Africa Is Open for Business

By Luigi Wewege Thursday, July 16, 2020

Africa is rich in both heritage and minerals, and the continent’s economies get increasingly business-friendly each year.

Drawing primarily from the World Bank’s 2020 Doing Business report, this article examines some of the positive business trends taking place in Sub-Saharan Africa, from the ease of doing business to the ease of getting business credit.

Global Ranking Trends

Mauritius sits in the Doing Business top 20 economies at 13 overall, and is the highest-ranked Sub-Saharan African country on the list. The country's core industries are tourism, financial services, and business process outsourcing, mostly relying on business and customers from abroad. The services sector alone contributed about 75% of the country’s GDP in 2019.

The second and third highest-ranking economies in the region are Rwanda and Kenya, respectively.

In just two years, Rwanda has moved up 31 spots in the overall Doing Business ranking. Rwanda, which ranks 38 overall in Doing Business, ranks among the best globally for property registration improvements. The country has an efficient land registry but underperforms with getting electricity and trading across borders.

Rwanda is also one of the world’s best performers for getting credit and starting a business. One major reform the government initiated was introducing a new law that improved the ease of accessing credit for businesses.

The Kenyan government has also been collaborating with IBM to develop technological solutions for its agencies that have since resulted in making registration of property easier by introducing an online system to pay fees and obtain digital certificates. Kenya currently ranks high for getting credit in the Doing Business report.

Kenya’s economy is expected to continue growing, but both the International Monetary Fund (IMF) and the World Bank predict that the COVID-19 pandemic will momentarily stall growth. What’s almost certain is that the country would remain East Africa’s leading regional hub for information and communication technology, financial, and transportation services.

A Look at Sub-Saharan African Reforms

Although a decline from previous record-breaking reform years for the region, Sub-Saharan saw a total of 73 reforms this year, with 31 of the region’s 48 economies implementing at least one reform. For comparison, the record high for the region was 108 reforms from 40 economies.

The largest number of reforms implemented in the region were in the Doing Business fields of “Starting a Business,” “Dealing With Construction Permits,” and “Getting Credit.” Each field received 12 reforms each.

Two Sub-Saharan African economies — Togo and Nigeria — made the list of global top 10 improvers this year. Kenya and Nigeria carried out six reforms, Togo carried out five, and Cabo Verde and Eswatini carried out a record number of reforms — four apiece.

Nigeria created a new online platform to pay stamp duties, which led to a reduction in the time to start a business from 19 to 11 days. Burundi increased construction permit transparency by publishing regulations related to construction online free of charge and improving the building quality control index.

Togo made the nation’s electricity less costly by reducing connection work costs and reducing the security deposit for new connections. Niger expanded credit bureau coverage and began to distribute data from utility companies in an effort to improve credit access information.

Conclusion

While there are places where the continent struggles economically, there has been widespread growth in Africa as a whole. Based on the current data, it is up to investors to interpret the political and commercial dynamics and see which reforms will succeed, which will stagnate, and which counties present the most attractive investment opportunities.

About the Author


Headshot of author Luigi Wewege

Luigi Wewege is the Senior Vice President, and Head of Private Banking at Caye International Bank. Outside of the bank, he serves as an Instructor at the FinTech School which provides online training courses on the latest technological and innovation developments within the financial services industry. Luigi is also the published author of: The Digital Banking Revolution.

Related Articles