Out of the top-10 top pro-business countries globally, five are African
Access to energy and registering property remain challenging for entrepreneurs
For all of the opportunities present in Africa’s huge and young population, growing economies and expanding trade links, the continent can be a daunting place to set up and run a company. Often, it is also expensive to start out. Bank loans come with double-digit interest rates, the electricity grid is sub-par, and diesel generators cost a fortune.
For the last few years, however, things have been getting better, according to the World Bank.
Every year, the Bank releases the global ‘Doing Business’ ranking of countries’ business environment, rating them based on how easy it is to start a company, raise finance, get connected to the power grid and other key indicators for entrepreneurs. Although few African countries are globally competitive, several have been striving to lower the regulatory barriers for entrepreneurs.
“What we do see is that there’s a lot of reform happening in Africa,” says Rita Ramalho, manager of the Doing Business project.
“We definitely do see that there is more awareness for these issues. I think before Doing Business started 13 years ago there were very few high-level politicians who would know how many days it took to start a business in their country, now they do know how many days it takes. Definitely it does bring that reality to them, so they connect better to what obstacles the average entrepreneur faces in their country.”
The World Bank publishes a parallel ranking of the countries that have pushed through the most business-friendly reforms. Of the top-10, five African countries – Kenya, Mauritania, Senegal, Benin and Uganda, are on the list.
Access to energy – a perennial problem across Africa – is one of the main concerns for entrepreneurs, but not the only one. The ease and reliability of registering property is also a real challenge, particularly where land registries are paper-based. Being able to get the title deeds to property reduces entrepreneurs’ risks and gives them the collateral that most banks demand before lending to small businesses.
The ‘Doing Business’ ranking is not a reflection of the actual economic opportunity in the countries listed. Nigeria, the continent’s largest economy, does not make the top-10 in Africa, languishing at 169 out of 189 in the world, below such frontier markets as Guinea, Myanmar and Iraq. Kenya, East Africa’s largest economy, would be 11th on the list.
With economic growth in Africa now slowing, in the face of falling prices for oil and minerals, there is more impetus for reforms that help entrepreneurs, Ramalho says.
“A lot of these reforms are not very costly, and oftentimes they may imply savings in the long run.”