africa competitiveness report 2007

The Africa Competitiveness Report 2007

The Africa Competitiveness Report 2007

The Africa Competitiveness Report 2007 © 2007 World Economic Forum

The Africa Competitiveness Report 2007 isthe result of a collaboration between theWorld Economic Forum, the World Bank, andthe African Development Bank.

AT THE WORLD ECONOMIC FORUM:

Professor Klaus Schwab

Executive Chairman

Fiona Paua

Head of Strategic Insight Teams

Jennifer Blanke

Senior Economist, Associate Principal

Haiko Alfeld

Director, Africa

AT THE WORLD BANK:

Paul Wolfowitz

President

John Page

Chief Economist, Africa Region

Demba Ba

Sector Manager, Africa Finance and PrivateSector Group

Giuseppe Iarossi

Senior Economist, Africa Finance and PrivateSector Group

AT THE AFRICAN DEVELOPMENT BANK:

Donald Kaberuka

President

Louis Kasekende

Chief Economist

Temitope Oshikoya

Director, Development Research

Peter Ondiege

Principal Research Economist

We thank Hope Steele for her superb editingwork and Ha Nguyen for her excellent graphicdesign and layout. Printing by SRO-Kundig.Cover design by Pierre Chassany.

The terms country and nation as used in thisreport do not in all cases refer to a territorialentity that is a state as understood by inter-national law and practice. The terms coverwell-defined, geographically self-containedeconomic areas that may not be states butfor which statistical data are maintained on aseparate and independent basis.

Copyright © 2007by the World Economic Forum, theInternational Bank for Reconstruction andDevelopment / The World Bank and theAfrican Development Bank

Published by the World Economic Forum,Geneva

The findings, interpretations, and conclusionsexpressed herein are those of the author(s)and do not necessarily reflect the views ofthe Executive Directors of The World Bank orthe governments they represent.

The World Bank does not guarantee theaccuracy of the data included in this work.The boundaries, colors, denominations, andother information shown on any map in thiswork do not imply any judgement on the partof The World Bank concerning the legal sta-tus of any territory or the endorsement oracceptance of such boundaries.

All rights reserved. No part of this publicationmay be reproduced, stored in a retrieval sys-tem, or transmitted, in any form or by anymeans, electronic, mechanical, photocopying,or otherwise without the prior permission ofthe World Economic Forum, the World Bank,and the African Development Bank.

ISBN-13: 978-92-95044-03-6


Contents

Preface...................................................................................................vby Donald Kaberuka, Klaus Schwab, and Paul Wolfowitz

Acknowledgments............................................................................vii

Overview..............................................................................................ix

Part 1: Selected Issues of African Competitiveness

1.1 Assessing Africa’s Competitiveness in a Global Context ............................................................................3by Jennifer Blanke, World Economic Forum

1.2 From Benchmarking to Impact: Indentifying Which Dimensions Matter.............................29by Reyes Aterido, Mary Hallward-Driemeier, and GiuseppeIarossi, World Bank

1.3 Competitiveness and Investment Climate in the SANE Economies..........................................................49by Louis A. Kasekende, Temitope W. Oshikoya, Peter O.Ondiege, and Bernard Z. Dasah, African Development Bank

1.4 Gender, Entrepreneurship, and Competitiveness in Africa .....................................................69by Elena Bardasi, C. Mark Blackden, and Juan CarlosGuzman, World Bank

1.5 Competitiveness and Information and Communication Technologies (ICTs) in Africa .................87by Hamadoun I. Touré, International Telecommunication Union

Part 2: Country Profiles

2.1 Competitiveness Profiles.....................................................113

How to Read the Competitiveness Profiles..................115by Thierry Geiger, World Economic Forum

List of Countries ..............................................................121

Competitiveness Profiles................................................122

2.2 Investment Climate Profiles................................................181

How to Read the Investment Climate Profiles.............183by Giovanni Tanzillo, World Bank

List of Countries ..............................................................187

Investment Climate Profiles ...........................................188

About the Authors..................................................................253


v

Pref

ace

The publication of this year’s Africa CompetitivenessReport 2007 (ACR) marks a new level of cooperation in Africa. It is the first report on the region’s businessenvironment to present a dual perspective based on acombination of aggregate perception data and firm-leveldata capturing the actual costs of operating in nationalbusiness environments; and the first to leverage knowl-edge and expertise within the African DevelopmentBank, the World Bank, and the World Economic Forum.Our three organizations have undertaken this work at atime when there is optimism about Africa’s future.TheReport presents a unified vision and a mapping of thepolicy challenges that countries on the continent mayaddress as a foundation for sustainable growth and prosperity.

The present Report comes amid renewed optimismagainst the background of a much more encouragingregional business environment that is better now than it has been for years. Many African countries are experi-encing an economic resurgence. Between 2001 and2006, growth in gross domestic product (GDP) on thecontinent averaged 4.9 percent annually. In 2006, thecontinent grew by more than 5.5 percent, and in 2007,the rate is expected to increase further to the highestgrowth rate registered for decades. Moreover, the cost of doing business is coming down in most countries as an increasing number of them are implementing critical reforms, placing Africa among the top threereforming continents—ahead of Latin America and theMiddle East.

This economic progress opens the door to greaterwealth creation and better standards of living for thepeople of Africa. Continued policy and institutionalreform remain central to ensuring that African countriesstay on a higher growth trajectory.Those responsible foreconomic management will have to be aware of thecontinued need for action and not give in to compla-cency as a result of the recent cushion of growth.Whilethe timing is propitious for reform, new policies shouldbe introduced in a prioritized and sequenced way, andattention must be given to the political economy ofreform as care must be taken to balance the interests ofwinners and losers that any program of reform engenders.

This Report is intended as a tool for African deci-sion makers from private and public circles. It measuresthe business climate potential for sustainable growth andprosperity and as such should be used to stimulate pri-

vate-public dialogue on the issues at stake.The privatesector can play a vital role in the process of reform.As a stakeholder, business can support andadvocate competitiveness-enhancing reforms with theirgovernments while highlighting the benefits of a morecompetitive economy for creating jobs and increasingwealth for all. For their part, governments will want toemphasize a sound business climate as a catalyst forlong-term growth and prosperity.

This Report is an ongoing collaboration among thethree institutions.This year it examines many aspects ofAfrica’s business environment and, more generally,themes that will boost the prosperity of nations, includ-ing detailed assessments of the drivers of productivityand employment growth; the competitiveness andinvestment climate in Africa’s four largest economies,which together account for slightly more than half ofthe continent’s output; the effect of gender disparitieson employment and competitiveness; and the role ofnew technologies in fostering a more dynamic businessenvironment.

The Report also includes detailed competitivenessand investment climate profiles, providing a comprehen-sive summary of the drivers of investment and competi-tiveness in each of the countries included in the Report.

PrefaceDONALD KABERUKA, President, African Development Bank Group

KLAUS SCHWAB, Executive Chairman, World Economic Forum

PAUL WOLFOWITZ, President, World Bank Group


The Africa Competitiveness Report 2007 was prepared by ajoint team comprised of Jennifer Blanke from the WorldEconomic Forum, Demba Ba and Giuseppe Iarossi fromthe World Bank, and Temitope Oshikoya and PeterOndiege from the African Development Bank.Thework was carried out under the general direction ofFiona Paua, Head of Strategic Insight Teams,WorldEconomic Forum; Louis Kasekende, Chief Economist ofthe African Development Bank, and John Page, ChiefEconomist for the Africa Region,World Bank.

Our gratitude goes to the distinguished authorswho have shared with us their knowledge and experi-ence, and contributed to this year’s Report.

We are similarly grateful to the staff of the threeorganizations who have worked so hard to make thisjoint report possible and who have provided commentsat different stages of the report preparation. In particularwe thank Douglas Barnett,Abdellatif Bernoussi,Francois Botes, Lobna Bousrih, Sana Harrabi, IsaacLobe, Michael Mahmoud, Mohamed Manai, LeilaMokadem, Laeticia Mukurasi, Eric Ndiaye, DetlevPuetz, Herimandiby Razafindaramanana, MohamedSalisu,Tim Turner, Gennet Hall Yirga, and Ahmed Zejlyfor the African Development Bank;Theodore Ahlers,Reyes Aterido, Najy Benhassine,Theresa Bradley, MayraBuvinic, Constantine Chikosi, Jozefina Cutura,AmadouDen, Simeon Djankov,Amanda Ellis, Lucia Fort,AlanGelb, Ola Granström, Mary Hallward-Driemeier,Samuel Munzele Maimbo, Melanie Mbuyi,AndrewMorrison, Francois Nankobogo, Gbemisola Oseni,VijayaRamachandran, Manju Shah, Giovanni Tanzillo, FedericaSaliola, Sudhir Shetty,Andrew Stone, Marilou Uy,Dileep Wagle, Michaela Weber, Julie Weeks, and MichaelWong for the World Bank; and Haiko Alfeld,AdeyemiBabington-Ashaye, Ciara Browne,Augustina Ciocia,Margareta Dzreniek,Thierry Geiger,Viktoria Ivarsson,Kamal Kimaoui, Irene Mia, and Stéphane Oertel for theWorld Economic Forum.

