Economic governance

African countries have made significant institutional and regulatory improvements since 2005. Burundi has eliminated three requirements to register companies while information on how to open a business is available in the national press. New companies can register at the Ministry of Trade and Industry. A study on Rwanda in the World Bank Doing Business 2013 report showcases the country as a best practice in fostering business prospects and promoting entrepreneurship (World Bank, 2013). Rwanda’s Vision 2020 strategy, aiming to become a middle-income country by 2020, stresses long-term planning and strengthened leadership. Following the national efforts, Rwanda is currently ranked second in the World Bank Doing Business 2013 “Distance to Frontier” index, a composite of each of the Doing Business indicators to show how far an economy is from its optimal performance.

Ease of doing business: Mauritius, South Africa and Tunisia were the only African countries among the world top 50 in the World Bank’s Doing Business 2013 ‘’ease of doing business’’ indicator. Seven African countries were among the next 50 countries. The majority of African countries were among the last 85 overall. Countries such as Botswana, Burundi, CAR, Comoros, DRC, Republic of Congo, Cote d’Ivoire, Kenya, Liberia, Malawi, Mali, Nigeria, Sierra Leone, Togo and Zambia have increased efforts to improve their business environment, including by setting up inter-ministerial committees. Business regulatory practices by the poor performers have been slowly improving.

Paying taxes: Countries such as Kenya have introduced or enhanced electronic systems for tax recovery. Mali has simplified its tax complaints process, while Burundi, Djibouti, Sierra Leone and Swaziland have introduced value added tax (VAT) to replace their cascading sales taxes. Cameroon, Mauritania, Senegal, Gambia, CAR, Congo Republic, Guinea and Chad remain among the most difficult places in Africa for paying taxes.

Starting a business: Entrepreneurship needs to be stimulated in Africa to strengthen job creation (AEO, 2012). Benin, Burundi, Comoros, DRC, Republic of Congo, Lesotho, Tanzania and Togo have simplified registration formalities for start-ups. Morocco reduced its minimum capital requirements. Others such as Burundi, Chad, Guinea, Lesotho and Madagascar created or improved one-stop shops for creating a company.

Getting credit: Access to credit has become much easier. A number of sub-Saharan countries have intensified reforms on the legal rights of borrowers and lenders. Ethiopia, for example, has incorporated new laws and regulations guaranteeing the rights of borrowers. Mauritius has enhanced access to credit information. Its credit registry now reports positive and negative data in addition to payment information from retailers. Algeria and Sierra Leone continue to improve the sharing of credit information. In addition, many sub-Saharan countries have put more emphasis on enforcement of security interests and intensified efforts to develop credit information systems since 2008.

Protecting investors: Lesotho enacted a new company law that requires company directors to disclose the full extent of any conflict of interest relative to proposed transactions. It also adopted a law setting out the duties and skills of directors. Overall, Burundi, Rwanda and Swaziland are the ones that improved the most regarding investor protection, while The Gambia, Guinea and Djibouti are performing worst in offering protection to investors.

Improving governance is a necessary condition for the credibility of the countries and their policies. African countries are stepping up efforts in a bid to attract foreign direct investment. However, they have a long way to go particularly in eliminating corruption and strengthening capacities in public governance and economic support.

Table 5.4 traces developments in economic freedom in African countries over the period 2004-13 as reported by the Heritage Foundation. Mauritius is making serious efforts to eliminate corruption and currently holds 8th position on economic freedom in the world. Among other issues, it has focused on improving business transparency.

World rank