South Africa lags in BRICS ease of business

With BRICS espousing multilateralism, a number of African and Asian leaders were invited to Johannesburg [PPIO]

The World Bank Group’s Doing Business report noted that the BRICS economies, Brazil, the Russian Federation, India, China and South Africa, introduced a total of 23 reforms, with getting electricity and trading across borders the most common areas of improvement.

Marking its 16th anniversary, the World Bank Group’s Doing Business report noted that 3,502 business reforms have been carried out since it began monitoring the ease of doing business around the world in 2003.

Governments around the world set a new record in bureaucracy busting efforts for the domestic private sector, implementing 314 business reforms over the past year, with two of those reforms being carried out in South Africa.

South Africa made starting a business easier by reducing the time for online business registration, while it also improved the monitoring and regulation of power outages by beginning to record data for the annual system average interruption duration index and system average interruption frequency index.

The World Bank said that given the importance of electricity, managing the risks associated with its use is imperative.

The lack of professional certification requirements and quality controls that characterize an inadequately regulated electricity sector reinforce the asymmetry of information individuals face when assessing the qualifications of electricians and engineers.

Deadly fires involving electrical failures are common, particularly in developing economies. In South Africa, for example,electrical fires accounted for 80% of the economic loss caused by the 46,000 fires that were attended to in 2015.

An independent regulator can ensure clarity and transparency and form the basis of a system that encourages accountability. In South Africa, for example, the statutory Bureau of Standards (SABS) has an explicit mandate to promote quality in products and services in several sectors, including engineering certifications and electrical appliances.

The reforms, carried out in 128 economies, benefit small and medium enterprises as well as entrepreneurs, enabling job creation and stimulating private investment. This year’s reforms surpass the previous all-time high of 290 reforms two years ago.

“Fair, efficient, and transparent rules, which Doing Business promotes, are the bedrock of a vibrant economy and entrepreneurship environment. It’s critical for governments to accelerate efforts to create the conditions for private enterprise to thrive and communities to prosper,” said World Bank Group President Jim Yong Kim.

The report finds that reforms are taking place where they are most needed, with low-income and lower middle-income economies carrying out 172 reforms. In Sub-Saharan Africa, a record number of 40 economies implemented 107 reforms, a new best in number of reforms for a third consecutive year for the region. The Middle East and North Africa region scaled a new high with 43 reforms.

However, South Africa is now only the fifth easiest country in Africa to run a business, and has fallen to a rank of 82 out of 190 countries in both 2017 and 2018 from 74 in 2016 and 32 in 2008.

The deterioration in the rankings is not so much that South Africa made it harder to do business, but rather that other countries such as Mauritius, which is ranked 20th, have made it easier to do business. So for instance China surged by 32 positions to 46th and India jumped 23 rankings this year to 77th.

India’s ranking improvement: 2018 from 2017

In the last two years the country has climbed 53 notches, a performance matched in the past only by Bhutan. The biggest gain was in construction permits, where India climbed 129 ranks to 52nd place on the back of targeted government effort to remove hurdles.

Part of what President Cyril Ramaphosa has promised to do is make it easier for South African businesses to do business. The emphasis here should be on cross-border trading where South Africa is only ranked 143rd compared with its neighbour Botswana at 55.

All BRICS countries in fact were in the bottom half of the world rankings in 2017 as the best ranking was for China at 97, then Russia at 100, followed by Brazil at 139, then India at 146 and finally South Africa at 147.

As defenders of the multilateral trading system at the BRICS Summit in South Africa, the BRICS countries resolved to improve trading between members and this is reflected in this year’s rankings where China surged to 65, India improved to 80, Russia edged up to 99, Brazil climbed to 106 and South Africa lagged with a gain to 143.

Helmo Preuss in Pretoria, South Africa for The BRICS Post

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