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THIS year’s World Bank’s Doing Business report is out, with regular star performers Mauritius and Rwanda topping the rankings, and Morocco, Botswana and South Africa rounding out the top five.
It’s been 14 years since the Doing Business report was first published by the World Bank; the survey measures aspects of business regulation affecting domestic small and medium-size firms, based on standardised case scenarios and located in the largest business city of each economy.
The survey covers 11 areas of business regulation – starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting minority investors, paying taxes, trading across borders, enforcing contracts and resolving insolvency, as well as some aspects of the labour laws.
A good performance in the Doing Business rankings is increasingly becoming a government priority for many African countries, following the lead of Rwanda, which was an early star-performer.[advanced_iframe securitykey=”68f51ed951ec4f22230bb7eb91315944cb08a912″ src=”//datawrapper.dwcdn.net/Imv28/1/” frameborder=”0″ transparency=”true” allowfullscreen=”true” width=”100%” height=”1971″]
President Paul Kagame is credited with “hacking” the Doing Business rankings in his intensely meticulous managerial style: this story by Jeffrey Gettleman in the New York Times describes how Kagame set up a special unit within his government structure, which broke down the World Bank’s ratings system, category by category, and figured out exactly what was needed to improve on each criterion.
With that Rwanda jumped to 52nd place in 2012 (around the time the story was written), from 158th in 2005. It has continued to maintain that spot since, among the top three in Africa, and in the top third of 180+ economies included in the rankings.
Today, to ensure the coordination of efforts across agencies, many African governments have formed regulatory reform committees that focus on improving performance in the rankings, as a measure of competitiveness.
These include the Democratic Republic of Congo, the Republic of Congo, Côte d’Ivoire, Burundi, Guinea, Kenya, Liberia, Malawi, Mali, Mauritius, Nigeria, Rwanda, Sierra Leone, Togo, Zambia and Zimbabwe.
Following the early example of Rwanda, many of them have also established units dedicated to specific reform action plans targeting the Doing Business indicators, the report states.[advanced_iframe securitykey=”68f51ed951ec4f22230bb7eb91315944cb08a912″ src=”//datawrapper.dwcdn.net/9OZzU/1/” frameborder=”0″ transparency=”true” allowfullscreen=”true” width=”100%” height=”1120″]
In Kenya, for example, the Ease of Doing Business Delivery Unit operates under the leadership of the Ministry of Industrialisation and the Deputy President, meeting on average every two weeks to discuss progress on an established action plan.
In Burundi, the agenda is overseen by the Office of the Second Vice President. The dedicated Doing Business Intelligence Committee comprises several ministers and is supported by an executive secretariat.
Nigeria’s government, which came to power in 2015, has placed a strong emphasis on increasing the country’s competitiveness. In early 2016 Nigeria established the Presidential Enabling Business Environment Council, which is chaired by the Vice President; the Federal Minister of Industry, Trade and Investment is the vice-chairman.
The Council’s main mandate is the supervision of the competitiveness and investment climate agenda at the federal and state levels, while the Enabling Business Environment Secretariat is charged with day-to-day reform implementation.
But there are weaknesses in the approach: the Doing Business indicators are based mostly on laws and regulations: around 60% of the data embedded in the indicators are based on a reading of the law.
It focuses on the domestic formal sector, and so is unable to reflect the reality for the informal sector. Of course, by its very nature, the informal economy is difficult to capture clearly, but about 80% of jobs in Africa are in the informal sector, according to data from the African Development Bank, the International Labour Organisation, and various national estimates.
If a survey excludes eight out of ten of workers in an economy, it cannot seriously be considered to be representative of the broader reality on the ground that most people will encounter. It may really only be useful as a benchmarking tool for policy wonks whose job is to monitor and evaluate things.
Even in the formal spaces, the assumption is that businesspeople know the law, and comply with regulations. In practice, entrepreneurs may not be aware of what needs to be done or how to comply with regulations and may lose considerable time trying to find out.
Alternatively, they may intentionally avoid compliance—by not registering for social security, for example. Firms may opt for bribery and other informal arrangements intended to bypass the rules where regulation is particularly cumbersome—which helps explain differences between the de jure data provided by Doing Business, and the de facto insights offered by the World Bank Enterprise Surveys, the report states.