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Business in Africa: You are welcome
Sub-Saharan Africa is still a hard place to do business. But a report from
the World Bank shows that things are starting to change, says Fortune's Cait
Murphy.
NEW YORK (Fortune) -- Out of Africa, the headline news is usually related to
the legendary four horsemen of the Apocalypse - pestilence, war, famine and
death. No question, these horsemen run rampant on the continent; but there
is another story worth hearing too.
Take, for example, the recent World Bank report, "Doing Business," an annual
survey of the countries it is easiest to do business in (Singapore is first,
the United States is third). As a whole, sub-Saharan Africa does poorly.
South Africa, the highest rated country, is 29th; eight of the bottom 10
countries are African. But again, scratch the surface, and things begin to
look a little interesting. According to the World Bank, sub-Saharan Africa
ranked third of the seven world regions in making business-friendly reforms.
Congo Capitalism
In the world's most difficult place to do business, an Indian entrepreneur
has built an empire of soap.
Congo's tin men
The global electronics industry has made tin a hot commodity. But that's
cold comfort to the miners of Walikale. China's appetite for African oil
grows. African governments view China as a more cooperative partner than the
West.
Rwanda, for example, set up specialized commercial courts and cut the time
needed to register a new business (albeit to a still unwieldy 16 days).
Mali's reforms in the construction sector cut costs and speeded operations.
Lesotho computerized its tax system. More than half a dozen countries made
it easier to transfer title on real estate. As a whole, says the Bank,
two-thirds of sub-Saharan African countries made at least one useful change
in 2005-06, with Tanzania and Ghana among the top 10 of the 175 countries
surveyed.
But wait, there's more: Every year since 2002, the continent has grown at
least four percent - not Asian tiger status, but as the African Development
Bank notes, the last time that happened even two years in a row was in the
1980s. Inflation is also at levels not seen in a generation. Exports are
rising.
Nigeria, the continent's most populous country (and the second-largest
economy, after South Africa) has stabilized its macro situation to an extent
that would have seemed implausible five years ago. Inflation is down to
about 13 percent; its credit rating is up; growth is strong; and reserves
have reached $36 billion. Sure, higher oil prices helped, but the real
difference is that this time Nigeria's leaders did not blow it all on
palaces and Swiss banks accounts.
What's behind this modest renaissance? Besides high commodity prices, for
which Africans can take no credit, there are some interesting things going
on - like the humble cell phone.
Mobile phone use is growing faster in Africa than in any other region - more
than 5,000 percent in a five-year period. Mobile networks are positively
associated with more economic activity - chiefly in the form of small
businesses. Thus, the more phones, the better.
It's a small thing that's a big one; the phone could help fill in what some
economists call the "missing middle" - the vast space in Africa between
multinationals and the scrappy informal sector.
There has also been some useful assistance from outside the continent. Debt
relief has helped to a certain degree; the G-8 promised to forgive $37
billion, much of it to African nations, helping to stabilize government
finances. The African Growth and Opportunity Act (AGOA), which provides
duty-free access to the U.S. market for a number of African-made goods, has
also worked, amazingly enough, pretty much as intended, with Africa's AGOA
exports rising more than 40 percent.
Finally, whether a link exists between democracy and economic health is
hotly disputed; what is not is that political instability is bad for the
economy. And as a whole, reports the OECD Development Centre, political
repression has lightened in Africa, as more governments have begun to tend
to things like the rule of law. That's important to building confidence (why
start a business if you think the government might later confiscate it?)
which is probably why intra-African investment is growing.
Perhaps, too, the power of example is kicking in. It wasn't that long ago
that China and India were in many ways comparable economically to Africa; it
has not escaped Africans' notice that this is no longer the case. The four
African countries that are easiest to do business in - South Africa,
Mauritius, Namibia and Botswana - are also among the four richest countries;
the four most difficult - the two Congos, Chad and Guinea-Bissau - are among
the poorest. This is not coincidence, and African policy makers have taken
due notice.
Taking off the rose-colored glasses, it is surely true that any continent
that is home to Sudan (and the Darfur tragedy); Zimbabwe (1,200 percent
inflation and the infamous Mugabe); and Congo (whose civil war cost 4
million lives, more than in any conflict since World War II) has its
problems. Perhaps a quarter of Africans are hungry this minute; the toll of
AIDS is heavy. So no, a couple of years of modestly good economic news are
hardly the beginning of the end for Africa's problems. It is not even the
end of the beginning. But it is, perhaps, the beginning of a beginning. |
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