Finally, our appreciation goes to the panel of exter-nal reviewers of the report, and in particular H.E. RamaKrishna, Minister of Finance of Mauritius; Raj Makoon,Director of the Mauritius Joint Economic Council;Nkossana Moyo, Director General of ACTIS CapitalLLP; Huberto Danso, Managing Editor of AfricaInvestor; Prof. Moses Kiggundu, Sprott School of

Business at Carlton University, Ottawa, Canada; Prof.Mthuli Ncube, Professor of Finance at Wits BusinessSchool, University of Witwatersrand, Johannesburg,South Africa; and Foluso Phillips, CEO of PhillipsConsulting.

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Acknowledgments


Algeria

Centre de Recherche en Economie Appliquée pour leDéveloppement (CREAD)

Professor Yassine Ferfera, DirectorYoucef Benabdallah, Assistant Professor

Angola

Serviços de Organização e Finanças (SOF)Marcolino Meireles, Manager

Benin

Micro Impacts of Macroeconomic Adjustment Policies (MIMAP)Benin

Epiphane Adjovi, Business CoordinatorMaria-Odile Attanasso, Deputy CoordinatorCosme Vodounou, Head, Department of Thematic StudiesDamien Mededji, Researcher

Botswana

Botswana Institute for Development Policy Analysis (BIDPA)Dr N.H. Fidzani, Executive DirectorKedikilwe P. Maroba, Programme Coordinator

Burkina Faso

SERF (Société d’Etudes et de Recherche Formation pour leDeveloppement)

Abdoulaye Tarnagda, Director General

Burundi

CURDES (Center of Scientific Research in Economics)Pascal Rutake, Dean, EconomicsFerdinand Bararuzunza, Professor, Economics

Cameroon

Comité de Compétitivité (Competitiveness Committee)Lucien Sanzouango, Permanent Secretary

Chad

Groupe de Recherches Alternatives et de Monitoring du ProjetPétrole-Tchad-Cameroun (GRAMP-TC)

Professor Gilbert Maoundonodji, DirectorLydie Beassemda, Program OfficerYode Miangotar, Researcher

Egypt

The Egyptian Center for Economic StudiesDr Hanaa Kheir-El-Din, Executive Director and Director of ResearchAmal Refaat, Economist

Ethiopia

Ethiopian Economic Association/Ethiopian Economic PolicyResearch Institute

Assefa Admassie, DirectorKibre Moges, Senior ResearcherWorku Gebeyehu, Researcher

Gambia

Gambia Economic and Social Development Research Institute(GESDRI)

Makaireh A. Njie, Director

Kenya

Institute for Development Studies, University of NairobiProfessor Dorothy McCormick, DirectorWalter Odhiambo, Research FellowPaul Kamau, Research Fellow

Lesotho

Sechaba ConsultantsBarbara Nkoala, Associate Consultant

Libya

National Economic StrategyProfessor Omran Bukhres, Director

Monitor GroupRajeev Singh-Molares, Director

Madagascar

Centre of Economic Studies, University of AntananarivoPépé Andrianomanana, Director

Malawi

Malawi Investment Promotion AgencyAlick C. E. Sukasuka, Acting Deputy General Manager

Mali

Groupe de Recherche en Economie Appliquée et Théorique(GREAT)

Massa Coulibaly, Coordinator

Mauritania

Centre d’Information Mauritanien pour le DéveloppementEconomique et Technique (CIMDET/CCIAM)

Moustapha Sidibé, DirectorChekroud Ould BouhakeAminata Niang

Mauritius

Joint Economic Council of MauritiusRaj Makoond, Director

Morocco

Université Hassan IIFouzi Mourji, Professor of Economics

Mozambique

EconPolicy Research Group, LdaDr Peter Coughlin, PartnerProfessor Dr Paulo N. Mole, Partner

Namibia

Namibian Economic Policy Research Unit (NEPRU)Dr Christoph Stork, Senior Researcher

Nigeria

Nigerian Economic Summit Group (NESG)Dr Felix Ogbera, Associate Director, ResearchChris Okpoko, Senior Consultant, Research

South Africa

Business Unity South Africa (BUSA)Jerry Vilakazi, Chief Executive OfficerFriede Dowie, Chief Officer Strategic Services

Tanzania

Economic and Social Research FoundationProfessor Haidari Amani, Executive DirectorJames Kajuna, Research Assistant, Commissioned Studies

Department

Tunisia

Institut Arabe des Chefs d’EntreprisesFaycal Lakhoua, Conseiller

Uganda

Makerere Institute of Social Research, Makerere UniversityDelius Asiimwe, Senior Research FellowWilson Asiimwe, Graduate FellowRobert Apunyo, Research Associate

Zambia

Institute of Economic and Social Research (INESOR), University ofZambia

Dr Mutumba M. Bull, DirectorDr Inyambo Mwanawina, Assistant Director and Coordinator,

Economics and Business Research ProgrammeKabombo Fenete, Research Affiliate

Zimbabwe

University of ZimbabweProfessor A.M. Hawkins, Graduate School of Management

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PARTNER INSTITUTES OF THE WORLD ECONOMIC FORUM


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After years of economic stagnation,Africa is experiencingan economic resurgence. Between 2001 and 2006,growth in gross domestic product (GDP) on the conti-nent averaged 4.9 percent annually. In 2006, the continentgrew by an impressive 5.5 percent, and in 2007, this isexpected to increase even further to 6.2 percent—thehighest growth registered for decades.

Despite the improved economic performance,questions remain as to how sustainable this growth will be over the longer run.Although the continent isexperiencing its highest growth since the 1970s, andeven though significant progress has been achieved instabilizing the macroeconomic environment in manyAfrican countries, most of the current growth has beenfueled by a confluence of external events and interven-tions, including high commodity prices, debt relief, anda favorable international economic environment.Trulysustainable growth, however, must be based on soliddomestic foundations rather than on cyclical or exogenous circumstances.

Moreover, high rates of growth over decades, suchas those observed in developing Asian countries, are des-perately needed in Africa to raise the living standards ofits people. Present growth rates in Africa, although highby historical standards, are still short of the estimated 7percent annual growth that would be required to meetthe Millennium Development Goal (MDG) of halvingpoverty rates in the region by 2015.1

There is every reason to expect that Africa canachieve a sustainable growth path, given proper policiesand investment. Even before the present economicupturn, studies were focusing on the great economicpotential of the continent, given the right policy envi-ronment. For example, the study Can Africa Claim the21st Century? (2000)—a joint study by the AfricanDevelopment Bank, the African Economic ResearchConsortium, the Global Coalition for Africa, the UNEconomic Commission for Africa, and the WorldBank—made the argument that Africa has enormousunexploited potential. It has hidden growth reserves inits people, including the potential of its women, whonow provide more than half the region’s labor but lackequal access to education and factors of production.2 Infact, the substantial economic role of women, especiallyin sub-Saharan Africa, is one of the characteristics thatdistinguishes Africa from other regions, and, once barriers to entrepreneurship are overcome, women’s

businesses are at least as productive as men’s, as will beexplored further in Chapter 1.4.A recently completedWorld Bank study identified infrastructure, investment,innovation, and institutional capacity as the most criticalareas demanding action if Africa is to make up for miss-ing two decades of global growth or replicate the growthmodels that have lifted millions of people out of povertyin other regions of the developing world.3

The international community is focusing on theregion with renewed commitment to assist countries inexpanding this growth and in reducing poverty. It is thusparticularly fitting now to take stock of the efforts tobenchmark and analyze the impact of critical dimensionsof the business environment in Africa.

