Top 10 African Countries with the Best Business Climate
December 30, 2018 (Ezega.com) - Africa has tremendous potential, with abundant natural resources and hardworking people. There exist a huge gap and opportunities for budding entrepreneurs.
Despite the challenges we experience, Africa has a huge potential for growth in almost all sectors.
The World Bank Group developed a ranking system called the Doing Business Index, which indicates the ease of doing business. A high ranking, which is denoted by a small numerical number, indicates a better climate and vice versa.
For the past fifteen years, the World Bank has been measuring business environments using this system. They have analyzed more than 190 economies using criteria like electricity, ease of business creation, taxes and the protection of property rights.
Based on this criteria, here are the top 10 African countries with the best business climates for starting and running a business:
Swaziland is ranked 104th globally and 10th in Africa. It is engaged in efforts to improve foreign investment rates, principally in the mining and tertiary sectors. These efforts are also geared towards other dynamic areas like services and new technologies.
The 2018 Doing Business Report indicates Lesotho is in position 49 for trade across borders, 77th in credit financing, 95th for enforcing contracts, 111th in remitting taxes, 108th in the protection of minority investors, and number 119 for starting a business.
Namibia rarely features on investors’ radar because its economy is small. It is also closely associated with South Africa, which is more advanced.
Nonetheless, it offers immense opportunities for potential investors and entrepreneurs due to its relative ease of starting a business, access to credit and available electricity. But it has a bureaucratic barrier in the time taken to register a property or business.
The country is ranked 101 globally, and it takes approximately 66 days to register and start a business. It will also take you 37 days to get electricity and 52 days to register your property with the relevant bodies.
The Doing Business Report ranks Zambia at position 85, which is an improvement from its previous position that was 98. The country has moved up 13 places. Presently, Zambia is listed among the top ten global economies that have shown notable improvements.
According to the report, Zambia has adopted three regulatory reforms: First, it is committed to ensuring entrepreneurs can access credit after launching the new Movable Property Tax Act.
Another notable development is the establishment of a Unified Collateral Registry. Last, the country effected a reform that lessens the rate of taxes paid when transferring property.
Zambia adopted a web-based customs data management system that facilitates import-export activities, which has attracted praise for its efforts to improve cross-border trade.
According to the World Bank Report, Zambia is ranked 2nd for getting credits, 15th in tax remittance and 89th in protecting startups.
Apart from that, it will take you approximately 7.5 days to start your business in Zambia, 117 days to get electricity, and 45 days to register property.
At position seven is Tunisia, which has dropped 11 places from position 77 to 88 according to the report. This cradle of Arab spring is ranked 2nd in ease of doing business in North Africa. Some of the key areas of concern for the World Bank include:
• Acquiring a business permit
• Connection to the national grid
• Registering property
It will take you approximately 11 days to set up your business in Tunisia, and 9 days for all the administrative procedures. Additionally, businesses have to through 18 administrative steps, which would take up to 96 days.
In terms of the ease of doing business, Tunisia is ranked 74th globally, and it will take you around 65 days to get electricity.
6. South Africa
With a score of 64.89, South Africa is ranked 82nd according to the report. At one time, this country was the most powerful in Africa in terms of tourist visits. People visited South Africa in large numbers to enjoy its beauty and diverse culture.
South Africa’s government is determined to reach the same status in attracting investors by offering them diverse facilities to enable them to do business.
The government, via the department of trade and Industry (DTI) and other agencies, offer investors varied investment incentives, which can be sorted into these categories;
• Facilitating exports
• Human resources
• Supplementary funding and grants
• Tourism development
• Investment aid
• Development finance
• Sectoral measures
In terms of protecting investors, the country is ranked 24th globally. Additionally, it is number 46 in tax remittance and 68th in credit facilitation. It takes you 46 days to start a business in South Africa, 226 days to get connected to the national grid, and 23 days to register your property.
Botswana is driven by diamond mining as it is one of the few African countries that has managed to maintain a high economic growth since 1996.
Ranked at position 71 in the World Bank Report released in 2017, Botswana has seen its status lowered in the 2018 report. It now ranks at position 81 and 5th in the continent.
Experts suggest this decline is a result of a lack of interest in the diamond mining sector. Many investors feel the country’s diamond doesn’t require transnational investments. Indeed, this has led to a decline in investments since 2015 from 30% to 25%.
Nonetheless, there have been significant investments in the banking and services sectors. Ease of doing business report indicates Botswana ranks 47th in tax remittance, 77th in credit lending, 50th in border trade, 81st in registering property and 153 in starting a business.
It takes you 77 days to get connected to the national grid, and approximately 12 days to register property in Botswana.
