Uganda 3rd in Ease of Doing Business in East Africa Rankings

14-April-2012

In the East African Community (EAC) Rwanda came first, Kenya was second, Uganda third, Tanzania fourth, and Burundi fifth.

Last week the “Doing Business in the East African Community 2012” was launched in the Rwanda capital Kigali.

The report, by the World Bank and International Finance Corporation, had quite a few pleasant surprises about the progress of the East African Community countries in reforming their business regulations, and economic integration.

For once there was good news from Burundi, which is almost always at the bottom of anything measured in East Africa.

The report said Burundi was among the most active economies in the world in implementing regulatory reforms in 2010/11 in the areas dealing with construction permits, paying taxes, protecting investors and resolving insolvency.

Rwanda, the report said, was the top performer in the region and “made the most progress” over the past six years.

Worldwide, it made the second-most progress. Over that period, Rwanda implemented 22 regulatory reforms, making it easier to do business.

The economy, among others, has undertaken ambitious land and judicial reforms, introduced new corporate, insolvency, civil procedure, and secured transactions laws.

In the EAC Kenya was second, Uganda third, Tanzania fourth, and Burundi fifth. Things get troublesome when you compare the East African countries against their global ranking in ease of doing business.

Rwanda is ranked 45th globally. Kenya, which is second in the region, is ranked 109th. This is a huge gap, and becomes evident when one considers that Uganda is ranked 123rd globally, Tanzania 127th, and Burundi 169th.

The gap between Rwanda and Kenya is about the same as that between Kenya and Burundi.

Burundi is a country still recovering from a devastating long civil war, so its case is understandable.

However, of the other four countries, it is Rwanda that emerged from conflict latest. Kenya and, especially, Tanzania have been the most stable, so one must ask why they are still closely matched with Uganda, which spent 20 years in chaos when they were stable.

My sense is that Rwanda’s ability to pass business reforms partly has to do with its war that ended just after the genocide of 1994 in which one million people were killed. It destroyed everything, and virtually all businesses.

There are therefore no old inefficient businesses that block reform to protect their positions, the way they do in Kenya and Uganda.

Tanzania’s case is slightly different. Because Chama Cha Mapinduzi (CCM or the Party of Revolution) has been in power so long, in its socialist era the parastatal and state sectors became deeply entrenched in business.

The Tanzanian parastatal sector is the most pervasive in East Africa, and its bureaucrats are closely linked to or are part of the CCM apparatus.

To protect their privileges, which come from monopoly and the lucrative rent seeking that comes with it, they are not hot on reform.

There is no better example of this problem than in Tanzania’s electricity industry and capital markets. It is in the Stone Age compared to Kenya’s and Uganda’s.

Thus one could argue that the biggest enemies to business competitiveness in EAC are, well, businesses—state businesses, and well established private business that have warped the market by buying off politicians and bureaucrats.

And, of course, entrenched long-ruling parties.

By Charles Onyango-Obbo: The East African