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November 4, 2013

Protecting their patch more important than improving lives

Dianna Games for Business Day
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IN MY early days of trawling Africa for information many years ago, I spoke to a wise old hand — an international bureaucrat who had travelled Africa while working for the World Bank — about why it was proving to be so difficult to improve the business environment.

It took only political will, not money, I argued, to change regulations to make it much easier to do business. He laughed at my naivety and said political will was a much bigger problem than money would ever be. Any change to business regulations, or the removal of other impediments to business, usually meant someone had to give up some power, thereby reducing their relevance in the system.

Change in a bureaucracy, he said, was viewed as a zero-sum game. To make it happen, someone would win and someone would lose. Those who thought they might be the losers did everything in their power to ensure the change did not happen. For example, however busy and unavailable they might be, senior officials are unlikely to delegate their signing powers to a lower level, which means nothing can move forward until the relevant official has time to sign things off.

A lack of vision by political leaders meant the status quo remained.

Looking at changes to the African rankings in the World Bank’s Doing Business index over the years, it is remarkable how few changes have actually been made in Africa, with regard to the 10 indicators the index tracks. This is especially noticeable in the poorest countries, which most need to improve their regulatory and operating environments.

The bank’s press releases hail nations for making even one regulatory reform in the period under review. But given the scale of the problem, in so many African countries making just one reform a year is better than none, but it is a feeble and inadequate response to significant challenges.

The index tracks 10 indicator sets: starting a business; dealing with construction permits; getting electricity; registering property; paying taxes; trading across borders; getting credit; protecting investors; enforcing contracts; and resolving insolvency.

The 11th Doing Business report, which came out last week, said 66% of African countries enacted at least one reform last year with regard to the indicator sets — double the number that did so in 2005 (33%). This does show a definite trend of reform.

It is easy to be cynical about the proliferation of indices that have emerged in recent years. Those at the bottom of such lists do not seem to care about their shameful rankings.

But these indices do nevertheless provide some indicator of performance against benchmarks and countries can use them to assess their relative performance and to guide them in making reforms.

This is the route chosen by Rwanda. It has been the best performer on the index in Africa since 2005. Last year, it implemented the most reforms in the region — in eight of the 10 areas tracked. It is no coincidence that it is also one of the top emerging market destinations for investor interest today, despite its small economy and landlocked position.

Nine other African countries are among the top 20 most improved in terms of business regulations since 2009: Benin, Burundi, Côte d’Ivoire, Ghana, Guinea-Bissau, Liberia, Sierra Leone and Togo. Most are postconflict states. But the countries that linger at the bottom of the index — Chad, the Central African Republic, Republic of Congo, Eritrea and the Democratic Republic of Congo — are among the least-developed countries in the world and they do not seem to mind being there, if their minor attempts at reform are an indicator.

Bureaucrats and officials in these and many other countries ensure that getting things done is more difficult than it needs to be, not easier. Their need to keep control of their official patch is ultimately much more important than improving the lives of their citizens.

• Games is CEO of Africa @ Work, an advisory and consulting company.

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