Kenya has risen 12 places in the report released in 2018 and appears in position 80, compared to the previous year when it ranked at position 92.
These improvements are a result of public-private sector engagements in business. 2017 proved to be a turning point for the country, despite the protracted electioneering period.
“The country delivered the highest number of business-related reforms in the continent,” Said Adan Mohammed, the Cabinet Secretary for industrialization.
Kenya’s position this year remains its best compared to the last fifteen years.
Since the country is determined to be among the top fifty countries with the best climate for business, it is working hard in collaboration with the private sector to facilitate the process of creating and doing business in different sectors like manufacturing and health.
The government has also made it easy for businesses to pay taxes by creating a system known as ITAX, which enables individuals and businesses to file tax returns online.
Apart from that, through a system known as e-citizen, you can access all the government services like business registration, which reduces the amount of time wasted moving from one government office to another.
The ease of doing business report indicates that Kenya significantly reduced the time taken to comply with taxes from 405 hours to 196 hours. Stamp duties were also eliminated making it easier for companies to start their operations.
Though it did not experience some of the turbulent periods like its North African neighbors, Morocco witnessed many socio-economic pressures like economic inequity and joblessness.
However, the kingdom has responded well with reforms that have made the country’s climate conducive for starting a business. At position 75, Morocco is one of the countries with a conducive environment for startups with a score of 67.91 points.
It confirms Morocco is the leader in North Africa, ahead of Tunisia, Algeria, and Egypt.
The CNN reports that it takes you approximately 10 days to start a business, 57 to get connected to the national grid, and 30 days to register property. However, the country lags behind in regulatory and legal indicators.
As far as taxes are concerned, the report indicates the country has simplified its payment procedures which makes the process smooth. With these developments, Morocco ranks 3rd in Africa in terms of having a conducive environment for business.
Rwanda offers the second best environment for starting and running a business and ranks as one of the best African countries globally.
Though small and landlocked, Rwanda’s success story is one envied by many due to its relentless determination to eliminate the barriers to entrepreneurship.
Following years of reform, the country has lowered the requirements needed to start and run a business and made it far easy to obtain credit.
Rwanda is among the top 50 countries globally according to the World Bank Report, compared to last year when it was position 56. It has made it easy to register goods via an online platform that also facilitates the registration and transfer of property.
The country has an integrated land registry that makes it possible to transfer property within seven days at a cost of 0.15 of its value. In this pointer, the country is 2nd worldwide.
Rwanda strengthened the protection of minority directors by expediting the prosecution of directors. This clarifies the control and ownership structures, which leads to accountability.
Apart from that, it takes you 5.5 days to start a business, 34 to get connected to the national grid and 32 days max to register property. The most lucrative sectors in Rwanda are:
• Real estate
• Information technology
The report also highlights Rwanda’s facilitation for the execution of contracts, which was made possible by the judgments rendered in commercial cases. These judgments can be accessed by the public via the judicial website.
Mauritius has the best climate for starting and running a business in Africa due to its focus on the expansion of IT infrastructure and renewable energy sources.
Historically, the country thrived on textiles, finance, tourism, and sugar, but thanks to changing trends, there are other opportunities for investors.
Its liberal approach to taxation and regulation makes it number one in the ease of starting and running a business.
According to the report, it takes an average of 6 days to start a business, 81 to get connected to the national grid, and 14 days to register property.
It ranks 25th globally and leads other African countries with a rating of 77.54 points. The World Bank noted these areas:
• Acquiring a building permit
• Tax remittance
• Cross-border trade
• Business creation
• Resolving insolvency
Nonetheless, Velocity Global reports Mauritius should improve on protecting minority investors and acquisition of credit.
Why do these African countries have the best climate for starting and running a business?
• These top nations have put in place policies that make it possible for startups to thrive.
• A close scrutiny of the top countries in this category indicates a common trend; they have invested in information technology. Tax, business registration, and transfers are made easy because it is done online.
• Electricity is an important part of a business, and these countries have stable power and they charge affordable rates.
• Another significant and common trend with the top countries is they are stable.
• They also have vibrant economies that attract entrepreneurs.
The economic growth in Africa has been declining, though the continent offers unique investment opportunities. However, breaking into some of the African countries is not easy.
In this regard, there is a need for African countries to embrace reforms that can make the climate conducive for entrepreneurs.
These reforms are inexpensive because they involve policy changes, and it may help African states save a lot in the long run while achieving economic progress.
According to the World Bank, it is thus clear why these African countries rank high in terms of having the best business climate for starting and running a business.
By Solomon O. for Ezega News