EA still a difficult place to do business

August 17, 2011
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, ARUSHA, Tanzania Aug 17 – The East African Community needs to aggressively undertake business regulation reforms that can help accelerate private sector growth, according to a new report.

Although many people acknowledge that good progress has been made in regional integration, the International Finance Corporation (IFC) and the World Bank believe that addressing the critical obstacles to entrepreneurial activity would further spur development and enable the region to compete more favourably in the global arena.

This conclusion has been drawn from the findings of a survey conducted by the two organisations on the overall ease of doing business in 183 world economies.

“If each East African country was to adopt the region’s best practice for each Doing Business Indicator, East Africa would rank 18, bringing the community closer to the global top performers,” said World Bank Senior Private Sector Development Specialist and co-author of the report Sabine Hertveldt.

He was referring to the 11 parameters including starting a business, dealing with construction permits, registering property, getting credit, protecting investors, paying taxes, trading across borders, enforcing contracts, closing a business which were used to rank the economies.

The report titled ‘Doing Business in the East African Community’ and which draws on the global Doing Business 2011, placed the East African countries at an average ranking of 117.

Viewed individually, the global report indicated that Kenya had dropped four places in the rankings on the ease of doing business from 94 in the previous year to 98.

Tanzania also slipped three places from 125 to 128 while Burundi remained at 181.

However, Uganda improved greatly moving seven places up to rank 122.

And in keeping with its improvement as a top reformer, Rwanda was for the second year in a row, featured among the 10 economies that improved the most on the ease of doing business, moving up from 70 in the global rankings in ‘Doing Business 2010’  to 58.
Despite the mixed performances, each country has some good practices that can help improve the bloc’s overall ranking if they were to be shared.

For instance, Kenya has some of the most business-friendly regulations for dealing with construction permits. Ugandan courts resolve insolvency relatively efficiently while Rwanda is among the fastest places to start a business.

“If each East African country were to adopt the region’s best practice in each of the Doing Business Indicators, the region’s average ranking on the ease of doing business would move 99 places up,” the findings showed.

In addition, deeper regional integration could help achieve economies of scale and allow the East African Community to compete more efficiently in the global economy.

The member states have on average grown faster than the rest of Sub-Saharan Africa since 2005, with annual per capita growth averaging close to four percent.

“Properly implemented, a larger single market could turn around the systematic underinvestment in the East African Community and expand its economy,” the report further documented.

And while acknowledging the findings, the EAC Secretariat said the economic bloc was determined to ensure a competitive and friendly business environment that attracts and reassures investors.

“We are serious about our role in the creation of an environment which is attractive to increasing private sector activity within and across our borders. We can do this by further streamlining regulations affecting businesses,” pledged EAC Deputy Secretary General Enos Bukuku.

He admitted that while the common market has opened several opportunities for businesses in the region, it still requires an investment climate that is properly suited to catalysing additional trade and investment.

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