WB 2013 Doing Business Report on the EAC

The World Bank Doing Business is a tool that measures regulations that enhance business activity and those that constrain it and it also measures regulatory quality and efficiency.

There has been a recognition that regional integration alone is not enough to spur growth. The EAC needs an investment climate—including a business regulatory environment—that is well suited to scaling up trade and investment and can act as a catalyst to modernize the regional economy. Despite the reform efforts of all 5 member economies, the EAC’s average ranking on the ease of doing business has remained fairly constant over the past 4 years, at around 117 and in fact comparing the 2010 Doing Business performance to 2013, the EAC has seemingly not registered much of an improvement. This is a clear indication that critical obstacles to entrepreneurial activity remain and that economies in other regions have picked up the pace in improving business regulation. Improving the investment climate in the EAC is therefore an essential ingredient for successful integration—the foundation for expanding business activity, boosting competitiveness, spurring growth and, ultimately, supporting human development.

The development of regional strategies and institutional frameworks that connect and streamline national reform programs is an indispensable condition for a well-functioning common market that can attract foreign investment. A lack of coordination among member countries and the implementation of “isolated” national reforms—which often focus on short-term gains and fail to consider the impact on the region—can hinder progress in fully implementing the common market. Conversely, continual exchange among different authorities across countries, the implementation of an agreed-on regional reform agenda and a focus on common goals and objectives create synergies and help the region as a whole to improve its investment climate.

Fostering economic growth by tapping the potential of the private sector is among the main objectives of the fourth EAC development strategy. In addition to increasing institutional coordination, other important steps to achieve this objective are better integrating small and medium-size enterprises into the financial sector and creating business-friendly administrative structures and tax regimes. Additional challenges are to ensure the availability of reliable data and statistics and to implement credible surveillance and enforcement mechanisms.

The EAC economies have an average ranking on the ease of doing business of 117 (among 185 economies globally). But there is great variation among them—from Rwanda at 52 in the global ranking to Burundi at 159. This wide variation in business regulations is among the issues that the EAC needs to tackle to achieve the desired level of integration. While the regional average ranking is less than ideal, if a hypothetical EAC economy were to adopt the region’s best regulatory practices in each area measured by Doing Business, it would stand at 26 in the global ranking on the ease of doing business. Burundi was among the world’s most active economies in implementing regulatory reforms in 2011/12. It implemented policy changes in 4 areas measured by Doing Business: starting a business, dealing with construction permits, registering property and trading across borders.

One area where the EAC shows strong performance is business start-up. To start a business in the EAC requires only 8 procedures and 20 days on average. As such the EAC’s average ranking on the ease of starting a business is 84, higher than those of other regional blocs in Africa—104 for the Southern African Development Community (SADC), 110 for the Common Market for Eastern and Southern Africa (COMESA) and 127 for the Economic Community of West African States (ECOWAS)

The 2013 Doing Business Report on the EAC can be downloaded here.

Why Investors are Flocking to Mauritius

Foreign companies with an eye on Africa’s emerging markets are apparently flocking to Mauritius to incorporate local subsidiaries in a move that could deny more than a dozen African governments billions in corporate taxes and position the island nation as the region’s economic hub.

Possibly the the range of incentives available to foreign firms in Mauritius. This includes a 15 per cent charge on a company’s taxable income such as business or trading profits. This amount is half the almost 30 per cent rate that other countries in the region apply to  similar income.

Foreigners living in Mauritius are also apparently spared royalty taxes compared to other countries in the region who in some cases tax at the rate of 20 per cent.  In addition, Mauritius has more than 30 double taxation treaties with African countries alone and has recently entered into Investment Promotion and Protection Agreements (IPPAs) with its double taxation partners.

Finally an efficient judicial and dispute resolution mechanisms has also given Mauritius an edge over the competition in Africa, with the The World Bank’s Doing Business 2011 report, ranking Mauritius’ judicial system as the best in Africa in terms of reforms aimed at facilitating business and investment transactions.

