Good news for Lesotho!

Good news for Lesotho!

Staff Reporter

MASERU – LESOTHO climbed 12 places on the World Bank’s Ease of Doing Business rankings, making it one of the biggest movers among the 48 sub-Saharan African countries surveyed.

Released this week, the Ease of Doing Business survey ranks countries on how friendly and easy their policies and regulations are to businesses.

It sheds light on how easy or difficult it is for a local entrepreneur to open and run a small to medium-size business when complying with relevant regulations.

To rank the countries the survey, started in 2002, measures and tracks changes in regulations affecting 11 areas in the life cycle of a business.

These are  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 and labour market regulation.  All these are crucial when deciding to invest in a country or a particular sector.

Countries that make it easier and faster to comply with their regulations are likely to be favoured by both domestic and foreign investors.

Some countries use the survey to attract aid. That is why the Ease of Doing business survey, conducted annually, is a big deal for countries and their governments.

In this year’s report Lesotho is ranked number 100 out of 190 countries surveyed.

That is a jump of 12 places from last year, an improvement high enough for the government to crow given that political instability has eroded investor confidence in Lesotho.

In sub-Saharan Africa only Kenya registered a bigger improvement on the rankings than Lesotho, moving to 92 up from 113. Tanzania also moved 12 places, from 144 to 132.  Mauritius remains the highest ranked country in the sub-region at number 49 followed by Rwanda at 56, Botswana at 71 and South Africa at 74.

Apart from those four, only Seychelles (93) and Zambia (98) are ranked higher than Lesotho in sub-Sahara Africa.

Apart from registering one of the biggest movements on the rankings, Lesotho also leaped over Swaziland and Namibia, its peers in the Southern African Customs Union. In fact Swaziland dropped three places to 111 while Namibia slipped four places to 108.

The report says Lesotho made starting a business easier by “creating a One stop shop for company incorporation and by eliminating the requirements for paid-in minimum capital and for notarization of the articles of association”.

It also noted that Lesotho made transferring property easier by streamlining procedures and increasing administrative efficiency. The country also improved access to credit information by establishing its first credit bureau, whose coverage has been expanding.  There has been efforts to strengthen investor protection by “increasing the disclosure requirements for related-party transactions and improving the liability regime for company directors in cases of abusive related-party transactions”.

Lesotho made enforcing contracts easier by launching a specialized commercial court, the report says.

The report shows that 37 of the 48 countries in the sub-region implemented 80 reforms to make it easier to do business.

Yet even with such reforms Su-Sahara Africa remains a tough place for businesses, with cumbersome regulations and off-putting red tape.

The report reveals that sub-Sahara Africa economies under performed in areas of Getting Electricity, Trading Across borders and dealing with Construction Permits.

It takes an average of 120 days to obtain permanent electricity connection to the grid in sub-Sahara Africa, compared to the global average of 93 days.

The Ease of Doing Business survey however has limitations that potential investors should not overlook when looking for a destination for their money.

For instance it does not assess an economy’s proximity to large markets, the quality of its infrastructure services (other than those related to trading across borders and getting electricity) as well as the security of property from theft and looting.

In addition, the transparency of government procurement, macroeconomic conditions and the underlying strength of institutions are not directly studied.

This has been a major grumble towards the survey by some investment experts who view it as narrow in scope. Other critics point out that the survey is not based on the input from businesses but assesses the laws of a country in relation to how long it takes for businesses to comply.

This, the faultfinders say, produces results that are far removed from reality. Others fret that some governments tweak laws merely to climb up the ranks but achieve nothing substantial in removing regulatory hurdles for business.

Still these concerns do not significantly undermine the broader import of the survey.

The report remains a useful guide for investors and should inspire governments to do more.

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