Many a time the World bank’s ease of doing business report has been referenced and Zimbabwe’s placing 155 out of the 190 rated countries. Ever wondered what it’s all about? Is Zimbabwe all bad? Is there anything we are good at in this report? Well let’s dive into the report and answer all these questions and more. I hope you will be surprised (positively) as I was by some of the details of the report.
The doing business index was created by Simeon Djankov of the world bank group. The idea is simple, to create an index that measures how convenient and expedient critical processes to starting, building and running businesses are in different countries. Then utilising the scores attained to rank countries. The argument being that in a competitive and globalising world, capital will flow to places where it has the greatest returns with the least risk and uncertainty .
The report looks at the following 10 areas
- Starting a business
- Dealing with Construction Permits
- Getting electricity
- Registering property
- Getting credit
- Protecting minority investors
- Paying taxes
- Trading across borders
- Enforcing contracts
- Resolving Insolvency
Ease of doing business total ranking
The graph shows Zimbabwe’s scores and ranking in the 2019 report. It’s not easy to understand right off the bat whether we are really doing well at anything aside from the ranking 155 out of 190. Let’s look at our performances to understand what these rankings actually mean. Rankings alone tend to be misleading because they compare us to others. Some cases you may score well but rank poorly (see starting a business). Comparison with regional peers also gives insight into some of our performances.
What we are doing well
Starting a business (score 66.48, rank 176)
This is one of the most focused on topics. We have seen our government go to great lengths such as the Zimbabwe Investment Authority one stop shop for foreign investor registration to expedite the process. So it’s fair to say they have yielded results. Of course the process could be greatly improved but it is ironically our best performance.
Paying taxes (score 58.71, rank 145)
ZIMRA of course is another government department that has been reforming over the years. The goal of receiving more of the tax due to them has always been a focus and the introduction of the ASYCUDA system as well the best government website (based on response and accuracy of information) has certainly helped. None the less we still rank low ok this front so there is clearly much to do.
Registering property (score 58.2, rank 109)
In this regard our score is good but the rank fails to break into the top 100. With a single deeds registry process and a simplified system Zimbabwe scores well. But our rank tells us that we are a long way off.
Where we rank well
Getting credit (rank 85, score 55)
I’m sure this one is a bit shocking to the start ups out there. Matter of fact it should be to everyone given to how much we bemoan access to funding in Zimbabwe. While the score of 55 certainly leaves room for improvement it is our highest rank in the report. In spite of past transgressions Zimbabwe does have strong financial systems.
Protecting minority investors (rank 95, score 53.3)
The protection of minority investors is a very important issue for businesses in general and for Zimbabwe in particular. The now partially suspended Indigenisation that mandated majority domestic ownership was considered one of the biggest deterrents to investors, though I believe it is something else that is still with us. The protection of minority investors is important still because investment is about pooling of funds and often from many small sources. Zimbabwe does have detailed company law and is making further strides to improve the rules here.
What we are not doing well
Enforcing contracts (score 39.66 and rank 168)
If you would ask me where it all falls apart I would say this is it. We can start their businesses faster, register property faster and make them pay taxes in a click but if we can’t enforce contracts what is the point? The upcoming consumer protection bill may go some way towards helping in this regard but we have strong laws already in existence. The effects of activities at the reserve bank over the last decade may also have an effect on this. If there’s anything we needed to work on this is it.
Getting electricity (score 44.81 and rank 166)
Given our power challenges this one is not a surprise but it is still critical to business operations. Whether for vital communication or manufacturing processes it is absolutely vital to business and how it’s done.
Dealing with Construction Contracts (score 48.55 and rank 176)
No surprises here as we have already covered the poor enforcement of contracts. Construction contracts are an important measure for two reasons; firstly construction is critical and secondly construction contracts tend to be complex and lengthy arrangements.
It is important to note that the DB considers the experiences of both local and foreign investors when coming up with scores. While we have a tendency to roll out the red carpet for foreign investors we may be found wanting when it comes to the local. While our poor performance by no means makes business impossible it does make it difficult. The reality is in a competitive and globalised world the razor blade principle applies more than ever; the smallest difference is enough to win the business every time. A competitor country may only be 1% better than Zimbabwe but the results they get will be more than 1% better because every time investors will choose the 1% advantage. Government has made great strides in starting businesses and payment of taxes simplicity but the poor contractual enforcement makes Zimbabwean uncertain destination for investor funds.