This year’s Africa Competitiveness Report marks a newpartnership between three institutions.The WorldEconomic Forum, the World Bank, and the AfricanDevelopment Bank have come together to underscorethe importance of discussing the challenges of competi-tiveness in Africa. Each institution approaches the topicin its own way, which, when combined in this volume,provides the reader with a rich set of complementaryviews about how to expand opportunities and increaseproductivity and growth in Africa.

This joint publication is organized in five chaptersand reports on several data-collection efforts in itsassessment of the competitive environment across thecontinent.The World Economic Forum conducts itsyearly Executive Opinion Survey (Box 1), which isused, along with hard data sources, to derive the GlobalCompetitiveness Index (GCI). Now in its 28th year, thissurvey benchmarks countries on multiple dimensionsbased on the perceptions of CEOs and managers operating in each country.The World Bank launched its program of Enterprise Surveys in 2001 (Box 2) to collectsimilar subjective data along with more objective measuresof the time and monetary costs associated with access tovarious services and interactions with the government.The Enterprise Survey also collects data on the firms’performance, and on key ownership and other firmcharacteristics, allowing the impact of the investmentclimate conditions to be analyzed.The larger samplesizes also allow for comparisons across types of firms, forexample, by size or ownership.

Both of these approaches rely on what entrepreneursreport is their experience.These data can usefully becompared with another source of data benchmarking

Overview


countries, the World Bank’s Doing Business indicators(Box 3). For 10 areas of regulation, this project providesinformation on the time and monetary costs a genericfirm would face if it fully complied with all the legalrequirements. In many cases, what is on the books andwhat firms report in practice are aligned. But it can beinformative when there are discrepancies. Sometimesthe challenge to policymakers is to change the laws; butother times, the challenge is to get consistent enforcementof the rules.

The African Development Bank undertakes a num-ber of studies of its regional member countries on anannual basis.These include Private Sector CountryProfiles, Country Governance Profiles, and AfricanEconomic Outlook—a publication jointly produced withthe OECD—which are outlined in Box 4.

The aim of bringing the approaches together is toreinforce the complementary nature of different indica-tors. Each brings a different perspective that, takentogether, enrich the insights into the accomplishmentsand challenges still facing countries in Africa.

Five themes for sustaining developmentThis Report highlights five common themes that emergefrom the analysis of the competitiveness landscape inAfrica.

First, the importance of good policies to establish asound business environment is clearly demonstrated inthis Report. More than geography or geology, countriesthat have implemented sound polices score better onsubjective rankings, with more objective measures showing better conditions and better growth and pro-ductivity outcomes. Resource-endowed countries andcountries with direct access to the sea do enjoy a fewadvantages, such as lower transportation costs. However,overall, when we take into account a wider set of issues,entrepreneurs in Africa do not see these countries aspresenting a business climate that is significantly betterthan those in landlocked or resource-scarce countries.No matter whether we use Enterprise Survey data orthe Executive Opinion Survey, the average ranking ofresource-endowed countries is not statistically differentfrom that of resource-scarce countries. Similar resultshold for landlocked countries. Hence, to the extent thatcompetitiveness and productivity are determined by agood business environment,African countries in thecontinent should not rely on their natural endowmentsto foster productivity and competitiveness.Where policies respond to the needs of women as well as menentrepreneurs,Africa has the opportunity to unlockconsiderable additional productive potential. Moreover,it is clear that family enterprises, and family dynamicsmore generally, are integral to the business landscape inAfrica, with important ramifications for productivity andcompetitiveness. Finally, high-quality educational systemsremain a critical element underlying a good business

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Box 1: World Economic Forum: Executive OpinionSurvey

Box 2: World Bank Group: Enterprise Surveys

The World Bank’s Enterprise Surveys collect data throughface-to-face interviews with hundreds of entrepreneurs ineach country to describe the impact of their country’s invest-ment climate on their firms. Responses reflect their man-agers’ actual experiences. The data collected span all majorinvestment climate topics, ranging from infrastructure andaccess to finance, to corruption and crime. Detailed produc-tivity information includes firm finances, costs such as laborand materials, sales, and investment. The breadth and depthof data allow cross-country analysis by firm attributes (size,ownership, industry), and can probe the relationshipbetween investment climate characteristics and firm produc-tivity. Every year, 15 to 30 Enterprise Surveys are implement-ed, with updates planned for each country every three to fiveyears. This reflects the intense nature of administering firmsurveys and for the firms responding to the many, detailedquestions. So far over 100 countries have been surveyed,including 11,600 entrepreneurs, senior managers, and CEOsin 34 African countries. For more information, visitwww.enterprisesurveys.org.

The Executive Opinion Survey conducted annually by theWorld Economic Forum captures the perceptions of leadingbusiness executives on numerous dimensions of the econo-my from a cross-section of firms representing the main sec-tors of the economy. The Survey compiles data points in thefollowing areas: technology, government and the public sec-tor, public institutions, infrastructure, human resources andhealth, finance and openness, domestic competition, compa-ny operations and strategy, and environmental and socialresponsibility. All these areas feed into the nine pillars of theGlobal Competitiveness Index.

The Executive Opinion Survey serves as a gauge of thecurrent condition of a given economy’s business climate, andthe data generated from the Survey comprise the core quali-tative ingredient of the Competitiveness Report series. Themost recent data cover 128 countries, with an overallresponse rate of 11,436 worldwide and 2,374 senior manage-ment respondents in 29 African countries.

More information on the Executive Opinion Survey isavailable from the World Economic Forum on request [email protected].


environment, preparing the continent’s individuals withthe skills needed to contribute efficiently to the produc-tivity of their firms, and enabling African countries tomove up the value chain by producing more sophisticatedor higher value-added products.

Second, a critical constraint to businesses in Africaremains access to finance.This is more acute in lower-income countries, for small firms and for locally ownedfirms, and constrains both men and women entrepre-neurs.Worryingly, expanding firms report that finance isparticularly constraining and that making more financeavailable would significantly raise employment growth.Across countries, resource-rich countries view access tofinance as more of a problem, illustrating some of thedifficulties of diversifying activities in those countries.Efforts to expand access to finance on the continent hasbeen facilitated and improved recently, but more mustbe done. Finance is still elusive to most firms in Africa,especially small and rural firms.With the expansion ofnew technology (such as mobile phones) there is greatpotential for technology to help overcome location andcost barriers to expand access to financial servicesthroughout the continent. Nevertheless, improvementsin the regulatory environment (such as better collateral-ization, transparency, and auditing) represent a necessarystep for unleashing the potential impact of finance onfirm competitiveness in Africa.

Third, infrastructure remains one of the top constraintsto businesses in Africa. Indirect costs can represent asubstantial drag on productivity enhancements in Africaand can account for as much as 30 percent of overallcosts.This can easily erode any labor efficiency gainAfrican firms might enjoy. Both subjective and objective

indicators clearly show that energy and transportationare among the main bottlenecks to productivity growthand competitiveness in Africa. Firms lose as much as 8percent of sales to power outages, and transportationdelays can account for as much as 3 percent of lost sales.Infrastructure costs do not impact all countries and allfirms equally. Geography and firm characteristics canhelp some enterprises cope with such problems moreeasily than others. Coastal countries face less of a burdenof transportation, and large firms can more easily affordto buy a generator. Nevertheless, this infrastructure costcan represent as much as 4 percent of sales and themajority of African firms, small and medium, do not

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Box 3: World Bank Group: Doing Business

The World Bank’s Doing Business Indicators are based on asurvey of local experts in law and accounting who interactwith a large number of firms. The indicators presented meas-ure business regulation and the protection of property rightsas well as their effect on businesses, especially small andmedium-sized domestic firms. Constancy of firm descriptionacross countries allows for a straightforward comparisonand ranking by country for the various indicators. Ease of usemakes this a useful tool for policy analysis. The data entailsin-depth research and exchange with experts on 10 sets oflaws, regulations, and institutions covering specific aspectsof firm entry, operation, and exit. The most recent data cover175 economies. Forty-five countries in Africa are represent-ed, reflecting the responses of 900 lawyers, accountants,and regulatory experts. Data are collected annually, andeach year expanded collection (covering more economiesand indicators) is planned. For more information, visitwww.doingbusiness.org.

Box 4: The AfDB: Knowledge to improve the investment climate and competitiveness

The AfDB Private Sector Country Profiles

The African Development Bank (AfDB) prepared four PrivateSector Country Profiles—for Algeria, Egypt, Mali, and SouthAfrica— in 2006, as part of its efforts to support an enablingenvironment for private-sector development in the continent.These profiles provide an in-depth analysis of the privatesector; the political, economic, and legal environment, oppor-tunities, and constraints; and a strategy for the future.

