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South Africa scores for ease of business

20 October 2011

South Africa has climbed one place to 35th out of 183 countries on the World Bank's latest Ease of Doing Business Index, boosted by SA's new Companies Act, which has made it easier to start a new business in the country, and by its retention of first place for ease of access to credit.

This places South Africa in second position on the African continent, behind Mauritius (23rd), which has topped the African list for the past four years. Botswana (54), Namibia (78) and Zambia (84) rounded off the top five countries for ease of doing business in Africa.

According to the index – part of the World Bank's Doing Business Report 2012, which was released on Thursday – the five economies in which it's easiest to do business are, in order: Singapore, Hong Kong, New Zealand, the United States and Denmark.

The World Bank's 2011/12 report, entitled "Doing Business: Doing Business in a more transparent world", sheds light on how easy (or difficult) it is for a local entrepreneur to open and run a small to medium-sized business when complying with the relevant regulations.

It measures and tracks changes in regulations affecting 10 areas in the life-cycle of a business, namely: starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting investors, paying taxes, trading across borders, enforcing contracts, and resolving insolvency.

New company law

South Africa made a massive gain in the "starting a business" category, jumping 30 places, from 74th in 2010/11 to 44th for 2011/12.

"South Africa made starting a business easier by implementing its new company law, which eliminated the requirement to reserve a company name and simplified the incorporation documents," the report states.

The country also registered a strong gain in "registering property", where it moved up 14 spots from 90 to 76, as a result of "making transferring property less costly and more efficient by reducing the transfer duty and introducing electronic filing".

It also made gains in "enforcing contracts" (up four places to 81), "resolving insolvency" (up two to 77), and "trading across borders" (up two to 144).

"South Africa introduced a new reorganisation process to facilitate the rehabilitation of financially distressed companies," the report added.

The country's ranking for "getting credit" (1st, tied with the UK), "protecting investors" (10) and "dealing with construction permits" (31), remained unchanged.

Electricity, taxes

South Africa's ranking slipped, however, for "getting electricity", with the number of days needed to obtain an electricity connection rising above the sub-Saharan African and OECD (Organisation for Economic Cooperation and Development) average, resulting in a drop of two places, from 122nd to 124th.

South Africa registered its biggest drop for "paying taxes", slipping six places from 18th to 24th, with businesses needing to make nine tax payments per year and having to devote around 200 hours per year to ensuring tax compliance.

Businesses also had to pay a tax of 24.4% on company profits, higher than average for businesses in sub-Saharan African and OECD countries, though overall taxation as a percentage of profit remained lower than the sub-Saharan and OECD average.

SAinfo reporter