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Because of new credit regulations, South Africa has fallen six spaces in global ranking of the best countries to start a business in. Mauritius, on the other hand, went up by one after it introduced electronic filing in its legal system and reduced trade license fees. That’s according to a comprehensive annual report by the World Bank which looked at the nuts and bolts required to start a business in 189 countries, each with its own set of perks and quarrels.
Specifically, the Doing Business 2015 report weighed the relevant laws and regulations in each country as well as the input of over 10 000 professional respondents to present to us a list on which country’s environment is most suited to launch a business.
Interestingly, the report found that apart from Europe and Central Asia (counted as a single sector), Sub-Saharan Africa has improved the most of all the regions in the past three years.
One of the main drivers for the region’s 47 surveyed countries is the fact that most underwent regulatory reforms in the right direction. Sub-Saharan Africa, the region with the largest number of economies, accounted for the largest number of regulatory reforms in 2013 and 2014. It notes that 39 countries reduced the complexity and cost of regulatory processes and 36 strengthened legal institutions.
Not the biggest surprise, Singapore was ranked the best country to do business, followed by New Zealand, Hong Kong, Denmark and South Korea. The World Bank’s research concluded that Indonesia manages to combine high efficiency and high quality.
Specifically, businesses in Singapore and New Zealand — who ranked close second — can complete the entire process of registration online. The report notes that because different government agencies are interconnected, businesses can easily register tax and social security at the same time they do the incorporation process.
There are only three procedures to starting a business in Singapore which takes only 2.5 days to finalise. New Zealand only has one procedure and takes only 12 hours to register a business.
Below is the full list of the World Bank’s top countries to do business in:
South Africa sits at number 43 — down from 37th spot last year. The report indicates that the number of procedures it takes to register a business is five while it takes nineteen days to do so. According to the report, South Africa dropped in ranking because it made access to credit information more difficult by introducing regulations requiring credit bureaus to remove negative credit information from their databases.
Mauritius — the golden child of the Sub-Saharan Africa — ranks 28th, the top country for businesses in Africa. Similar to its Southern African counterpart mentioned above, it also takes only five procedures to register a business but only six days to do so.
Benin, the Democratic Republic of Congo, Côte d’Ivoire, Senegal, and Togo meanwhile are among economies which have made the biggest improvement in business regulation over the past year.
Centralised electronic systems seems like the way to go
One massive factor in achieving success is going paperless. The introduction or improvement of online or electronic platforms has played a great role in catapulting company registrations. For example, the report showcases Rwanda by pointing out several advantages online registration systems hold.
First-off, electronic registration is a lot cheaper and more accessible (in the respective countries) than paper-based processes. Also, it reduces both corruption and bribery. Fewer delays and face-to-face interactions translate into less bribery. Rwanda, for instance, recorded a massive growth in new firms after reforms were implemented.
A few years ago, starting a company in Rwanda took nine procedures, 18 days and 235.5% of income per capita in fees. After the reforms were implemented, there are eight procedures, it takes just over six days and it costs only 52.3% of income per capita.
Of the most common reforms, the introduction or enhancement of electronic tax filing was the most popular. This makes it easier for both the tax authorities’ workload and the time it takes for a business to submit.
Romania is hailed as the country that has made the biggest improvement in this instance. The government has developed an electronic system for filing and paying taxes in 2010. As one can see in the graph below, tax compliance has been made a heck of a lot easier. The graph below highlights the impressive growth upon implementation:
Now to leave you with a bitter aftertaste, the worst countries to do business in, according to the Ease of Doing Business report, are Eritrea, Libya, The Central African Republic and South Sudan.
Either way, regardless of the country’s position, we can still learn a lot from reports like these. Essentially, the report found that an efficient bureaucracy together with rules of governance that facilitates entrepreneurship and creativity among individuals can promote growth and shared prosperity. On the other hand, evidence shows that burdensome regulations and bureaucracy leads to less-productivity.
Image by Kenneth Lu via Flickr