The AfDB Country Governance Profiles

The AfDB Group’s governance policy and its implementationguidelines provide the basis for addressing governanceissues facing Regional Member Countries. Also, good gover-nance remains a key criterion in the performance-basedallocation of African Development Fund resources, with moreresources going to countries with high governance ratings.The AfDB prepares Country Governance Profiles for a num-ber of countries annually. These profiles provide detailedassessments of major governance issues in the concernedcountries. They analyze the governance situation in the polit-ical, social, economic, and corporate governance areas.They also review existing policies, institutional frameworks,and related capacity issues. Finally, these profiles highlightgovernance challenges and propose measures and recom-mendations to move the governance agenda forward. TheAfDB Group’s support for good governance and anticorrup-tion programs is through projects in public-sector manage-ment, industrial import facilitation, export promotion, andinstitutional support.

African Economic Outlook (AEO)

African Economic Outlook is an annual publication jointlyproduced by the AfDB and the OECD Development Centresince 2001/02. It reviews recent economic developments inAfrica by adopting a comparative approach and a commonanalytical framework. It provides forecasts for key macro-economic variables. The 2006/07 AEO covers 31 countrieswith the theme “Access to Drinking Water and Sanitation.”


have the necessary financial resources to cope with it.Beyond transport and energy, upgrading the nationalinformation and communication technologies (ICT)infrastructure also plays a vital role.These technologiesenable the fast and efficient communications across andwithin countries that are critical for success in today’sglobal economy, enabling African countries to leapfrogexisting underdeveloped infrastructures and geographicalbarriers, and to devise new and creative ways of doingbusiness.

Fourth, institutions in Africa need to be more busi-ness-friendly to foster competitiveness. More specifically,corruption in Africa remains a serious obstacle.This canbe manifest in the payment of frequent bribes, but it isalso associated with discretion on the part of officials,the inconsistent enforcement of regulations, significanttime spent with officials, and political favors beingdirected to special interest groups.These manifestationsare sometimes perceived as a greater problem forwomen entrepreneurs.These costs are shown to impactproductivity significantly—especially for small firms.Reforms are needed.And transparency of the reformprocess itself will be key to its success.

Finally, there are significant examples of successthroughout the region.The Global CompetitivenessIndex, described below, shows that the region, and sub-Saharan Africa in particular, lags primarily in the basicsof infrastructure and education. However, many coun-tries perform much better on issues associated withtechnology readiness and efficiency.While the basics areclearly important, the existence of highly productivefirms across the continent demonstrates that they are notthe only thing that matters.The challenge is how to sus-tain and expand these opportunities.The approaches inthis Report highlight ways to identify constraints, includ-ing efforts to benchmark countries and link indicatorsto outcomes.

Analyzing African competitivenessThe first chapters of the Report analyze competitivenessacross the region, with subsequent chapters focusing onparticular themes for more in-depth analysis.The finalsection provides detailed country profiles.

Chapter 1.1, by Jennifer Blanke of the WorldEconomic Forum, analyzes the results for 29 Africancountries compared with the performance of all 128countries included in the Global Competitiveness Index(GCI).The GCI assesses the set of institutions, policies,and factors that drive productivity and therefore set thesustainable current and medium-term levels of econom-ic prosperity. It measures the macro- and microeconom-ic drivers of competitiveness, or those factors drivingproductivity, across a large number of countries.TheGCI, with its nine distinct pillars, captures the idea thatmany different elements matter for competitiveness.These are identified as: institutions (public and private),

infrastructure, the macroeconomy, health and primaryeducation, higher education and training, market efficiency(goods, labor, financial), technological readiness, businesssophistication, and innovation.The exact methodologyunderlying the construction of the GCI is described inChapter 1.1.

Specific comparisons are made with relevant devel-oping countries and regions, including Latin America,economies of developing Asia, and the four emerging“BRIC” countries—Brazil, Russia, India, and China. Byplacing individual country performances into an inter-national context, the author highlights those areasrequiring urgent attention within African countries toincrease competitiveness and to better ensure sustainedstrong economic performance going into the future.

On average, the analysis shows that the competitive-ness of most countries in Africa continues to lag behindthat of the rest of the world, and even behind otherdeveloping regions across all areas measured by the GCI.The results thus provide a sense of the magnitude of theefforts required to raise competitiveness levels.

Although the specific priority areas vary fromcountry to country, there are some common areas ofconcern. For North African countries, which areassessed as doing comparatively well in some of themore basic areas measured by the GCI, the focus shouldbe on improving the factors such as technological readi-ness and improved market efficiency.

In sub-Saharan Africa, efforts are needed on allfronts within most countries.This includes upgradinginfrastructure and improving the health and educationof the workforce, as well as tackling weaknesses in theareas of market efficiency and technological readiness.Indeed, the results of the GCI indicate that several ofthe big economies in the region are receiving highscores in the innovation and business sophistication pillars relative to their overall ranking, while neglectingmore basic requirements that would help them migrateinto a higher stage of development and achieve moresustainable growth.

Although much remains to be achieved, the factthat there are a number of strong performers on thecontinent in specific areas provides reason for optimism.An analysis of the highest-ranked countries in Africaacross the various pillars of national competitivenessshows that there are strong individual country perform-ances throughout the continent in areas as diverse asinstitutional quality, macroeconomic stability, businesssophistication, and innovation.These countries can serveas benchmarks for other economies in the region, aspoints of reference in their efforts to improve theircompetitiveness.

The author concludes by stressing that with the rel-atively positive economic outlook across much of Africa,coupled with the renewed focus and increased attentionfrom several institutions from within the region andbeyond, there is now a promising opportunity to make

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the institutional and structural changes needed to putcountries in the region on a more sustainable growthpath and to pave the way for a more prosperous Africanfuture.

More details of the comparative performance ofAfrican countries in specific pillars, as well as the per-formance of individual countries from the region aredescribed in Chapter 1.1.

In Chapter 1.2, Reyes Aterido, Mary Hallward-Driemeier, and Giuseppe Iarossi introduce the WorldBank’s Enterprise Survey data.This chapter movesbeyond the ranking of locations to examine the actualimpact of these investment climate conditions. It exam-ines how differences in investment climate affect firmperformance and what the implications are for reformpriorities. It argues that priorities should be set by anissue’s impact, which may or may not correspond to theareas characterized by the longest delays or highest costs.Certain government services are associated with longdelays but have small impact; small differences in accessto finance can have large impacts on employmentgrowth.

The chapter also demonstrates that priorities forreform are not uniform across countries or withincountries—the impact of a particular issue varies bywhere you are and who you are.

“Where you are” determines specific challenges tofirms based on their country’s key geographic character-istics (for example, landlocked or coastal), its naturalendowments, and its economic advancement. But theseconditions do not determine firms’ prospects.The analy-sis shows how the quality of the investment climate cantrump country characteristics.Thus, a more reliableinfrastructure can counteract the greater challenges inaccessing markets in landlocked countries or be particu-larly beneficial in countries with greater concentrationof manufacturing exports, where timely delivery isincreasingly important.A more-developed financial system and consistent regulations are associated withbetter outcomes, particularly in lower-income countries.

Within countries, priorities vary most by “who youare”—especially a firm’s size, its openness to internationalmarkets (exporting or foreign investment), and whetherthe firm is expanding or contracting. Improving infra-structure, property rights, and inconsistent enforcementare particular challenges for smaller firms. Expandingfirms report different constraints than contracting firms.Addressing finance and skills are most helpful toexpanding firms, while labor regulations and corruptionare most constraining to contracting firms.

The three chapters that follow in the Report providea more in-depth look at a particular dimension of com-petitiveness and its impact.

In Chapter 1.3,“Competitiveness and theInvestment Climate in SANE Economies,” LouisKasekende,Temitope Oshikoya, Peter Ondiege, andBernard Z. Dasah of the African Development Bank

challenge the traditional country groupings used in analyzing Africa’s economic landscape, examining theconcept of the SANE (South Africa,Algeria, Nigeria,and Egypt), a group of Africa’s four largest economies.These countries represent almost a third of Africa’s pop-ulation and account for more than half of its total GDP.The authors also make some comparisons of competi-tiveness and investment climate between the SANE andthe BRIC (Brazil, Russia, India, and China) economies.

