doing business and narrow the gap with the rest of the world, it will go a long way to improve its economic outcomes, as Mauritius has demonstrated so remarkably.
An edited version of this article was previously published in Accounting and Business, the member magazine of ACCA (Association of Chartered Certified Accountants)