See related full article here.

Kenya's MPESA to Spearhead Seamless Mobile Financial Transfers in the Continent

Michael Joseph, the immediate former CEO of Safaricom, has been tapped to spearhead the expansion of M-Pesa to other African countries as part of a plan to have a seamless mobile money transfer service on the continent.  M-Pesa is already successful in Kenya, and is now also available in Tanzania, Afghanistan, South Africa, while a pilot service is on in India.

But Vodafone is looking at spreading the services to other African countries such as DR Congo, Lesotho, and Mozambique with the aim of linking the market.  This will see mobile phone consumers send and receive money across borders in a move that will pile pressure on traditional money transfer service operators such as Western Union and Money Gram who have lost market share in the local market.

“M-Pesa is the most successful mobile money transfer service in the world and with Michael is a sure bet to drive its regional expansion having been behind its growth in Kenya,” said a senior executive at Safaricom who sought anonymity because he is not the firm’s spokesperson. “The rollout of the service in the new territories will not automatically enable registered Kenyan subscribers to send or receive money.

“But there is a plan to link them to these markets in coming years,” said the source. At present, Safaricom subscribers can receive money from the UK directly to their mobile phones in transactions carried out in partnership with Western Union and Vodafone. Mr Joseph retired from Safaricom in November after serving for 11 years and passed the leadership mantle to Bob Collymore.  He sits on the board of Safaricom and Johannesburg-based Vodacom, which is owned 65 per cent by the Vodafone Group — which has operations in five countries including South Africa, Tanzania, DR Congo, Lesotho and Mozambique.

It was under him that Safaricom rose to become East Africa’s largest and most successful firm in terms of earnings, and a market leader in Kenya’s mobile telephony market with a 76 per cent stake.  By 2005, Safaricom’s grip on the Kenyan mobile market had been cemented and in 2007 the company launched its mobile money transfer service M-Pesa — an innovation whose implementation was credited to Mr Joseph’s courage and which paid off handsomely winning over more than 13.5 million subscribers by September 2010.

Transactions worth Sh596.8 billion have gone through M-Pesa since its inception.  The service accounted for 11 per cent of Safaricom’s revenues or Sh5.2 billion in the six months to September this year up from Sh930 million in the same period in 2008.  Safaricom has used M-Pesa as a value added service, successfully using it to defend and attract subscribers from rival networks.

The service has driven a revolution of sorts in Kenya’s financial services where it is being used for payment of utility bills, dividend, goods at retail shops and banking services such as ATM withdrawals, deposits and cash transfers.  It is this market position that Vodafone seeks to replicate in five African countries served by Vodacom, especially DR Congo, Lesotho and Mozambique. Mr Joseph’s brief will be to shepherd the rollout of the product in the three countries and to shore up its performance in Tanzania and South Africa where the mobile money transfer service is yet to penetrate the market.

Low cost

The service was launched in South Africa in September and Tanzania in April 2008.  Nearly half (47 per cent) of all money transfers in Kenya now take place through the mobile phone, according to a survey by Financial Sector Deepening, a research firm that conducted the survey for the Central Bank of Kenya.

This has seen traditional money transfer service operators lose their grip on the market as more Kenyans turn to mobile phone-based platforms.  Popularity of the service is mainly hinged on the low cost of transaction, safety, and speed. Mr Joseph succeeded Mr Grieves-Cook who had served as the KTB chairman for two consecutive terms since his first appointment in November 2004.  Under his chairmanship, KTB managed to put up aggressive marketing campaigns targeting domestic and international tourists.

In addition, the organisation partnered with international travel and leisure groups as well as the media and airlines to build a strong image for Kenya as a niche tourist destination.