The SANE economies are richly endowed inresources and strategically located with large marketsand populations. Given their relative size and importance,as the authors point out, these economies can becomeessential growth poles for the rest of the continent.Theycan help shape the development of their respective sub-regional networks of economies for attracting capitalflows, facilitating regional infrastructure and developingskills that Africa needs to compete in the global econo-my. In spite of these potentials, a number of constraintsto competitiveness and the investment climate continueto undermine the productivity of businesses in theSANE.

As a start, there is very little intra-African trade bythe SANE economies, except South Africa, whichaccounted for 14.6 percent of South Africa’s exporttrade in 2005, while Egypt accounted for only 1 percentand Nigeria for a tenth of its total exports in that year.The compelling implication of this situation is that theSANE countries will surely have to augment their intra-African trade before they can be seriously regarded aspotential growth poles.

The authors explain that although South Africa isboth the largest and the most sophisticated economy inAfrica, a number of obstacles remain: high levels ofincome inequality in the economy; weak education andbasic health; scarcity of land; crime; and corruption,which are strategic focal points that should be addressedfor the country to achieve its full potential. In Algeria,the economy faces unfair competition, lack of workingcapital, high interest rates, corruption, scarcity of indus-trial land and building, complex tax regulations, andshortage of skilled labor.

Although Nigeria has made considerable progresswith respect to improving macroeconomic and financialmarket reforms, it ranks poorly on most other indicatorsdespite its huge oil wealth: power failure is the mosturgent problem, followed by the poor state of otherinfrastructure, a lack of access to capital, and high interestrates, which are the fundamentals for achieving sustainedeconomic growth. Egypt’s most pressing investmentconstraints are related to macroeconomic uncertainty,tax regulations and tax rate policies, unfair competition,and corruption.

As a group, the SANE countries compare relativelywell with global emerging economies that make up theBRIC countries.While the population of the SANE isabout a fifth of India’s population, the nominal GDP of

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the SANE represents more than two-thirds of India’sGDP. In 2005, the SANE attracted foreign direct invest-ment (FDI) that was two and half times the FDI toIndia. FDI to the SANE as a group was also higher thanFDI to Brazil or Russia. In terms of competitiveness,although the rankings of Algeria and Nigeria are lowerthan those of the BRIC economies, South Africa andEgypt are on a par with the BRICs.

It is easier to start a business in the SANE than inthe BRIC economies. On average, entrepreneurs in theSANE economies go through 10 steps to launch a busi-ness, while launching a business in the BRIC economiesrequires 12 procedures. Similarly, the average number ofdays taken to license a business in the SANE economiesis two-thirds of those required in the BRIC economies.It takes about 23 and 26 days to export goods in theSANE and the BRIC economies, respectively.Also, theaverage number of documents needed to import goodsin the SANE is marginally smaller than that of theBRIC. However, the BRIC economies perform betterthan the SANE on protecting investors. China, Russia,and India have higher rankings in this category than anycountry in the SANE.The average number of days forregistering property in SANE is almost three times theaverage number for the BRICs.Also the SANEeconomies face higher import costs than the BRICeconomies; these costs are a direct burden on the SANEcompetitiveness.

In conclusion, the SANE economies have the sizeand the scale to be drivers of Africa’s economic growth,regional economic cooperation, and integration into theglobal economy. However, the SANE would need toaddress key obstacles to competitiveness and constraintsto their investment climate before their potentials in boththe regional and global economy can be fully realized.

Chapter 1.4,“Gender, Entrepreneurship, andCompetitiveness in Africa” by Elena Bardasi, C. MarkBlackden, and Juan Carlos Guzman from the WorldBank, is a welcome contribution to the debate on therole of gender in firm-level competitiveness.As theauthors point out, gender is an important dimension ofAfrica’s competitiveness that affects Africa’s potential andprospects for private sector–led growth. Both men andwomen are active as entrepreneurs in Africa, and theirenterprises share many common characteristics. For theselect sample of manufacturing and service sector entre-preneurs, there are some differences in the types of busi-ness in which men and women are engaged and somedifferences in perceived constraints. However, these dif-ferences are often quite small and are not consistentlyassociated with specific countries, sectors, or types ofbusiness.

Because the chapter finds such small differencesbetween men and women entrepreneurs, it may betempting to conclude that there is little to be gainedfrom addressing entrepreneurship in Africa through agender lens.This would be a mistake, as even the

absence of differences—for example, with respect tofirm performance—is an important and positive finding.The chapter highlights several important findings thatare relevant for strengthening Africa’s competitivenessand entrepreneurship.

Women entrepreneurs are more likely than theirmale counterparts to be engaged in family enterprises,and are generally younger and less likely to be married.Family dynamics play an important role in entrepre-neurship in Africa.The confluence of family and businessactivity suggests that the legal status and rights of womenwithin the family, especially in relation to marriage,inheritance, and property rights, have a bearing on theircapacity to engage in entrepreneurial activity.

Women’s businesses are at least as productive asthose of their male counterparts. Once men and womenentrepreneurs are operating their businesses, the con-straints and obstacles they face affect them in largely thesame way, and differences based on gender tend to dis-appear.The absence of significant gender-based barriersin operating a business does not mean that there are nogender-based obstacles to entrepreneurship. It is verylikely that barriers to entry into entrepreneurship presentgreater obstacles for women than for men. Consequently,measures aimed at facilitating entry into entrepreneur-ship through legal, regulatory, and other reforms arelikely to have a more positive impact on women entrepreneurs.

The finding that there are no or few significant dif-ferences between female and male entrepreneurs oncethey are already operating businesses is encouraging. Itsuggests, for example, that Africa does indeed have con-siderable hidden growth potential in its women, and thattapping that potential—including through removal ofbarriers that exist at entry—and reducing disparities inaccess to and control of resources by empoweringwomen economically can make a substantial differencefor Africa’s growth and poverty reduction. If Africa is toremain competitive, and is to tap the full productivepotential of all economic actors—male and female—it isimportant to understand and tackle gender-based barri-ers to entrepreneurship. Once Enterprise Surveys obtainmore information on the background of male andfemale entrepreneurs, including through larger samplesof female entrepreneurs, it will be possible to undertakea more robust analysis of the gender dynamics of entre-preneurship in Africa.

In Chapter 1.5,“Competitiveness and Informationand Communication Technologies (ICTs) in Africa,”Hamadoun Touré of the International TelecommunicationUnion examines the policy and regulatory landscapethat is the foundation for the rapidly improving ICTinfrastructure in Africa.As seen in earlier chapters,Africa’s future growth and success depends on the com-petitiveness of its firms. Becoming competitive needs along-term strategy to raise efficiency, boost skill andtechnology levels, and move into higher-value products

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and processes, and the adoption of ICTs are a vital partof this strategy. ICTs enable rapid communications andcan create the new skills essential in modern business.They can generate new growth and technologicalchange across the whole range of the economy—fromagriculture to finance, construction, and modern services.

African governments have made considerable head-way in opening up the telecommunications markets togreater competition and introducing measures toencourage investment and to build local capabilities.Theresults are promising.African markets have witnessedstrong growth, especially in mobile technologies, andthe rise of resource-rich strategic investors. However,although African governments have already done muchto liberalize telecommunications markets, encourageinvestment, and promote the technological readinessvital to firms’ survival, more remains to be done. In par-ticular, the author notes that incentives are needed tobuild local capabilities and help make local firmsbecome more competitive.

At the same time, the author notes that Africanfirms and telecom operators are not waiting for the government.They understand the importance of tech-nology and in many cases they are forging ahead andintroducing new communication technologies.As theauthor points out, far from being isolated in the globaleconomy, some African firms are already participating inthe forefront of technological developments and invest-ment opportunities.Telecom operators are innovatingwith a range of different strategies and pricing modelsto suit consumers.

One of the striking features of the recent boom inmobile communications is that it is largely Africanfirms—such as MTN, Orascom, and Celtel—that arecapitalizing on the new investment opportunities.Theboom is as much home-grown as it is based on foreigninvestment, and may therefore prove more likely to besustainable than previous rounds of investment in thecontinent.

As the author points out,African governments andtelecom operators no longer face the strategic choice ofwhether or not to resist new technologies—they mustinstead decide how best to adapt to them.The challengefor Africa is not whether to integrate into the globaleconomy, but how to become competitive within anintegration process that is already taking place.The next10 years will prove decisive in whether Africa is ready toaccept this challenge.

