Clearly, Africa’s strong reform drive is cause for celebration. The sober truth, however, is that the world’s most difficult places for businesses are still largely found in Africa, argue Hafez Ghanem and Sérgio Pimenta of the World Bank and International Financial Corporation, respectively, in this opinion piece.
Togo, a small country in West Africa known for its glimmering phosphate reserves and sandy beaches, just earned its place among the world’s top 10 reformers on the World Bank Group’s Doing Business 2020 report.
The country jumped an impressive 30 places in the rankings after making it easier to start a business, obtain construction permits, pay taxes, access credit, and register property. These and other improvements lifted Togo to 97th place among the 190 countries ranked globally on the ease of doing business.
Togo isn’t Africa’s only standout, however.
Nigeria, the continent’s largest economy and with a GDP 100 times bigger than Togo’s, also cracked the Doing Business top 10 this year. Both countries – large and small – recognize that advancing policies that make it easier for the private sector to grow and create jobs strengthens the economy and reduces poverty. This formula may be simple, but it is one in which we at the World Bank Group firmly believe.
Togo’s impressive list of reforms included introducing an online application portal for construction permits, saving developers time and reducing stress. Meanwhile, Nigeria made it easier to open a business through an improved online platform, lowered the cost of construction permits, and established a new small claims court to deal with commercial cases. Nigeria enacted reforms in six of the ten areas measured by the Doing Business report.
While Togo and Nigeria are Africa’s standouts this year, countries across the continent — Côte d’Ivoire, Kenya, and Rwanda among them—have also been improving their investment climates to help businesses invest, expand, and create jobs. IFC and the World Bank have supported these efforts, bringing the public and private sectors together to agree on priorities, overcome obstacles, and lay-out long-term reform strategies.
Over the past decade, sub-Saharan Africa has become the top-reforming region globally. An entrepreneur can now register a business in 20 days or less in 26 of sub-Saharan Africa’s 48 economies: A decade ago, this was possible in only three countries.
Clearly, Africa’s strong reform drive is cause for celebration. The sober truth, however, is that the world’s most difficult places for businesses are still largely found in Africa. Only two sub-Saharan African countries rank in the top 50 on the ease of doing business, while many in the bottom 20 are from the region.
Why is Africa lagging? Reforms in areas like taxation, and access to electricity and credit, for example, can be time-consuming and costly for governments, involving big investments in infrastructure and IT systems. Africa is also home to the highest concentration of fragile states and countries recovering from conflict, places where private sector reform can be especially difficult to implement. Still, economies across Africa should be prepared to make the investments to catch up with economies in Asia, Europe, and North America.
Africa’s challenges, though real, are not a cause for alarm. Rather, we have seen that the region’s commitment to reform and to grow the private sector is now generally well entrenched. Governments are not only simplifying regulations for entrepreneurs but also undertaking key policy reforms so that they can tap into private investment for projects in infrastructure, agriculture, and other key sectors. All of these are critical for creating jobs for a young, dynamic, and growing workforce.
At the World Bank, we are supporting countries as they implement policies and reforms that make it easier for people, no matter their socioeconomic background, to get good jobs. At IFC, we are working upstream with governments to mobilize private investment into the most critical areas, especially in infrastructure, to improve people’s lives and make doing business easier.
The top African country on the 2020 Doing Business list this year is Mauritius, which is ranked 13th. It takes about 95 days to build a warehouse in Mauritius, compared to 213 days in France and 222 days in Austria. In Kigali, it takes three simple steps and a total of 7 days to transfer a property, putting Rwanda in third place on this indicator behind New Zealand and Qatar. It might not be long before others – in Africa and the rest of the world – catch up.
Hafez Ghanem is the World Bank’s Vice President for Africa
Sérgio Pimenta is IFC’s Regional Vice President for the Middle East and Africa