Sudanese-born billionaire entrepreneur, Mo Ibrahim once said that the perception of Africa’s business climate is much worse than the reality and that whenever there is a gap between perception and reality, there is a fantastic business opportunity.
In the 1990s, he struggled to build his mobile phone company, Celtel, because banks wouldn’t lend him money to invest in a ‘lost’ continent. Ibrahim later sold Celtel for $3.4bn. Not all investors know that many African countries are making notable progress in removing barriers to doing business. As Neville Isdell writes, it will take the continued commitment and conversion of goodwill into practical action in order to achieve the reforms needed to enable businesses to thrive.
Democracy and a vibrant free enterprise are growing, making Africa a promising emerging market. Governments are shifting the negative international perception by improving the business climates. The continent is known for its abundance in natural resources, which include 90% of the world’s platinum, 50% of the world’s gold,70% of the world’s coltan (which the majority of cell phones around the world use) and 30% of the world’s diamond reserves. It is also the second largest and second most-populous continent.
Africa is by no means as ‘lost’ as is occasionally stated. This is already revealed by the growth rates of the past decade but also by several recent studies, which demonstrate that Africa has enormous potential.
Having lived and worked in Africa for much of my life, I have witnessed, first-hand, Africa’s entrepreneurial spirit, which is visible in any African marketplace. I have also encountered the obstacles that make doing business on the continent an uphill struggle. Registration of businesses is one of the first barriers encountered by most investors in Africa, whether foreign or national.
This is an important barrier that needs to be tackled as it plays a catalytic effect on enterprise formalisation to private sector development, job creation and poverty reduction. Some governments have recognised the importance of improving the business registration procedure in order to position their countries appropriately in the current shifting landscape. Some countries are taking proactive actions.
To provide some illustrations of the effectiveness of the Investment Climate Facility (ICF) approach: in Burkina Faso, business registration now takes just three days rather than 18, costing $106 rather than $350. In 2007, there were 13 procedures involved in registering a company in Rwanda. It would take over 30 days at a cost of $400. Today, two procedures are involved that are processed within 24 hours at a cost of $43. In Liberia, the number of procedures to register a business has been reduced from 12 to 5, the time it takes from 68 to 20 days and the cost of registering a business from US$819 to US$119.
For the first time, in these countries, entrepreneurs can register a business without being impeded by prohibitive times and costs. These reforms were implemented in partnership with ICF and are immensely beneficial to the growth of businesses and support formalisation of enterprises.
ICF focuses on delivering tangible and sustainable changes that are required to build a more conducive investment climate. Across the continent, ports, judiciaries, customs and taxation systems, land and business registries are all undergoing reforms to remove red tape, streamline procedures and automate processes. Businesses of all sizes are reporting immediate and tangible improvements to the ease of doing business in the 29 countries that ICF works.
The World Bank’s Doing Business 2011 report revealed that a record number of African countries have significantly improved their investment climate. High performers include Rwanda, Burkina Faso, Mauritius, Zambia and Senegal, and reforms are snow-balling at a rapid pace. ICF responds quickly to funding requests. The entire process from project application to agreement generally takes fewer than six months and ICF can provide green lights to projects that meet its selection criteria within weeks. Projects focus on delivering practical, results-orientated solutions in as short a time frame as possible.
The results achieved in fewer than four years of operation are testimony to the validity and effectiveness of ICF’s strategy, and heralds a new proven model for aid, with private-public collaboration at the heart.
It is as a result of this continued commitment and conversion of goodwill into practical action, and public-private collaboration that Africa and businesses in Africa will continue to grow. We will all benefit from a more prosperous and economically stable Africa.
Neville Isdell is Co-Chair of the Investment Climate Facility for Africa (ICF) and former chairman and CEO of the Coca-Cola Company. ICF works to remove the barriers that exist to doing business in Africa, recognising that a healthy investment climate is crucial for the continent’s economic growth.