The final section of the Report provides detailedcountry profiles for the countries included in the WorldEconomic Forum’s Global Competitiveness Index(GCI) and World Bank Enterprise Surveys.The firstpages provide the detailed rankings that go into thebroader GCI Ranking.The second profiles providemainly objective measures of indicators of the businessclimate.They are drawn from the Enterprise Surveys,and—thanks to the large sample size—these indicators

are also compared across size of firms, export orienta-tion, and ownership.

Notes1 IMF 2006.

2 World Bank 2000.

3 World Bank 2006.

ReferencesIMF (International Monetary Fund). 2006. World Economic Outlook

(September 2006). Washington, DC: International Monetary Fund.

World Bank. 2000. Can Africa Claim the 21st Century? Report preparedjointly by the African Development Bank, the African EconomicResearch Consortium, the Global Coalition for Africa, theEconomic Commission for Africa, and the World Bank.Washington, DC: World Bank.

———. 2006. Facing the Challenges of African Growth: Opportunities,Constraints, and Strategic Directions. Washington, DC: WorldBank.

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Part 1 Selected Issues of AfricanCompetitiveness


CHAPTER 1.1

Assessing Africa’sCompetitiveness in a Global ContextJENNIFER BLANKE, World Economic Forum

The World Economic Forum has analyzed the competi-tiveness of African countries since the early 1990s andhas produced regional reports on the economic compet-itiveness of Africa for nearly a decade.The first AfricaCompetitiveness Report was published in 1998, followedby two further editions in 2000 and 2004.The goal ofthis series is to highlight the prospects for sustainedgrowth in the region and, more importantly, the obsta-cles to competitiveness.This fourth Report comes amidrenewed optimism against the background of a muchmore encouraging regional economic climate.

After many years of economic stagnation, and attimes even decline,Africa is experiencing an economicresurgence. Between 2001 and 2006, growth in grossdomestic product (GDP) on the continent averaged 4.9percent annually, according to the InternationalMonetary Fund (IMF). In 2006,Africa as a whole grewby an impressive 5.5 percent and sub-Saharan Africa inparticular by 5.7 percent. In 2007 these rates are expect-ed to increase even further—to 6.2 and 6.8 percent,respectively—the highest growth registered for decades.In parallel, foreign direct investment has been pickingup, with increasing activity by booming emerging mar-kets, drawn by the continent’s rich natural resources.Accordingly, the overall outlook for the region’s eco-nomic prospects is broadly optimistic.

Despite this new-found optimism, questions remainas to how sustainable this growth will be over the longerrun. Even though the continent is experiencing its high-est growth since the 1970s, and even though significantprogress has been achieved in terms of stabilizing themacroeconomic environment in many African countries,most of the current growth has been fueled by a conflu-ence of external circumstances and interventions, includinghigh commodity prices, debt relief, and a favorableinternational economic environment. Genuinely sustain-able growth, however, must be based on solid domesticfoundations rather than on cyclical or exogenous circum-stances. Moreover, high rates of growth over decades, likethose observed in developing Asian countries, are des-perately needed in Africa in order to significantly raisethe living standards of its people. In this context,Africancountries must become more competitive.

To illustrate the importance of increasing theregion’s competitiveness, Figure 1 compares the growthrates of Africa with those of developing Asia and theworld average since 1980.As the figure shows, through-out the 1980s and 1990s Africa’s growth rates weremostly below the world average, and consistently belowthe developing Asia average.The figure also shows thatsince the beginning of this decade,African growth rateshave finally exceeded those of the world average.At thesame time, growth rates continue to be much lowerthan the group of developing countries from Asia, aregion that has raised the living standards of its citizenssignificantly over recent decades. Indeed, these are themagnitudes of growth rates that must be achieved over a

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long period of time in Africa in order to lift many citizensrapidly out of poverty. Present growth rates in Africa,although high by historical standards, are still short ofthe estimated 7 percent annual growth that would berequired to meet the Millennium Development Goal(MDG) of halving poverty rates in the region by 2015.1

With a few exceptions, income levels across the conti-nent remain very low, and African poverty rates are thehighest in the world.

Recognizing the urgency of enhancing Africa’scompetitiveness to improve living standards, the continenthas benefited from a renewed focus and increased atten-tion from several institutions from within the region andbeyond.Within the region, the effort that has probablyreceived the most attention is the New Partnership forAfrica’s Development (NEPAD).2 Such regional effortsare joined by the various institutions of the AfricanUnion (AU) and the African Development Bank(AfDB), as well as a number of regional economic com-munities that are pursuing, with varying degrees of suc-cess, the economic integration of the continent’s majorsubregions. Beyond the continent, promoting develop-ment in Africa has been high on the Group of Eight(G8)’s agenda since the 2005 summit in Gleneagles.3

The World Economic Forum’s work on competi-tiveness aims to complement these efforts by contributingto a better understanding of the key ingredients of eco-nomic growth and prosperity, and by placing individualcountry performances into an international context.Weassess a number of factors that will determine whether

African countries will continue on a sustained growthpath, or even accelerate that growth.

Why has Africa’s overall economic performancebeen lagging behind other developing regions? Whichare the areas requiring urgent policy attention in orderto ensure sustained strong economic performance goinginto the future? This chapter will present a frameworkfor addressing these questions. In order to prioritizethose areas requiring urgent policy attention to improvecompetitiveness on the continent, the analysis will pro-vide a bird’s eye view of the competitive landscape inAfrica. It will show how African countries are perform-ing vis-à-vis each other, as well as where the region standsvis-à-vis international benchmarks, highlighting specificareas where countries in the region are lagging behind.By highlighting the strengths and weaknesses of theregion and individual economies compared with othereconomies from around the world, policymakers, businessleaders, and other stakeholders are offered an importanttool for the formulation of improved economic policies,institutional reforms, and investment decisions.

The first section of this chapter describes in somedetail the methodology used by the World EconomicForum in measuring national competitiveness to placethe analysis in context.This is followed by a discussionof Africa’s competitiveness from a global and regionalperspective, comparing African countries’ performanceswith other relevant developing countries and regions,and highlighting some differences between the geo-graphical regions of North Africa and sub-Saharan

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–2

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1980 1983 1986 1989 1992 1995 1998 2001 2004 2007

World Developing Asia* Africa

Source: IMF, 2007.

* Developing Asia comprises Bangladesh, Bhutan, Cambodia, China, Fiji, India, Indonesia, Kiribati, Lao People’s Democratic Republic, Malaysia, Maldives,Myanmar, Nepal, Pakistan, Papua New Guinea, Philippines, Samoa, Solomon Islands, Sri Lanka, Thailand, Tonga, Vanuatu, and Vietnam.

Figure 1: Africa’s comparative growth performance (1980–2007)

GD

P gr

owth

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Africa.The next section includes a more detailed analy-sis of the best performers in the region across the vari-ous “pillars” of national competitiveness.This analysisshows that there are strong individual country perform-ances in a number of areas and highlights the existenceof best practices within the region.The final sectionprovides details on the competitive performances ofindividual African countries, discussing both the com-petitive strengths and weaknesses in each, and pointingtoward those areas most requiring policy attention.

Measuring competitivenessIn order to assess national competitiveness, the WorldEconomic Forum has developed the GlobalCompetitiveness Index (GCI).4 Competitiveness is definedas the set of institutions, policies, and factors that driveproductivity and therefore set the sustainable currentand medium-term levels of economic prosperity.5 In thissense competitiveness is not viewed as a zero-sum game,such as competition among companies vying for a largerportion of a given market share. Instead, by placing thefocus on the drivers and the facilitators of productivity,improvements in one country’s competitiveness do notexclude similar improvements in other countries.

We have learned from our years of research that the measurement of competitiveness is a complexundertaking.The GCI, albeit simple in structure, providesa holistic overview of factors that are critical to drivingproductivity and competitiveness, and groups them intonine pillars: institutions (public and private), infrastructure,the macroeconomy, health and primary education, higher education and training, market efficiency (goods, labor, finan-cial), technological readiness, business sophistication, and innovation. Each of these pillars plays a critical role indriving national competitiveness.The GCI is the mostcomprehensive competitiveness index to date, measuringthe macro- and microeconomic drivers of competitive-ness across a large number of countries.

The selection of these pillars, as well as the factorsthat enter each of them, is based on the latest theoreticaland empirical research. It is important to note that noneof these factors alone can ensure competitiveness.Thevalue of increased spending in education will be under-mined if rigidities in the labor market and other institu-tional weaknesses make it difficult for new graduates togain access to suitable employment opportunities.Attempts to improve the macroeconomic environment—for example, bringing public finances under control—are more likely to be successful and receive public sup-port in countries where there is reasonable transparencyin the management of public resources, as opposed towidespread corruption and abuse. Innovation or theadoption of new technologies or upgrading managementpractices will most likely not receive broad-based supportin the business community if protection of the domestic

market ensures that the returns to seeking rents arehigher than those for new investments.

