Doing Business in Africa in 2016
February 29, 2016
Around the world, governments and multinational corporations are increasingly setting their sights on Africa as a new frontier for doing business. Potential investors want to understand where and how to invest in the most rewarding and efficient manner.
In this regard, the World Bank’s annual Doing Business report offers valuable information on 189 economies around the globe by ranking countries according to how conducive their business environment is, based on a number of different factors. These rankings give detail on how easy it is for business to engage in a number of crucial activities like register and obtain licenses, pay taxes, obtain construction permits, and much more. Such rankings give investors an indication on how well a country is able to attract and grow new businesses - to the benefit of its overall economic growth and, ultimately, the enrichment of its citizens’ lives.
According to the Doing Business 2016 report, a number of African countries have made great strides in improving their business environments. As outlined in a previous ICF article, Sub-Saharan Africa accounted for almost a third of the improved global regulatory reforms, as well as half of the world’s top 10 improvers, namely; Uganda, Kenya, Mauritania, Senegal and Benin.
In fact, this marks the second year in a row that Senegal and Benin were featured in the Doing Business report’s list of the top ten countries that have made the most improvements with regards to the creation of a business-friendly environment.
ICF has been working with some of these countries to help them improve their business environments and make it easier for businesses to thrive. ICF has worked with the Senegal Government to help bring improvements in three different areas: it has helped to improve trade facilitation by modernizing the cargo clearance process and reducing cargo dwell time from 17 days to 3; a tax modernization initiative has established an online system which enables large taxpayers to declare and pay their taxes in 15 minutes instead of the previous 12 days; and it has established an electronic system for the issuance of construction permits in the region of Dakar.
ICF has also been working with the Government of Senegal to improve tax administration in the country. The first phase of ICF support introduced a new legal framework that streamlined regulatory and administrative tax procedures. The second phase of the project aims to increase the number of taxpayers who are using these electronic services. We will bring you more details in our next article.
Members of the Organization for the Harmonization of Business Law in Africa were also singled out by the report as doing particularly well. According to the Report, “14 of the 17 economies implemented business regulation reforms in the past year—29 in total.” ICF has been working with the Organisation for the Harmonisation of Business Law in Africa, also known as OHADA, (Organisation pour l'Harmonisation en Afrique du Droit des Affaires) to help simplify and harmonise business laws among the 17 member states. This includes the reforming and adoption of the Commercial Act and the Securities Interest and Mortgages Act. Adoption of these two Acts is already helping to improve access to credit in member countries, as lending banks now accept a much wider range of assets as collateral. Benin is one of these 17 member states.
When we look at overall trends regarding doing business in Africa, we see a number of positive signs. These include continuing improvements in the regulatory environment; an ongoing demand for resources, in which Africa is abundantly blessed; a young and fast-growing population, which creates a significant labour force; and ongoing urbanisation and a growing middle class, both of which create consumer demand and investor interest.
Recent developments indicate that companies (both local and foreign) are taking advantage of the improved business environment across Africa. Here are a few examples:
- In 2014, Coca Cola announced that it will invest $17 billion in Africa in companies involved in the soft drink beverage and food industries between 2010 and 2020. Already it has acquired a 40% stake in Nigeria’s largest juice market, TGI Group’s Chi Ltd, which sells beverages such as Chivita 100% and Chi Ice Tea.
- The British financial services company AXA Insurance has invested $83-million – in exchange for eight per cent in equity in the company – in the Africa Internet Group, which owns e-commerce company Jumia and nine other e-ventures in Africa.
- Some 100 local companies have expressed interest in energy investment in Tanzania, following moves from the Tanzanian Government to encourage local investors to become involved in the generation, transmission and distribution of power.
- Global power generation company Cummins Cogeneration Limited signed a partnership agreement with Nigerian power generation company Sapele Power Plc on 3 February 2016, with the intention of building one of Africa’s largest gas-fired power plants in Nigeria.
The ongoing interest in investing in Africa was also showcased by the recently-held tenth Biennial US-Africa Business Summit, which took place in Addis Ababa, Ethiopia. The Summit brought together more than one 1,400 delegates from Africa, the United States, Europe, Asia and the Middle East. Attendees included investors, government officials and private sector representatives. It was the first time that the Summit, sponsored by the Corporate Council on Africa (CCA), had taken place in Africa in almost ten years.
The US-Africa Business Summit was an important event for governments and private sectors across the continent. It showed once again that confidence is rising from both foreign as well as local investors, and that more opportunities to invest in Africa are opening up all the time across a number of different industries.
ICF is happy to be a part of this growing development that is seeing African countries improve their investment climates so that all businesses can operate in a friendlier environment. We look forward to bringing you more information on our projects and collaborations across the continent throughout 2016 as the year unfolds.
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Implementing investment climate reforms across Africa
ICF infrastructure development projects: practical and innovative African solutions
Infrastructure facilitation in Africa: a green light for investors