Doing Business 2010

The International Finance Corporation (IFC), a World Bank institution, released its annual “Doing Business 2010” report yesterday. The audit looks at how countries around the world have improved the environment for small to medium businesses (including sole traders and entrepreneurs) to set up and do business.

Singapore remains at the top for overall “ease of doing business” but some interesting results for Africa – and opportunities for sharing best practices.

287 reforms were recorded in 131 economies (June 2008 to May 2009) – a record – but more significant was the fact that low- and lower-middle-income economies accounted for two-thirds of reforms in 2008/09. Is the economic crisis hitting developing nations harder than we thought, kick-starting reformers into action to attract more inward investment?

Rwanda – the top reformer - introduced reforms in 7 out of the 10 categories (such as registering property, enforcing contracts, getting credit, protecting investors), rising from 143rd to 67th place on the ease of doing business rankings – and the first time a Sub-Saharan African country has led the world in reforms. Liberia entered the top ten, while Mauritius and Sierra Leone were also recognised for leading in certain areas.

So post-conflict countries have a reason to reform as well it seems – again with the driver of attracting Foreign Direct Investment. While business reforms are only one part of economic development / recovery, it is one area that the government can manage, monitor and measure. The question is how much the private sector can influence the government – but big business has to realise the advantages of a thriving SME sector in that case.

Rankings are one thing – the World Economic Forum also released its 2009 / 10 global competitiveness index yesterday, to give countries even more numbers to compete on, but surely what counts is the experience in each country. As Penelope Brook, Acting Vice President for Financial and Private Sector Development for the World Bank Group said – absolute scores are what matter. A women trying to set up a retail business in South Africa is not going to care what others are going through in Ghana or Guinea; what matters is the speed and ease of processes for her. All the top rankings in the world count for nothing if people on the ground don’t experience change.

So where to from here? Is it the case, as Thierry Tanoh, IFC Vice President for Sub Saharan Africa, states, that we are seeing a sea change in the way Africa views investment, or is it a short-term shift in rankings due to circumstance? There are remarkable signs of progress in Africa, with the likes of Rwanda providing a roadmap for others, but the ability to maintain that momentum, and weather the storms of political, economic or social changes is crucial – for domestic and international audiences and investors.

World Bank report highlights downturn in growth and capital flows to SSA

On 22 June, the World Bank released its 2009 edition of Global Development Finance, in which the institution indicated that the world economy would shrink by 2.9% this year vs a 1.2% growth in developing countries. In this latter group, investment flows ebbed to $707bn in 2008, significantly down from the $1.2trn recorded in 2007.

In the case of Sub-Sahara Africa (SSA), the World Bank highlighted that the region had been hit hard by negative dynamics in external demand, plunging export prices, weaker remittances and tourism revenues, and sharply lower capital inflows. Growth in SSA is now seen at 1% in 2009, from 5.7% in 2006-08, although it should strengthen in 2H09 and may rebound to 3.7% in 2010 and 5.2% in 2011, respectively.

On World Bank data, the fastest growing economies in the region in 2009 include the Republic of Congo (7.4%), Malawi (6.6%), Ethiopia (6.0%), Rwanda (5.1%) and Uganda (5.0%), while six nations could experience a contraction in GDP growth (of which Seychelles' is estimated at -10.5%, Botswana -8.0%, and Angola -1.9%). Nigeria is forecast to expand 2.9%, in line with the IMF projection.

World Economic Forum and the New Global Economy

The World Economic Forum in Cape Town last week brought together the public, private and non-governmental sector, as well as media and commentators on Africa.

Despite the recession, the overall feeling was upbeat. Most conversations were framed within the current economic circumstances, but if I took one message away it was “Africa can do it, but we need less planning and more doing”.

Another theme was that the talent and capability exists already, the resources and the will. Africa needs to celebrate its success stories, to change international perceptions of the continent as a place to invest, as a destination of choice. But it’s easy to be positive in a room of 700 people who all feel the same way. My question is whether Africa believes in itself when faced with international pressure, when confronted with China or Brazil making its demands, or when trying to find a voice at the global negotiations table on climate change, for example.

I do also sometimes wonder what we would all talk about if there wasn’t a global financial crisis on. And what would be the trigger to inject investment into Africa’s infrastructure and tourism business if the continent had not won the opportunity to stage the FIFA 2010 World Cup finals. But while we do have both crisis and opportunity right here and now, there are some interesting discussions.

If you are a Twitter follower, check out #africa09 for a summary of things coming out.
Zaprio’s cartoon posted to Twitter - http://twitpic.com/7g9y3

A quick summary of some of the sessions I attended follow...

Africa and the New Global Economy

• Jacob Zuma, President of South Africa: The global economic crisis is being felt all over. Africa has its own way of response. Its own problems too, but we must do our best in the spirit of belief in a recovery. All economies become inward looking during a crisis, but we must avoid shutting others out.
• Kofi Annan, Co-Chair of WEF on Africa: We are facing a crisis of governance and a crisis of leadership, and need to restore it. Africa needs to be part of the solution by seeking to invest in infrastructure, education, health. We can’t ignore the needs of the poor, or any system we set up won’t last long.
• Ngozi Okonjo-Iweala, MD, World Bank: There is a short-term response, but also an opportunity for long-term development. To quote Hilary Clinton: “Don’t waste a good crisis.” We need to think about shape of the continent post-crisis, working things like climate change in to our solution. China has expressed an interest in Africa – are we crafting our own response or simply waiting for it to happen?
• Soud Ba’alawy, Executive chairman, Dubai Group: There is a misperception of Africa as high risk, it is a good investment destination. Africa needs to develop its own home-grown solution, using its resources, its young population, and to create an environment conducive for business.