The most competitive economies in the world willtherefore typically be those where concerted efforts havebeen made to frame policies in a comprehensive way—that is, those that recognize the importance of a broadarray of factors, their interconnection, and the need toaddress the underlying weaknesses they reveal in aproactive way.

The nine pillars are measured using both “hard”data (such as inflation, Internet penetration, lifeexpectancy, and school enrollment rates) from publicsources and data from the World Economic Forum’sExecutive Opinion Survey, conducted annually amongtop executives in all of the countries assessed.TheSurvey provides crucial data on a number of qualitativeissues (for example, corruption, confidence in the publicsector, quality of schools) for which no hard data exist.6

Our sample covers 128 economies at differentstages of economic development, with GDP per capitain the wealthiest country surpassing that of the poorestcountry by a factor of 117, based on purchasing powerparity. Clearly policy priorities must evolve as countriesadvance on the development path, since what it takes toachieve productivity improvements in a less-advancedeconomy—such as improving health, fighting illiteracyand corruption, or constructing basic infrastructurefacilities such as roads and ports—will no longer be suf-ficient to increase productivity in a more sophisticatedeconomic framework, where productivity gains fromthese policies have often already been exploited.

To take this process into account, the concept ofstages of development has been introduced into the cal-culation of the Index. Specifically, countries are separat-ed into three stages, based on the idea that as countriesmove along the development path, wages tend toincrease, and that in order to sustain this higher income,productivity must improve.This concept is integratedinto the Index by attributing higher relative weights tothose pillars that are relatively more relevant for a coun-try given its particular stage of development.

In the factor-driven stage countries compete based ontheir factor endowments, primarily unskilled labor andnatural resources. Companies compete on the basis ofprices and sell basic products or commodities, with theirlow productivity reflected in low wages.To maintaincompetitiveness at this stage of development, competi-tiveness hinges mainly on a stable macroeconomicframework (pillar 1), well-functioning public and privateinstitutions (pillar 2), appropriate infrastructure (pillar 3),and a healthy, literate workforce (pillar 4).

As wages rise with advancing development, countriesmove into the efficiency-driven stage of development, whenthey must begin to develop more efficient productionprocesses and increase product quality.At this point,competitiveness becomes increasingly driven by highereducation and training (pillar 5), efficient markets (pillar

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6), and the ability to harness the benefits of existingtechnologies (pillar 7).

Finally, as countries move into the innovation-drivenstage, they are able to sustain higher wages and the asso-ciated standard of living only if their businesses are ableto compete with new and unique products.At this stage,companies must compete through innovation (pillar 9),producing new and different goods using the mostsophisticated production processes (pillar 8).Thus,although all nine pillars matter to a certain extent for allcountries, the importance of each one depends on acountry’s particular stage of development.

To account for this, the pillars are organized intothree subindexes, each critical to a particular stage ofdevelopment.The basic requirements subindex groups thosepillars most critical for countries in the factor-drivenstage.The efficiency enhancers subindex includes those pillarscritical for countries in the efficiency-driven stage.Andthe innovation and sophistication factors subindex includes allpillars critical to countries in the innovation drivenstage.The three subindexes are shown in Figure 2.

The GCI implements the concept of developmentalstages by weighting each of the subindexes differently,depending on the stage of a given country, placing moreweight on those pillars that are most important at agiven stage of a country’s development.The specificweights we attribute to each subindex in every stage ofdevelopment are shown in Table 1.7

For the calculation of the Index, the countries areallocated to stages of development based on two criteria.

The first criterion is the level of current GDP per capitaat market exchange rates.This widely available measureis used as a proxy for wages, because internationallycomparable data for the latter are not available for allcountries covered.8 In addition, we have updated ourmethodology to also take into account the extent towhich each individual economy is factor-based, usingthe share of primary exports as a percentage of totalexports (goods and services) to measure factor intensity.9

The GCI also takes into account that some countriesare “in transition” between stages. For these countries,the weights change smoothly as a country develops,reflecting the smooth transition from one stage of devel-opment to another. By introducing this type of transitionbetween stages into the model—that is, by placingincreasingly more weight on those areas that are becom-ing more important for the country’s competitiveness asthe country develops—the Index can gradually “penalize”those countries that are not preparing for the next stageand “reward” those that are doing so.The classification

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Figure 2: Composition of the three subindexes

Basic Requirements• Institutions• Infrastructure• Macroeconomy• Health and Primary Education

Efficiency Enhancers• Higher Education and Training• Market Efficiency (goods, labor, financial)• Technological Readiness

Innovation and Sophistication Factors• Business Sophistication• Innovation

Key for

factor-driveneconomies

Key for

efficiency-driveneconomies

Key for

innovation-driveneconomies

Table 1: Weights of the three main groups of pillars ateach stage of development

Basic Efficiency Innovation andrequirements enhancers sophistication

Weights (percent) (percent) factors (percent)

Factor-driven stage 50 40 10Efficiency-driven stage 40 50 10Innovation-driven stage 30 40 30


of countries into stages of development is shown inTable 2. Appendix A describes the exact composition ofthe GCI, and Appendix B provides further technicaldetails on its construction.

Table 2 shows the allocation of African countriesinto the different stages of development.The table showsthat all of the 29 countries in Africa analyzed in thischapter, shown in bold, are categorized in or betweenthe first two stages—none has yet reached the innova-tion stage. Specifically, 22 African countries are in stage1, 5 are in transition between stages 1 and 2, and only 2countries—Mauritius and South Africa—have reachedstage 2.

The GCI calculations in this Report have beenupdated since the Global Competitiveness Report2006–2007. Specifically, three Arab world countrieshave been added to the sample, including one Africancountry, Libya, which appears in our work this year forthe first time. Further, a number of the hard data vari-

ables included in the Index, particularly those related totechnology, have been updated.All of the data included inthe calculation are provided in the CompetitivenessProfiles of Part 2 of this Report.

Measuring Africa’s competitiveness: The internationalcontextThis section will assess the performance of individualAfrican countries, as well as the overall competitivenessof Africa as a region, compared with international stan-dards.Table 3 shows the rankings and scores of the 29African countries covered in the 2007 GCI out of all128 countries covered.The table also shows their rank-ings in 2005 for comparison.To put the analysis into aglobal context, we also include a number of comparatoreconomies.These include the averages of two relevantdeveloping regions—Latin America and SoutheastAsia—as well as the ranks and scores of the four rapidly

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Table 2: List of selected countries in each stage of development

Stage 1 Transition from 1 to 2 Stage 2 Transition from 2 to 3 Stage 3

Angola Algeria Brazil Barbados AustraliaBangladesh Bosnia and Herzegovina Bulgaria Czech Republic AustriaBenin Botswana Chile Estonia CanadaBolivia Colombia Costa Rica Hungary CyprusBurkina Faso Ecuador Croatia Korea, Rep. DenmarkBurundi El Salvador Kazakhstan Malta FinlandCambodia Jordan Latvia Trinidad and Tobago FranceCameroon Libya Lithuania GermanyChad Macedonia, FYR Malaysia GreeceChina Namibia Mauritius Hong Kong SAREgypt Peru Mexico IrelandEthiopia Thailand Poland ItalyGambia Tunisia Romania JapanGeorgia Venezuela Russian Federation NetherlandsGuatemala Slovak Republic NorwayIndia South Africa SingaporeIndonesia Turkey SpainKenya Uruguay SwedenLesotho SwitzerlandMadagascar United Arab EmiratesMalawi United KingdomMali United StatesMauritaniaMoldovaMongoliaMoroccoMozambiqueNepalNigeriaPakistanPhilippinesSri LankaTanzaniaUgandaUkraineVietnamZambiaZimbabwe


developing and large “BRIC” countries (Brazil, Russia,India, and China).

