Doing business in sub-Saharan Africa

Global Business District -Addis Ababa

The World Bank Group recently published the annual report “Doing Business 2018: Reforming to Create Jobs,” the 15th edition since its inception. The report examines how countries’ business regulatory environments rank across 11 indicators, with the aim of promoting practices that enable the private sector to be a driver for prosperity and equality. This year’s report looked at the regulatory environments of 190 countries and their progress or regression toward making it easier to do business since the previous year.

As shown in Figure 1.2, countries with good and bad regulatory practices can be found across every region of the globe, with a spectrum of high and low performers in between. As a region, sub-Saharan Africa has the greatest range between highest scoring countries and lowest scoring countries, with Mauritius and Somalia ranking at 25th and 190th, respectfully, a reminder that the region should not be viewed as a single entity. Rather, sub-Saharan Africa is a diverse collection of economies, all with their own strengths and weaknesses and some more prime for private sector investment.

Figure 1: Where it is easier to do business and where it is more difficult

Graph: Where it is easier to do business in Africa and where it is more difficult

Calculated from 2016/2017, the report also measures the improvements over the past year. Malawi, Zambia, Nigeria, and Djibouti (although considered a part of the Middle East and North Africa in the report) all made the top 10 list of countries with greatest improvements across three or more indicators. Notably, all four countries had significant improvements to the ease of getting credit. As the report suggests, well-designed credit market regulations and well-functioning court systems for debt recovery are important elements for supporting business growth and a marked step forward for these economies.

Figure 2: The 10 economies improving the most across three or more areas measured by Doing Business in 2016/17

The 10 economies improving the most across three or more areas measured by Doing Business in 2016/17

The authors state that the number of positive business reforms a country makes correlates with the improvements to its business environment. To understand the scope and depth of reforms regionally, the report calculates not only the average number of reforms per country, but also the average impact of the reforms in making it easier to do business, shown as distance to frontier score (Figure 3). While sub-Saharan Africa did not have the highest average total positive reforms per economy, it did have the highest average impact.

Figure 3: The average number of reforms per economy is highest in South Asia but the average impact is biggest in sub-Saharan Africa

The average number of reforms per economy is highest in South Asia but the average impact is biggest in sub-Saharan Africa

The figures show that sub-Saharan Africa as a region has been both successful in implementing good regulatory practices and, at the same time, lags behind, meaning that significant regulatory challenges lay ahead for many African countries. As the report authors suggest, if business is to help draw people out of poverty, policymakers have a role to play in providing the regulatory environment that supports such growth.

SOURCE:brookings.edu

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