Nation Media

The Life Cycle of Trade in Services Negotiations

Despite the experience gained from more than two decades of services negotiations at the multilateral, plurilateral, and bilateral levels, trade in services continues to rank among the most complex subject matters in modern trade diplomacy. Such complexity arises from a number of factors, including:

1. the intangible nature of service-sector activity, and the corresponding difficulty of measuring and assessing a sector’s contribution to production and exchange and the economic consequences of alternative policy choices;

2. the considerable diversity of activities encompassed in a sector;

3. the challenge of factor mobility (capital and labor) involved in services transactions; and

4. the ubiquity (and diversity) of market failures affecting services transactions and related regulatory intensity.

For instance some African countries may be considering services market opening with the EC, as a part of the EPA Services and Investment negotiations. In this regard, the World Bank has developed a useful manual on trade in services negotiations, which addresses the 5 stages of the services negotiations life cycle. The stages include:

1. mapping a strategy for services in national development plans;
2. preparing for services negotiations (i.e., developing an informed negotiating strategy or identifying the capacity needs required to do so; setting up the proper channels of communication with key stakeholders; and conducting a trade-related regulatory audit);
3. conducting services negotiations (i.e., acquiring a voice in debates on outstanding rule-making  challenges in services trade by pursuing offensive interests; devising strategies to deal with defensive concerns; analysis of negotiating requests of trading partners; formulating own requests and offers; and participating in collective requests and offers);
4. implementing negotiated outcomes (i.e., addressing regulatory capacities and weaknesses; and identifying implementation bottlenecks); and
5. supplying newly-opened markets with competitive and international standard-compliant services (i.e., addressing supply-side constraints on the ability to take full advantage of the outcome of trade negotiations, including aid-for-trade in services).

The manual provides guidance on each of these platforms and can be accessed here.  


Meanwhile. the EPA-EC negotiations remain contentious and inclusive interim goods agreements in several regions have not even been completed (e.g. West Africa, East Africa, SADC EPA and Pacific regions).  On services and investment, it is not clear if African countries will get sufficient time and resources to negotiate with the the largest services economy in the world, the EU.  


Nonetheless, African countries should proceed with caution and with a clear strategy.  They should also bear in mind that Europe as a single market is the world‘s largest exporter of manufactured goods and services; the biggest export market for more than one hundred countries and has over 20 FTA and other trade negotiations under way (counted by country), which include services agreements.

2010 Report on Doing Business in the East African Community

Rwanda is the most highly ranked economy to do business in the East African Community (EAC) region.  This is according to the Doing Business 2010 Report compiled by the World Bank and International Finance Corporation. The Report measures business regulatory reforms and this year  ranks Rwanda as the top reformer in the world, along with Egypt and Liberia, both in the top 10 global reformers list.  

The Report finds that the 5 EAC countries (Burundi, Kenya, Rwanda, Tanzania and Uganda) are undertaking regulatory reforms, even under the Common Market Protocol, but still have further to go and as such, no East African country makes it into the global top 30 economies. However Mauritius ranks no.17 globally and is the only African country in the world's top 30. 

Indeed, the average ranking for East African countries is 116th out of 183 economies overall. However performance varies across East Africa countries from Rwanda, which ranks 67th on the ease of doing business to Burundi, which ranks 176th.

What is interesting about the EAC report is that if each East African country were to adopt the region’s best practice for each Doing Business indicator, East Africa would rank 12th on the ease of doing business rather than 116th. In other words, if the best of East African regulations and procedures were implemented across the board, the business environment in East Africa, as measured by Doing Business, would be comparable to that in Thailand (12th in the 2010 global rankings on the ease of doing business). 

In recent years, EAC economies have intensified efforts to cooperate and learn from one another. They have also worked to harmonize legislation relating to the EAC Customs Union and even concluded Common Market Protocols.  Since a key objective of the EAC is to develop an effective common market, the Report provides a good basis for comparing regulatory performance across the region, and identifying how this can contribute to deeper regional integration.

The full EAC Doing Business report can be obtained here.