Ease of doing business ranking in Africa.
Doing business in Africa is usually considered very difficult. However, there are few countries with impressive score in the ease of doing business ranking in Africa. Countries like Mauritius and Rwanda for example can compete globally on the ease of doing business ranking. So today we shall look at the ease of doing business ranking for other countries in Africa too. So follow me for a detail analysis of the ease of doing business ranking in Africa. But before we proceed, what is ease of doing business?
What is Ease of Doing Business?
Ease of Doing Business or “EDB”is a measure of how ease or difficult it is to start or successfully run a business in any country using some parameters developed by organizations such as World Bank, World Economic Forum and International monetary Fund.
The Ease of Doing Business Index was first developed by three top economists at the World bank. Simeon Djankov, Michael Klein, and Caralee McLiesh. The academic research for the report was done jointly with professors Edward Glaeser, Oliver Hart, and Andrei Shleifer. Ease of Doing Business ranks economies from 1 to 190. 1 represents the best ranking. And 190 represents the worst possible ranking for any economy. A high ranking (that is a low numerical rank, typically from 1 to 20) means that the regulatory environment for business is very conducive. 21 to 60 is considered fair. 61 to 100 is bad. While anything above 100 is high risk.
Usually there are ten parameters that are considered in determining the ease of doing business ranking of any economy. There are individually calculated. And at the end an average of the 10 individual sores is take. And that is what forms the overall ease of doing business ranking in that economy or country.
What Factors are Used to Calculate Ease of Doing Business?
- Starting a business
- Dealing with construction permits
- Getting electricity
- Registering property
- Getting credit
- Protecting minority investors
- Paying taxes
- Trading across borders
- Enforcing contracts
- Resolving insolvency
All topics carry equal weight. Data are collected by the World Bank with a standardized survey that uses a simple business case to ensure comparability across economies and over time. It works with assumptions about the legal form of the business, its size, its location, and nature of its operation.
Breaking Down The Parameters on Ease of Doing Business Ranking in Africa
Starting a business
The first parameter for calculating the ease of doing business in any economy is the ease of starting business. It includes procedures for registration like CAC registration. It also covers the time, cost, and minimum capital to open a new business
Dealing with construction permits
The next has to do with permits. Depending on the industry of operation, certain permits might be necessary. So it will be important to know how easy it is to obtain such permits for new businesses. It considers procedures, time, and cost to build a warehouse
Getting electricity is another important factor in calculating the ease of doing business. It has to do with the procedure, time, and cost of connecting a permanent electricity to a new business outlet.
This is basically for those in the real estate sector. It covers the the procedures, time, and cost to register commercial real estate
Equally important is getting credits. How easy is it to get information about credit facilities available for new businesses? When available how easy is it to secure such.
Also important in the ease of doing business ranking in Africa is protecting investors. This deals with the indices on the extent of disclosure, the extent of director liability, and ease of shareholder suits
This has to do with the number of taxes paid, hours per year spent preparing tax returns, and total tax payable as a share of gross profit. It also includes the ease of getting Tax Consultants especially for small businesses.
Trading across borders
Trading across borders covers the number of documents, cost, and time necessary to export and import
Another index is that of enforcing contracts. it deals with the procedures, time, and cost to enforce a debt contract
Finally we have the resolving insolvency index. It deals with the time, cost, and recovery rate (%) under a bankruptcy proceeding
Ease of Doing Business Ranking in Africa
For 15 consecutive years (2006 – 2020) Mauritius have maintained its stronghold as the best country in terms of ease of doing business in Africa. In 2020 the country consolidated its already impressive rating by jumping from 20 to 13 position on the global ease of doing business index. Rwanda comes a distant second among African countries. The gap between the two top countries from Africa widened due to Rwanda’s drop from its previous 29th position to 38th. Morocco also maintained her position in 3rd place, closing the gap on Rwanda by gaining 7 places to move from 60 to 53 in the global rating.
The top 10 position is completed by Kenya, Tunisia, South Africa, Zambia, Bostwana, Togo and Seychelles. The highest gainer for year under review is however Togo who 40 places, jumping from 137 to 97th position and now 9th in Africa.
Ease of Doing Business Ranking in the World
New Zealand has the best ranking of ease of doing business in the world. In fact it has remained number one since 2017 when it overtake Singapore. Singapore on its part was number one for 10 consecutive years (2007 – 2016).
Since the ranking commenced in 2006 the two countries has monopolized the first position with no other country ever tasting it. Hong Kong displaced Denmark in 2020 to complete the top 3 positions, while Denmark went to 4th.
Others in the top 10 include South Korea, United States (in 5th), Georgia, united Kingdom (in 7th), Norway and Sweden. The highest position United States has attained since the ranking commenced is 3rd (from 2006 – 2009).
Where Does Nigeria Rank?
Where does Nigeria, the giant of Africa rank in the ease f doing business Africa ranking? Well, unfortunately Nigeria does not rank in the top 20 despite the gain recorded in the last few years. Nigeria fell just short. It had moved from 146 in 2019 to 131 in 2020. but it was not enough to bring it to the top 20. So it settles for the 21st position in Africa.
Conclusion on The Africa Ease of Doing Business Ranking
From our discussion, you can see that Mauritius leads in the ease of doing business in Africa. The rating also reflects in the economy of the country which has been growing steadily in the last few years. Finally,New Zealand leads in the global ease of doing business index.