The March to Prosperity
The World Bank and its private-sector lending arm, the International Finance Corpo-ration, brought good news in September to Africa business watchers, particularly those with an eye on countries south of the Sahara Desert. In their latest “Doing Business” report, the agencies reveal that four of the top 10 business-environment reformers are African: Senegal, Burkina Faso, Botswana and Egypt, ranking fifth, sixth, seventh and tenth, respectively, among the 181 countries tracked.
“Doing Business” tracks regulatory reforms aimed at improving the ease of doing business. Countries are ranked based on how much time and money it takes to meet government requirements in 10 key areas of the life cycle of a business: startup, dealing with construction permits, employing workers, registering property, getting credit, protecting investors, paying taxes, trading across borders, enforcing contracts and closing the business.
According to “Doing Business 2009,” which covers reforms implemented between April 2007 to June 2008, Mauritius not only has sub-Saharan Africa’s most favorable business regulations, but its ongoing reforms also landed it at number 24 among the top 25 countries for ease of doing business — the first time a sub-Saharan country ranks among the top 25. The region placed second after Eastern Europe/Central Asia in the total number of reforms easing business startup.
The continent had its share of poor performers. Sixteen countries implemented no major reforms, while eight made life more difficult for business people in at least one area. The news service AllAfrica Global Media reports that nearly half of the 34 worst performers among the 181 countries assessed are members of the Organization for Harmonization of Business Law in Africa, a 16-nation bloc of former French colonies, plus Guinea-Bissau and Equatorial Guinea, operating under a uniform business code based on outdated French laws. “While other countries can easily amend their business laws to adapt to a changing environment, changes within OHADA must be agreed upon by all member states, which vary greatly in size, economic specialization and per-capita income,” a Sept. 10 article says.
Overall, however, sub-Saharan Africa continued its upward trend in reform, with 28 countries implementing 58 reforms — more than in any year since “Doing Business” began tracking reforms five years ago. The report attributes this focus on easing regulatory constraints to pressure from the surge in business opportunities that has accompanied the region’s record economic growth over the last several years. Annual growth has averaged nearly 6 percent in the past decade.
Entrepreneurship advocates are cheering Africa’s reformers, saying support for business creation will speed its march to prosperity. One of them is Carl J. Schramm, president and CEO of the Ewing Marion Kauffman Foundation, a Kansas City, Mo., entrepreneurship research and development nonprofit with a $2 billion asset base.
For Schramm, new firms are engines of innovation, they drive economic growth and are essential for creating wealth and raising living standards. “Time and again, the breeding of new companies, new jobs and new industries has helped pull the [U.S.] economy out of a slump and fuel a rebound,” he wrote in his essay “Building Entrepreneurial Economies,” which appeared in the July/August 2004 issue of Foreign Affairs.
Schramm and British Prime Minister Gordon Brown are the brains behind a new initiative, Global Entrepreneurship Week, set for Nov. 17 to 23. The goal is to involve young people in various aspects of entrepreneurship that will inspire them to embrace innovation, imagination and creativity, to encourage them to think big and turn their ideas into reality. Ten African countries — Botswana, Ghana, Kenya, Madagascar, Mali, Morocco, Mozambique, Nigeria, South Africa and Uganda — have signed on to the initiative and will host events at national and local levels to engage youth.
African governments still can do more to support entrepreneurship, Schramm says. “At least the countries that have signed on to Global Entrepreneurship Week are doing something,” he told me at the fall conference of the Society of American Business Editors and Writers, which his foundation hosted in Kansas City in September.
In a sign that African governments get the idea, most of the reformers described in “Doing Business 2009” focused on easing the startup process, as they have done in previous years.