President Obama’s Power Africa Plan, ongoing energy procurements and other developments have made Africa an increasingly attractive market for developers of energy projects. For energy companies that are doing business in Africa or are considering developing a project in an African country, the latest K&L Gates Africa Legal Insight offers a review of the World Bank’s new findings on the subject.
The World Bank has recently released the 2015 edition of its annual Doing Business report. This publication is significant for businesses considering expansion in Africa because it signals which countries may be poised to attract and support more investment in the coming year.
Background on the Report
The Doing Business report is the World Bank’s annual publication that analyzes how easy it is to do business around the globe. This year, the World Bank worked with more than 10,000 experts worldwide to measure key factors that impact business operations in 189 countries. Through questionnaires, conference calls, and visits to selected countries, the World Bank surveyed several topics, including the procedures, cost, and time necessary to start a business in a given country, transfer title to real property, enforce a contract, import and export goods, obtain electricity, and mediate a minority shareholder dispute. After aggregating this information into a single “ease of doing business” ranking for each country, the Doing Business report presents global and regional emerging trends.
Although the report examines the ease of, and barriers to, doing business for domestically-owned small and medium-sized enterprises, the report’s findings are important for all companies. The report measures regulatory procedures that can affect any business operating in a given national market. In addition, policymakers consider the report in deciding how to reform procedures that impact commerce. Thus, for companies and investors considering expansion into African markets, Doing Business 2015 is a key indicator of which countries may have the most (or least) conducive environments to operating a business.
Africa’s Performance in Doing Business 2015
Doing Business 2015 noted several improvements to doing business in Africa in the past year. The report’s findings allow for useful comparisons on the regional and national levels.
In sub-Saharan Africa, the report ranks Mauritius, South Africa, and Rwanda as the three easiest places to do business. These countries also performed well on an international level, joining the top 50 performers worldwide. Thirty-nine of the 47 countries in sub-Saharan Africa covered in the report implemented one or more regulatory reforms making it easier to do business. Of the 230 business reforms documented worldwide, countries in sub-Saharan Africa were responsible for the largest share.
In North Africa, the report found that it is easiest to do business in Tunisia and Morocco, which ranked 60th and 71st globally. After a significant gap came Egypt, ranking third in North Africa and 112th worldwide. North African countries also achieved notable rankings in the individual subject areas measured by the report. For example, Tunisia ranked 38th worldwide for ease in getting electricity, coming in above Australia (55), the United States (61), and the United Kingdom (70).
The ranking of African countries within the report’s individual subject areas is noteworthy. For instance, the countries with the strongest protections for minority investors are South Africa (17), Mauritius (28), Ghana (56), and Seychelles (56). The countries in which it is easiest to start a business are Burundi (18), São Tomé and Príncipe (23), and Mauritius (29). Finally, the easiest countries for registering property are Rwanda (15), Ghana (43), and Sudan (46).
Top Ten and Bottom Ten Performers in Africa
|Top 10 Countries||Global Ranking||Bottom 10 Countries||Global Ranking|
|South Africa||43||Congo (Republic of)||178|
|Seychelles||85||Central African Republic||187|
The Most Improved Nations
Doing Business 2015 highlights the performance of the 10 most-improved countries worldwide. Five of these countries are in sub-Saharan Africa, and several of their reforms bear additional consideration:
- Benin: Benin reduced the minimum capital requirement and fees for starting a business; reduced the number of documents needed for customs clearance of imports; introduced greater disclosure requirements for related-party transactions; and made it possible for shareholders to inspect documents and appoint auditors to inspect such transactions.
- Democratic Republic of Congo: The Democratic Republic of Congo simplified its corporate income tax returns; abolished a minimum tax that was payable based on a company’s size; established a credit registry; and increased disclosure requirements for related-party transactions.
- Côte d’Ivoire: Côte d’Ivoire digitized its land registry system; lowered the property registration tax; reduced the minimum capital requirement for starting a business; and increased disclosure requirements for related-party transactions.
- Senegal: Senegal simplified the transfer of property by removing the requirement that property transfers first be authorized by the tax authority (instead, one need only notify the tax authority); abolished the vehicle tax; made declaration forms for the value-added tax (VAT) available online; and reduced the time necessary for processing building permit applications.
- Togo: Togo reduced the property registration and the payroll tax rates; enabled the publication of notices of incorporation; and introduced greater requirements for disclosures in related-party transactions.
Overall, the report shows positive improvements in Africa. Several countries have implemented practical reforms, reducing the complexity and cost of regulatory processes and strengthening legal institutions to simplify doing business. On an international scale, however, most African countries fall low in the report’s ranks, and additional improvement is needed.
Companies considering expansion in African markets should review Doing Business 2015 for several reasons: the report provides a database for researching specific issues and costs that affect operating a business in Africa, it influences governments and their policies towards doing business in Africa, and it shapes public perceptions towards doing business in the region. The combination of these factors sheds light on which countries in Africa may be optimal locations for a company to expand.
Like any index, the Doing Business 2015 report cannot measure all the factors that influence doing business in Africa; therefore, it is critical to seek legal counsel with experience in the region. K&L Gates has extensive experience in Africa, having worked in more than 40 countries to represent public and private companies, governments, and state-owned enterprises in their business, financing, regulatory, compliance, litigation, and dispute resolution activities. K&L Gates has over 2,000 lawyers on five continents, and nearly 100 of those lawyers practice in the firm’s Africa Group, which regularly helps businesses make informed decisions about doing business in Africa.
 Every year, the Doing Business report generates significant attention. Last year’s report received almost 6,000 media citations within two weeks of its publication, and the Doing Business website generated over half a million page views within ten days of the report’s publication. See World Bank Group, DB News, Doing Business: Measuring Business Regulations, http://www.doingbusiness.org/newsletters/dbnews-11 (last visited Nov. 7, 2014); World Bank Group, Starting a Business Questionnaire, Doing Business: Measuring Business Regulations, http://www.doingbusiness.org/~/media/GIAWB/Doing%20Business/Documents/Methodology/Survey-Instruments/DB15/DB15-Starting-a-Business-questionnaire.pdf (last visited Nov. 7, 2014).  Numbers in parentheses represent a country’s international ranking within the relevant subject area (e.g., getting electricity).