• Africa Rising is a weekly look at business, investment, and development trends.
Entrepreneurs, listen up: Sub-Saharan Africa isn’t such a bad place to open up shop these days, thanks to legal and regulatory reforms that have made life easier for businesses in many parts of the continent.
The recent improvements have been totted up in the latest Ease of Doing Business Index, a set of rankings published each year by the World Bank and the International Finance Corporation. Taking into account factors like how many days it takes to set up a new company and how much it costs to get a shipping container through a port, the index serves as a global guide to business friendliness.
“Economic activity requires good rules – rules that establish and clarify property rights and reduce the cost of resolving disputes,” Janamitra Devan, the World Bank’s vice president of Financial and Private Sector Development, wrote in the report’s preface. “The objective is regulations designed to be efficient, accessible to all and simple in their implementation.”
Sub-Saharan Africa has a reputation for weak legal institutions and lax property rights, but the region has made some huge strides, as this year’s index shows.
Thirty-six of the region’s 46 economies have improved their business environments in the past year, the report found. That’s a five-year record for the region, and it means that sub-Saharan Africa has made more progress than any other part of the world except Eastern Europe in making life easier for businesses.
Rwanda is the continent’s standout performer, having improved its business environment more than any country in the world, bar one – Georgia – since 2005. Among Rwanda’s recent changes: slashing the fees associated with starting a business, making credit information more readily available, and reducing the frequency of a company’s value-added tax filings from monthly to quarterly. Rwanda now ranks 45th overall in the index, just one slot behind Spain.
Along with Rwanda, five other sub-Saharan nations – Burkina Faso, Mali, Sierra Leone, Guinea-Bissau, and Senegal – fall within the index’s top 15 most improved.
But those countries are starting from a very low level, and there’s still a long way to go. Despite the recent gains, sub-Saharan Africa as a whole remains the world’s least business-friendly region.
Just consider the case of Ghana, the highest-ranked country in West Africa. On average, it costs $1,315 and takes 29 days to import a shipping container through the country’s main port. That’s compared with $439 and four days in Singapore, the country that came out at the top of this year’s rankings.
South Africa, by far most powerful economy in sub-Saharan Africa, is also the most friendly to businesses. The country placed 35th in the latest index, up one slot from the previous year.
The United States ranked fourth this year, behind Singapore, Hong Kong, and New Zealand.