A World Bank official says Zimbabwe still has an intricate legal-institutional web to untangle to climb up the ladder of global competitiveness, amid strong expectations the country could earn an improved ranking in the 2011 Doing Business Report based on reforms chalked so far.
In the last survey, Zimbabwe moved one step up to 159 from 160 out of the 183 economies after it introduced reforms in just one category, registering a property, where it “lowered the cost of transferring a property by 15% of the value of the property”.
“Wherever there is a will, there is a way,” said David Bridgman, the manager for Africa for the World Bank’s Investment Climate Advisory Services.
“Zimbabwe needs to focus on regulations relevant to the life-cycle of a small to medium-size business and move from informal to the formal way of doing business.
It’s time to focus on what enables the economy to grow.”
The report, produced by the World Bank and the International Finance Corporation (IFC) every year to keep track of business reforms across the world, researches business laws and regulations in over 183 economies between May and June the following year and benchmarks 10 variables that promote or inhibit economic growth, ranking countries according to their performance on the indicators.
Widely considered a proxy for economic competitiveness, the ease of doing business index reviews regulations relating to starting a business (corporate law), registering property (real estate law), employing workers (employment law), protecting investors (corporate law), getting credit (collateral law), enforcing contracts (commercial litigation), closing a business (bankruptcy) and trading across borders (trade law).
Bridgman observed that regulations dealing with licensing new businesses, construction permits, trading across borders and closing a business were overly onerous.
He noted that starting a business in Zimbabwe “is lengthy and costly”, with the process taking up to 96 days and costing as much as 500% of the country’s per capita income, currently estimated at around $260.
This is against a global benchmark of one day and zero cost, respectively.
He also noted that building a warehouse in Harare is a cumbersome, protracted and expensive process, which takes nearly four years, fleecing an estimated 24,470% of income per capita.
“Trading across borders is also lengthy and costly because of customs bureaucracy,” Bridgman observed, stating importers are required to complete nine documents and wait up to 73 days to receive the consignments.
In contrast, it takes just two documents to import goods in France and just three days to receive the goods in Singapore.
He also pointed out that the process of closing a business is also lengthy with zero recovery rate.
Bridgman said the World Bank was committed to promoting reforms in Africa and recommended a series of reforms Zimbabwe would have to undertake in the medium term to improve its global rating.
To start with, government should launch a one-stop company registration shop and license only those companies “which engage in business activities that may impose risks to environment, health, and public safety”.
This he said should be paralleled by efforts to eliminate:
the waiting period in confirming business registration at the National Social Security Authority;
a requirement to advertise in a local newspaper the application for a trade and business licence;
create an electronic search system for company names at the Registrar; and
increase the efficiency of the tax authorities and the Registrar of Companies.
Bridgman also urged government to streamline the approval process for low-risk construction projects, introduce fixed rate fee schedules for all clearances related to the building plan approval and expedite the process of obtaining quotations for electricity supply.
In his view, the occupancy certificate should be issued at the time of the final inspection.
Since June 2009, government has implemented more than five reforms in a bid to enhance the ease of doing business.
The most notable reforms include:
launch of Bippa with South Africa in November last year;
launch of a one-stop border post at Chirundu;
harmonisation of corporate tax rate at 25%;
launch of an investor protection fund by the Securities Exchange Commission, which boosts investor protection.