Government and the Costs of Doing Business Around the World

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Government and the Costs of Doing Business Around the World—Africa

Written by Richard M. Ebeling

Monday, 06 October 2008 03:00

The World Bank report, Doing Business, 2009, examines government regulation of business in 181 countries. While the study emphasizes recent improvements that free business from stranglehold of government regulation, it also highlights the extent to which political authorities around the globe continue to make business difficult and costly.

In earlier webposts, we saw that the Western developed nations are far from being models of free-market economies. We also reviewed the record of selected countries in Asia. The degree of regulation in Asia varies widely—from Singapore, judged by the World Bank as the most business-friendly nation in the world, to nations such as Indonesia and the Philippines, where regulations hinder and significantly add expenses to every step of doing business.

In this post we examine the regulation climate in Africa. The World Bank measured government regulation of business around the world in three broad categories: business start-ups, property registrations, and business closings.

	Business Start-Up			Property Registration			Business Closing
	Procedures	Time	Costs	Procedures	Times	Costs	Time	Costs
	(Steps)	(Days)	(% of per capita income)	(Steps)	(Days)	(% of Property Value)	(Years)	(% of Estate)
Africa
Algeria	14	24	10.8	14	51	7.5	2.5	7
Congo	13	155	435.4	8	57	9.2	5.2	29
Egypt	6	7	18.3	7	72	0.9	4.2	22
Ethiopia	7	16	29.8	13	43	7.1	3	15
Ghana	9	34	16.6	5	34	1.2	1.9	22
Kenya	12	30	39.7	8	64	4.1	4.5	22
Liberia	8	27	100.2	13	50	14.7	3	43
Morocco	6	12	10.2	8	47	4.9	1.8	18
Nigeria	8	31	90.1	14	82	21.9	2	22
South Africa	6	22	6	6	24	8.8	2	18
Tanzania	12	29	41.5	9	73	4.4	3	22
Zambia	6	18	28.6	6	39	6.6	2.7	9
Zimbabwe	10	96	432.7	4	30	25	3.3	22
Source: World Bank Group, Doing Business 2009

The business environment created by government regulation in Africa also varies greatly from nation to nation. But the variation is more extreme than in Asia. Some governments such as those South Africa, Egypt, and Ghana have created a regulatory environment that is roughly on par with the more restrictive regulatory environments in the Western democracies. Other nations have imposed regulations far in excess of those found in the more restrictive environments of both Asia and Latin America.

As the table above shows, in terms of business start-ups, Egypt and South Africa offer the cheapest business climate. Egypt, Ghana, Kenya, and Morocco are least expensive in terms of registering a business.

On the other hand, the Congo, Liberia, Nigeria, and Zimbabwe are the least friendly and most costly countries to do business. They impose huge business costs in all three categories. These are poor countries in which most citizens find it extremely difficult to operate a business officially. This is the reason why so many honest, legitimate businesses around the world are forced to function in the informal underground economy.