Among other key factors such as high commodity demand and prices, improved economic governance, including sound macroeconomic and public expenditure management, and institutional reforms to improve the business environment underpinned good economic performance in Africa prior to the current global downturn. This subsection on economic governance focuses on developments in the business environment in Africa in 2008.

Doing business has become easier in Africa in 2008, as many countries have implemented more reforms in 2007/08 than ever before. In 2007/08, 28 economies implemented 58 reforms as compared to 24 economies and 49 reforms in 2006/07. The pace of reforms is gathering momentum with a 70 per cent rise in the number of countries reforming between 2005 and 2008. Consequently, in 2008 Africa’s regional ranking on the pace of reform improved to third place after Europe and Central Asia, up from fifth place in 2007. Three African countries (Senegal, Burkina Faso and Botswana) are among the top 10 in doing business reformers in 2007/08.

Top reformers in SSA in 2008 include Senegal, Burkina Faso, Botswana, Liberia, Sierra Leone and Rwanda. Several regulatory reforms were undertaken in these countries that substantially improved their global rankings on overall ease of doing business by 2008 (Table 10). Starting a business and trading across borders are the most popular reforms in the region this year. Senegal has improved its business environment and moved up from 168th (DB2008) to 149th (DB2009) due mainly to major regulatory reforms that made it easier to start a business, register property and trade across borders. Burkina Faso implemented a new labour code; introduced a one-stop shop for construction permits that made transferring property much easier.

Botswana cut the time to start a business through computerisation, facilitated trade by introducing an electronic data interchange system; and strengthened investor protections. Liberia facilitated firm entry by simplifying its business registration process and licensing reforms. It also eased access to credit by establishing a borrower database/credit information system held by the Central Bank of Liberia. Starting a business has become much easier in Sierra Leone because of the elimination of some registration formalities such as the requirement to pay taxes upfront and to obtain permission from exchange control. Among other things, reduced time and cost to register property as well as introduction of a single application form for location clearance and building permit made doing business easier in Rwanda.

According to the Doing Business 2009 Report, the best performers in the overall global ranking on ease of doing business in SSA are Mauritius (24) followed by South Africa and Botswana. In fact, Mauritius has joined the top 25 countries in the world in terms of the ease of doing business in 2009. The country has introduced major reforms in starting a business, registering property and getting credit. South Africa implemented two major reforms in the area of business start-up, and paying taxes. Thanks to amendments to the Corporate Act, electronic submission of documents and publications eased business start-up. The government also reduced the tax burden by eliminating the regional establishment levy and regional service levy.

In addition to starting a business, SSA countries also implemented major tax reforms, reflected in reduced corporate income tax rates, a simplified process of paying taxes, elimination of some taxes, revised tax codes, and the time needed to comply with the corporate tax system (DB2009). Four of the 25 world economies that reduced corporate income tax in 2007/08 are from Africa: Burkina Faso, Côte d’Ivoire, Madagascar and Morocco. Mozambique has simplified the process of paying taxes in 2007/08 and along with Morocco and Zambia has joined the group of countries that revised their tax code in the same year. Madagascar and South Africa are among the few world economies that removed some taxes in 2007/08. Cameroon, Congo Republic and Nigeria are among the 10 economies in the world where it takes over 200 hours to comply with the corporate tax system in 2007/08.

Thirteen SSA countries did not undertake major reforms in 2008; six of these countries are landlocked (Burundi, DRC, Ethiopia, Malawi, Uganda and Swaziland), two are islands (Comoros and Seychelles) and one is an oil economy (Sudan). The remaining countries are Guinea-Bissau, Niger, Tanzania and Togo. Some Sub-Saharan African countries are still in the bottom list of the economies where doing business is most difficult: Burundi (177th), Congo, Rep (178th), Guinea-Bissau (179th), CAR (180th) and DRC (181st).

Nevertheless, Africa is still lagging behind in business environment. Despite profound improvements in the pace of reforms to make the business environment more conducive to domestic and foreign investors, the business environment in Africa is still least attractive to firm entry and growth, compared to the rest of the world.

Starting a business in Sub-Saharan Africa is the most difficult in the world. It entails 10.2 procedures that take nearly 49 days to complete with a cost of 111.2 of GNI per capita and a minimum capital requirement of 173.4 per cent of GNI per capita (Table11). Only Latin America outranks Sub-Saharan Africa in the length of days (65, compared to 49) to complete a business start up, but in Latin America the process costs less and the minimum capital requirements is lower.

Registering property in Sub-Saharan Africa involves more procedures and cost than in other regions. Again, only the Latin America and Caribbean region is comparable. It has the highest “rigidity of employment” index and the highest costs of firing employees, implying that the labour market is highly inflexible. However, it is worth mentioning that some African countries like Burkina Faso have joined the world’s top reformers in employing workers in 2008. Access to credit is the most difficult, compared to other regions of the world, mainly because of the lack of credit information and collateral requirements. For instance, Sub-Saharan Africa has the lowest ranking in terms of a credit information index (1.4) that measures the rules affecting the scope, access and quality of credit information. Nevertheless, the sub-region is close to the world average in terms of contract enforcement, duration of bankruptcy procedure and the subsequent recovery rate. Mozambique is the world’s top reformer in enforcing contracts in 2008.