July 26, 2021

Peer Pressure Improving The Ease of Doing Business in Africa

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Watching a neighbouring country improve its ease of doing business – and then trumpet the achievement on social media – seems to be having a profound effect on African economies, just as the continent ushers in a new era of collaboration.

A light moment during a state visit to Kenya by Tanzanian President Samia Suluhu in May this year appears to have set the tone for business relations on the continent. The message: put historical, political differences aside and get on with business and free trade.

“You’re lucky to have on this side of the border Uhuru (freedom) to do business and on the other Suluhu (solution) to all trade barriers, it’s now all up to you,” quipped Tanzania’s president Samia Suluhu when she was addressing business leaders in Nairobi. The joke, a play on the meanings of her own name and that of Kenyan President Uhuru Kenyatta not only brought down the house but instantly went viral.

Suluhu’s visit also marked the start of a new era in bilateral ties that has seen significant improvements for traders in the two countries.

During the two-day visit, Kenyatta removed the requirements for business visas or work permits for Tanzanians seeking to do business in Kenya. Kenya and Tanzania also resolved to address all non-tariff barriers and other restrictions affecting the two countries, within four months. A review meeting has been slated, with Kenya again being the host country.

While the World Bank’s Report, Doing Business 2020 shows that the majority of countries in Africa are catching up with their developed counterparts in ease of doing business, what is unique on the continent is that African countries seem to be racing to improve their rankings inspired by reforms from their peers.

For the second time, Nigeria was ranked among the 10 economies in the world that improved the most in terms of the ease of doing business, after implementing a total of 59 regulatory reforms in the 2018/19 fiscal year. Reforms focused mostly on starting a business, dealing with construction permits, and trading across borders.

“The motivation for reform in Nigeria… and Togo was in part the developmental achievements of their neighbours,” said the report.

Nigeria’s comprehensive reform journey, the report revealed, was inspired by the ease of doing business reform activities in Kenya. Kenya is ranked 56th across the globe, while Nigeria is in position 131.

During the period under review, Kenya introduced online features to its existing credit registries to build a robust system for secured transactions.

According to the report, Togo authorities have led several delegations to Rwanda’s capital, Kigali, to learn about successful reforms, inspired by that country’s progress over the last decade.

“Togo’s president set a goal to be number one in West Africa in Doing Business 2020. To achieve this target, Togo made significant reform efforts in the areas of starting a business, registering property, and getting credit,” adds the report.

Rwanda tops mainland Africa in ease of doing business rankings, at 38th in the world, while the African island nation of Mauritius is at position 13 worldwide. Kenya is third, at 56, with South Africa, long seen as Africa’s business leader, down at 84.

Niger, Senegal and Togo, have also passed laws allowing the credit bureau, Creditinfo VoLo, to collect broader historical data.

“With more credit data and data from alternative sources, these three economies were able to boost coverage rates,” said the report.

The cost of doing business for low to middle-income economies- many African economies among them – dropped five-fold between 2004 and 2020, to below 30 percent.

“Among the most common regulatory changes over the past 17 years are simplifying the requirements to start a company, easing tax compliance burdens, increasing access to credit, and ensuring the survival of viable businesses,” said the report.

Africa’s new continental free trade agreement or AfCFTA is likely to provide a further boost, all jokes aside.

Source: Bird/Africa No Filter

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