Opinion / Columnist
Zimbabwe slips in doing business rankings
16 Jun 2012 at 12:16hrs | Views
The advent of the multicurrency regime brought a new era in the Zimbabwean economic and business environment. Macroeconomic indicators such as gross domestic product (GDP), inflation and exchange rates showed an improving economy but oddly enough the business environment continues to be unfriendly.
According to the 2012 World Bank report on Doing Business Indicators, Zimbabwe was ranked 171 out of 183 countries, three places down from the 2011 ranking at 168. Singapore remained the world best (ranked 1) in terms of doing business indicators while Chad took over from Central African Republic as the worst countries to do business in. In Sub Saharan Africa, Mauritius remained the most business friendly country despite slipping two places to be ranked 23. The Sub-Saharan (SSA) average ranking was 137, implying that much still need to be done in the continent to improve business conditions but more-so for Zimbabwe whose ranking is way outside the SSA average.
So what exactly is Zimbabwe doing wrong? Trading across borders appears to be Zimbabwe's waterloo given our ranking of 172 out of 183 in both 2011 and 2012. According to data collected by Doing Business, exporting a standard container of goods from Zimbabwe requires eight documents, takes 53 days and costs US$3?280. Importing the same container of goods requires nine documents, takes 73 days and costs US$5?101.
While it takes the same number of documents, it only takes 31 days and cost US$1?960 to export in the SSA region. It also takes half the days (37) and cost 50 percent less (US$2?502) to import in the SSA region compared to Zimbabwe.
The other major challenge facing the country is getting electricity, where the country was ranked 167. It requires six procedures, takes 125 days and costs 5,305,5 percent of per capital income to get electricity connection in the country. The SSA regions does not fare better as far as electricity is concerned given that it takes on average five procedures and 137 days to get electricity. Dealing with construction permits is another nightmare in the country with a global ranking of 166 out of 183. It requires 12 procedures and 614 days to deal with construction permits in the country.
Despite the launch of the one stop shop by the Zimbabwe Investment Authority (ZIA) in 2010, Zimbabwe was ranked 144 in 2012 (142 in 2011) on the ease of starting a business. It would appear that other countries have done more to speed up the business starting processes compared to the country given our negative rating movement.
The reforms by ZIA which were implemented in 2011 saw the time required to start a business declining from 97 days to 90 days whilst the cost fell to 148,9 percent from 182,8 percent or per capita income. It will also come as no surprise that Zimbabwe recorded its biggest drop in rankings on the ease of getting credit indicator where the country fell ten places from 116 in 2011 to 126 in 2012.
While Zimbabwe's strength of legal rights index remained unchanged at seven out of 10 (better than SSA - six), the country performed poorly on the depth of credit information index and the private bureau coverage.
The only areas where Zimbabwe recorded improved ratings were in the payment of taxes and resolving insolvency where it was ranked at 127 down from 132 and 153 down from 166 respectively. In 2011 Zimbabwe reduced the corporate income tax rate from 30 percent to 25 percent and simplified the payment of corporate income tax by allowing quarterly payment through commercial banks.
In the tax category, Zimbabwe fares better than the SSA region in terms of the hours spent to comply with three major taxes (242 hours vs. SSA at 318 hours per year) as well as on the total tax rate as a percentage of profit (35,6 percent vs. SSA at 57,1 percent).
The improved rating on resolution of insolvency was brought about by the significant jump in the recovery rate which went up from 0,2 cents per dollar in 2011 to 10 cents per dollar in 2012.
Mauritius, which is the SSA benchmark, is however ranked 11 and 79 in terms of tax payments and insolvency resolution respectively. The total tax rate in Mauritius is 25 percent while the recovery rate on insolvency is 35,1 cents per dollar.
According to the 2012 World Bank report on Doing Business Indicators, Zimbabwe was ranked 171 out of 183 countries, three places down from the 2011 ranking at 168. Singapore remained the world best (ranked 1) in terms of doing business indicators while Chad took over from Central African Republic as the worst countries to do business in. In Sub Saharan Africa, Mauritius remained the most business friendly country despite slipping two places to be ranked 23. The Sub-Saharan (SSA) average ranking was 137, implying that much still need to be done in the continent to improve business conditions but more-so for Zimbabwe whose ranking is way outside the SSA average.
So what exactly is Zimbabwe doing wrong? Trading across borders appears to be Zimbabwe's waterloo given our ranking of 172 out of 183 in both 2011 and 2012. According to data collected by Doing Business, exporting a standard container of goods from Zimbabwe requires eight documents, takes 53 days and costs US$3?280. Importing the same container of goods requires nine documents, takes 73 days and costs US$5?101.
While it takes the same number of documents, it only takes 31 days and cost US$1?960 to export in the SSA region. It also takes half the days (37) and cost 50 percent less (US$2?502) to import in the SSA region compared to Zimbabwe.
The other major challenge facing the country is getting electricity, where the country was ranked 167. It requires six procedures, takes 125 days and costs 5,305,5 percent of per capital income to get electricity connection in the country. The SSA regions does not fare better as far as electricity is concerned given that it takes on average five procedures and 137 days to get electricity. Dealing with construction permits is another nightmare in the country with a global ranking of 166 out of 183. It requires 12 procedures and 614 days to deal with construction permits in the country.
Despite the launch of the one stop shop by the Zimbabwe Investment Authority (ZIA) in 2010, Zimbabwe was ranked 144 in 2012 (142 in 2011) on the ease of starting a business. It would appear that other countries have done more to speed up the business starting processes compared to the country given our negative rating movement.
While Zimbabwe's strength of legal rights index remained unchanged at seven out of 10 (better than SSA - six), the country performed poorly on the depth of credit information index and the private bureau coverage.
The only areas where Zimbabwe recorded improved ratings were in the payment of taxes and resolving insolvency where it was ranked at 127 down from 132 and 153 down from 166 respectively. In 2011 Zimbabwe reduced the corporate income tax rate from 30 percent to 25 percent and simplified the payment of corporate income tax by allowing quarterly payment through commercial banks.
In the tax category, Zimbabwe fares better than the SSA region in terms of the hours spent to comply with three major taxes (242 hours vs. SSA at 318 hours per year) as well as on the total tax rate as a percentage of profit (35,6 percent vs. SSA at 57,1 percent).
The improved rating on resolution of insolvency was brought about by the significant jump in the recovery rate which went up from 0,2 cents per dollar in 2011 to 10 cents per dollar in 2012.
Mauritius, which is the SSA benchmark, is however ranked 11 and 79 in terms of tax payments and insolvency resolution respectively. The total tax rate in Mauritius is 25 percent while the recovery rate on insolvency is 35,1 cents per dollar.
Source - fingaz
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