Economy / 25 October 2019, 09:30am / Siphelele Dludla
JOHANNESBURG – The ease of doing business in South Africa slipped slightly among 190 economies as the country implemented only a single reform in the year to May and four in the past five years.
The country’s ranking in the latest World Bank’s Ease of Doing Business 2020 report, released yesterday, fell two places from 82nd last year to 84th this year.
South Africa came fifth among African countries.
The country’s business confidence has slid to its lowest in 20 years, dragged lower by unreliable energy that resulted in spoiled perishable goods, damage to sensitive equipment, and productivity losses.
Investec chief economist Annabel Bishop said numerous intricacies of South African regulatory environment contributed towards weakening the country’s economic growth trajectory.
“The recent release of the 2020 World Bank’s Ease of Doing Business 2020 report continues to echo this in the main… as the difficulty of starting a business in South Africa increased in the rankings, as did getting electricity, while dealing with construction permits, registering property, getting credit, resolving insolvency and trading across borders were all seen to have become more onerous,” Bishop said.
The World Bank research demonstrates a causal relationship between economic freedom and gross domestic product growth regarding wages and prices, property rights, and licensing requirements that lead to economic development.
Economies in sub-Saharan Africa continued to improve their business climates, with Nigeria earning a place among the year’s top global improvers alongside Togo.
Togo was on the list of top improvers for the second year in a row, thanks to reforms lowering fees for construction permits and streamlining property registration procedures, among other measures.
Nigeria conducted reforms impacting six indicators, including making the enforcement of contracts easier, which placed the 200-million-person economy among the world’s top improvers.
Mauritius was the highest-ranking sub-Saharan African economy overall, becoming the only economy from this region in the top 20 cohort as it ranked number 13.
Rwanda and Morocco were the other two sub-Saharan African economies in the top 50, while Kenya and Tunisia took third and fourth place in Africa.
As a comparative indicator against other countries, the ease of paying taxes in South Africa was also seen to have deteriorated.
Bishop said the ability to enforce contracts and protect minority shareholders had not been enough to mitigate the overall decline.
“Looking forward, government regulatory efficiency needs to improve substantially to aid the ease of doing business in South Africa, with government departments in particular quickening delivery time, as well as clearly identifying what needs to be done to meet compliance and clearing their backlogs,” Bishop said.
“In particular, the ease of doing business examines the complexity and cost of regulatory processes and the strength of legal institutions in a country, boosting this ranking tends to result in higher growth.”