SA holds steady for ease of business

1 November 2013

South Africa has held steady in the World Bank’s annual scorecard on the ease of doing business around the world, released this week.

The country was ranked 41st out of 189 economies around the world surveyed by the World Bank, which judges countries on 10 criteria that measure the time, cost and hassle involving in doing business.

The World Bank’s 2014 report, titled Doing Business: Understanding Regulations for Small and Medium-Size Enterprises, sheds light on how easy (or difficult) it is for a local entrepreneur to open and run a small to medium-sized business when complying with the relevant regulations.

How South Africa fared

South Africa received points for its tax reforms, with its rating for paying taxes moving up two points to 24. The government made paying taxes easier for companies by replacing the secondary tax on companies with a dividend borne by shareholders.

South Africa’s “distance to frontier” score also inched up in the rankings, to 70.93%. This measure represents the distance of each economy from the best performance observed on each of the topics.

The country remains a strong performer when it comes to protecting investors (10), especially in the category “allowing access to all corporate documents before a trial”.

Getting credit is becoming slightly more difficult in South Africa, however, with the country’s ranking dropping four places to 28th.

South Africa is ranked at an impressive 39 for dealing with construction permits, and starting a business is also easier (53). The report notes that the country has lowered its registration fees and has substantially reduced its notary fees.

Together with its Sub-Saharan partners, South Africa made progress in trading across borders, with its ranking improving four places to 106.

Getting electricity in the country remains weak, however, at 150. While relatively simple procedurally, it takes too long at an average of 226 days, and is too expensive, the report finds.

Global increase in regulatory reform

The pace of business regulation reform in the past year has picked up, with 114 economies enacting 238 reforms, against 108 economies and 201 reforms in 2011-12.

“This year, we see a higher number of reforms – 18% more – the second-highest number since the financial crisis,” said Rita Ramalho, programme manager for Doing Business at the World Bank Group. “This pick-up in pace of regulatory reform is good news particularly for small and medium-size businesses – the main job creators in many parts of the world.”

In Africa, 66% of countries enacted at least one reform last year, against 33% in 2005.

Nine African countries are among the top 20 most improved in terms of business regulations since 2009: Benin, Burundi, Cote d’Ivoire, Ghana, Guinea-Bissau, Liberia, Rwanda, Sierra Leone, and Togo.

Rwanda, in fact, rates as the most improved country worldwide since 2005. Sub-Saharan Africa is home to nine of the 20 economies narrowing the gap with the regulatory frontier, the most since 2009. Low-income economies narrowed this gap twice as much as high-income economies did, the World Bank says.

Singapore retained its No 1 spot in the overall rankings for the eighth straight year. Hong Kong, New Zealand, the US, Denmark, Malaysia, the Republic of Korea, Georgia, Norway and the UK make up the top 10 countries with the most business-friendly regulatory environments.

Reuters reports that an independent panel set up by the World Bank and headed by South Africa’s planning minister, Trevor Manuel, has recommended that the practice of ranking be scrapped because it can too easily be affected by small factors and is sometimes not objective.

However, the World Bank says the ratings should be considered in the broader context of how much countries have improved their business regulations, and should not be taken as representative of every factor that impacts economic growth.

Doing Business is not about less regulation but about better regulation,” the World Bank says in the report.

SA’s 2014 rankings

2013 rankings in brackets.

  • Starting a business: 64 (56)
  • Dealing with construction permits: 26 (25)
  • Getting electricity: 150 (151)
  • Registering property: 99 (95)
  • Getting credit: 28 (24)
  • Protecting investors: 10 (10)
  • Paying taxes: 24 (26)
  • Trading across borders: 106 (110)
  • Enforcing contracts: 80 (80)
  • Resolving insolvency: 82 (82)

SAinfo reporter