By The Solutions Tower Staff.
The Ease of Doing Business ranking is used by the World Bank to compare economies of different countries using different parameters to define it. It is a relative measure of how a country’s regulatory climate facilitates efficiency in Ten Stages of business’s life.
The Ten Stages are as follows:
- Starting a Business
- Dealing with licences/Permits
- Employing Workers
- Registering property
- Getting Credit
- Resolving Insolvency
- Protecting Minority Investors
- Paying Taxes
- Trading Across Borders
- Enforcing Contracts/Closing a Business
- Getting Electricity(for African countries)
The rankings on the average of each economy’s distance frontier (DF) scores for the 10 topics. When compared across years, the distance to frontier score shows how much the regulatory environment for local entrepreneurs in an economy has changed over time in absolute terms, while the ease of doing business ranking can show only how much the regulatory environment has changed relative to that in other economies.
Year to year movements in rankings can provide some indication of changes in an economy’s regulatory environment for firms, but they are always relative. These yearly changes in the overall raking do not reflect how the business regulatory environment in an economy has changed over time or how it’s changed in deferent areas.
According to the Global Competitiveness Report, the index currently ranks economies from 1-191 by the ease of doing business, with first place being the best.
Zimbabwe’s rankings from 2010-2017 are as follows:
- 159 out of 183 in 2010
- 171 out of 183 in 2011-12
- 131 out of 148 in 2013-14
- 170 out of 189 in 2014
- 171 out of 189 in 2015
- 157 out of 190 in 2016
- 161 out of 191 in 2017
Despite Zimbabwe having undertaken reforms including its indigenisation policy, the 2017 ranking showed the worst place in Southern Africa.
The adoption of the US dollar in 2009 brought stability and restored confidence in the market.
The relatively peaceful 2013 elections also resulted in a stable political environment which is an advantage for economic growth. Moreover the government’s commitment to continue using the multi-currency regime suggests that there is a minimal risk for investors.
Using the US dollar opened possibilities for entering into infrastructural projects such as energy, rail and road networks through public private partnerships. Economic growth has been especially in mining and agricultural sectors, thus opening opportunities for equipment manufactures and investors.
The Zimbabwean government’s reviewing of the Indigenisation Policy is positive for transparency and acceptability to foreign investors. The ZANU (PF) campaign manifesto for the 2013 general election was based primarily on indigenisation, empowerment and employment, as reflected in the form of Zimbabwe Agenda for Sustainable Socio-Economic Transformation (Zim-ASSET).
Zim-ASSET had a number of positive elements such as the results based management and clear implications background. The policy blue print also identified a number of fundamentally binding restraints to development; nonetheless it did not clearly articulate the country’s institutional and fiscal capacities to deal with those restraints simultaneously within the five year term.
When the economy is not doing well there is bound to be uncontrollable levels of corruption. This has plagued Zimbabwe especially after 2000. The loss of political cohesion is contrary to the tenets of ease of doing business.
There are also a number of political challenges that make starting a business in Zimbabwe cumbersome, costly and time consuming. The current environment makes business regulations confusing, arbitrary and costly thus inhibiting starting a business; deter foreign investment consequently reducing productivity.
The multi-currency regime imposed a hard budget restriction on public spending. This results in high unemployment which cuts off tax revenue whilst food imports drain the little foreign currency.
The country continues on a downward spiritual in rankings as it goes deeper into economic and political crisis due to bad governance, misalignment of priorities and mismanagement. Public institutions received poor assessment, and major concerns remain with regards to property rights, were we are among the lowest ranked countries.
The indigenisation policy currently compels companies to cede at least 51% ownership to locals. Zim-ASSET programme’s objective is to explicitly further the indigenisation programme. However, the government’s and foreign investments levels are not sufficient to sustain the aspirations of Zim-ASSET. Moreover, the frequency of changing indigenisation policies was also not helpful on such things as planning and operating a business.
Agriculture is crucial to the success of Zim-ASSET as it supports Economic transformation, enhances food security and helps eradicate poverty, however, the chaos in farm ownership is not helping. The Fast Track Land reform brought uncertainty to land tenure on the beneficiaries as they saw agriculture to be a risky investment.
Agricultural output and consequently exports of produce have been slashed from 2000 due to violent farm grabs, deterring investment in the process, including depressing foreign investments.
Zimbabwe needs to do more to improve the economic recovery environment, especially against the background for growth-enhancing public expenditure.
The Predicament of Doing Business in Zimbabwe is largely caused by policy inconsistency, funding constraints, corruption, inefficient government bureaucracy and inadequate infrastructure, especially electricity, roads and rail.
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