As the table shows, of all the countries coveredTunisia is the strongest performer, ranked among the top30 of all countries included in the Index.Tunisia alsooutperforms all other comparator economies shown inthe table.Within Africa,Tunisia is followed by SouthAfrica and Mauritius, ranked 46th and 58th, respectively.A bit farther down in the rankings are the other NorthAfrican countries, namely Egypt, Morocco, Libya, andAlgeria, ranked 65th, 72nd, 73rd, and 76th, respectively.All other countries ranked below Algeria are from thesub-Saharan region, with Botswana, Namibia, and Kenyaas the only three other countries within the top 100countries ranked.All of the other 19 countries fromsub-Saharan Africa rank among the 27 weakest per-formers occupying ranks of 102 or lower.

Tables 4 through 7 provide more details behindwhat is driving the overall ranks and scores shown inTable 3. North Africa and sub-Saharan Africa have radi-cally different competitive performances, as shown by

the averages in Table 4. Specifically, North Africa out-performs the average of the other countries on the con-tinent in all three subindexes measured by the Index, aswell as all nine pillars.The largest gaps can be found inthe areas of health and primary education, higher edu-cation and training, infrastructure, and the macroeco-nomic environment.The smallest gaps are in marketefficiency, technological readiness, and innovation.

The gaps between the north and south of the con-tinent are echoed in many of the comparisons with theother regions and selected countries shown in the tables.Sub-Saharan Africa is, on average, outperformed by allcomparators in seven out of the nine pillars: namely,infrastructure, health and primary education, highereducation and training, market efficiency, technologicalreadiness, business sophistication, and innovation.Again,the largest performance gaps relative to the comparatorsare in infrastructure, health and primary education, andhigher education and training. However, we note that,on average, sub-Saharan Africa outperforms a few coun-tries in the remaining two pillars.This includes Russia,China, and, narrowly, Brazil with regard to the quality ofthe institutional environment, and Brazil with regard tomacroeconomic stability.Yet overall, it is clear that sub-Saharan Africa’s competitive performance trails wellbehind that of other developing countries and regions.

By contrast,Table 5 shows that North Africa onaverage matches up quite well to many of the compara-tors shown across a number of areas. For example,North Africa outperforms all comparators except forIndia in the area of institutions. Its infrastructure isassessed as more developed than all comparators exceptfor Russia and China (with scores very close to theNorth African average).The region’s macroeconomicenvironment is more stable than in all comparatorsexcept China, Russia, and the Southeast Asia average.With regard to health and primary education, NorthAfrica scores higher than India, Russia, Latin America,and Southeast Asia, and is on a par with China. In otherwords, North Africa performs well compared with theother economies shown in the tables in the more basicareas measured by the Index.

The competitive landscape in North Africa andsub-Saharan Africa get closer to each other once wemove beyond the basic factors.Tables 6 and 7 showtheir comparative performance in more complex factors,such as technological readiness, market efficiency, inno-vation, and so forth, where North Africa performs moremodestly. In fact, for most of the five pillars capturedunder the efficiency enhancers, innovation, and sophisti-cation factors subindexes, North Africa and sub-SaharanAfrica alike receive the worst assessments of all countriesand regions shown in the tables.This is true for marketefficiency, technological readiness, business sophistication,and innovation. Only in the area of higher educationand training does North Africa very slightly outperformanother comparator—China—but by a negligible margin.

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Table 3: Global Competitiveness Index, 2007 and 2005comparisons

GCI 2007 GCI 2005Country/Region Rank* Score Rank**

Tunisia 29 4.72 37India 42 4.47 45South Africa 46 4.42 40China 55 4.25 48Southeast Asia average 4.25Mauritius 58 4.22 55Russian Federation 61 4.13 53Egypt 65 4.09 52Brazil 67 4.08 57Latin America & Caribbean average 4.07Morocco 72 4.02 76Libya 73 4.00 —Algeria 76 3.98 82Botswana 83 3.83 72Namibia 88 3.76 79Kenya 97 3.61 93Nigeria 102 3.49 83Gambia 104 3.45 109Benin 107 3.41 106Tanzania 108 3.40 105Cameroon 111 3.32 —Madagascar 113 3.29 107Lesotho 115 3.24 —Uganda 116 3.21 103Zambia 117 3.21 —Mauritania 118 3.18 —Burkina Faso 119 3.10 —Malawi 120 3.09 114Zimbabwe 121 3.07 110Mali 122 3.04 115Ethiopia 123 3.00 116Mozambique 124 2.97 112Chad 126 2.64 117Burundi 127 2.62 —Angola 128 2.50 —

*Out of 128 economies; ** Out of 117 economiesNote: All averages are weighted by population.


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Country/Region Rank Score Rank Score Rank Score Rank Score

NORTH AFRICAAlgeria 76 3.98 44 4.91 92 3.30 92 3.22Egypt 65 4.09 64 4.55 75 3.63 65 3.63Libya 73 4.00 45 4.87 95 3.25 97 3.16Morocco 72 4.02 70 4.45 77 3.60 73 3.54Tunisia 29 4.72 33 5.27 40 4.34 28 4.42North Africa average 4.09 4.67 3.58 3.56

SUB-SAHARAN AFRICAAngola 128 2.50 128 2.48 126 2.51 126 2.52Benin 107 3.41 106 3.74 107 3.04 90 3.23Botswana 83 3.83 82 4.30 80 3.54 98 3.15Burkina Faso 119 3.10 124 3.17 112 2.96 86 3.27Burundi 127 2.62 127 2.73 127 2.46 121 2.66Cameroon 111 3.32 108 3.71 117 2.91 104 3.05Chad 126 2.64 126 2.90 128 2.35 125 2.53Ethiopia 123 3.00 118 3.31 123 2.69 119 2.72Gambia 104 3.45 105 3.84 103 3.11 115 2.89Kenya 97 3.61 109 3.70 83 3.47 59 3.73Lesotho 115 3.24 107 3.72 122 2.81 123 2.59Madagascar 113 3.29 114 3.60 116 2.92 91 3.23Malawi 120 3.09 119 3.30 119 2.87 112 2.93Mali 122 3.04 123 3.19 121 2.83 96 3.17Mauritania 118 3.18 117 3.41 113 2.94 108 2.98Mauritius 58 4.22 50 4.74 62 3.88 47 3.84Mozambique 124 2.97 122 3.25 124 2.63 118 2.86Namibia 88 3.76 72 4.44 93 3.29 88 3.25Nigeria 102 3.49 113 3.60 90 3.33 69 3.60South Africa 46 4.42 57 4.66 45 4.24 29 4.35Tanzania 108 3.40 115 3.56 96 3.17 77 3.49Uganda 116 3.21 121 3.27 100 3.12 83 3.30Zambia 117 3.21 116 3.52 109 3.01 127 2.43Zimbabwe 121 3.07 125 3.09 108 3.03 94 3.18Sub-Saharan Africa average 3.29 3.55 3.05 3.12

BRICsBrazil 67 4.08 88 4.23 58 3.96 38 4.09China 55 4.25 47 4.82 72 3.66 57 3.75India 42 4.47 63 4.56 41 4.33 26 4.60Russian Federation 61 4.13 68 4.49 59 3.96 72 3.55

Latin America and Caribbean average 4.07 4.41 3.83 3.75Southeast Asia average 4.25 4.53 4.01 3.90

Note: All averages are weighted by population.

OVERALL INDEX Basic requirements

SUBINDEXES

Efficiency enhancers Innovation factors

Table 4: The Global Competitiveness Index 2007: Africa and comparators

Although North Africa has made relative progressin some basic areas of competitiveness, much remains tobe achieved in Africa as a whole in order to achievehigher rates of growth, create jobs, and boost income.

Of course, the aggregate analysis of this sectionmasks a great deal of the diversity among individualcountry performances within the region in the variouspillars.Table 8 shows the rankings of African countriesin the nine pillars of the Index, highlighting the threebest performers in each case.The table shows thatTunisia is one of the top three performers in all of thepillars, while South Africa is one of the top performersin six of them and Mauritius in five, mirroring thesecountries’ positions at the top of the overall rankings.

The table also reveals notable comparative strengths inseveral other African countries in specific areas.

Tunisia, South Africa, and Botswana have stronginstitutional environments (ranked 26th, 31st, and 38th,respectively), on a par with countries such as Chile,Estonia, and Spain.These countries have commonstrengths such as independent judiciaries, efficient gov-ernment spending, and relatively low levels of corruption,leading to public trust in politicians. Private institutionsare also positively assessed, including corporate ethicsand aspects of corporate governance. Other countries inthe top half of the rankings are Mauritius (43rd),Namibia (49th), Egypt (50th), Zambia (56th), andGambia (57th), with rankings similar to countries such


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Table 5: The Global Competitiveness Index 2007: Basic requirements

Country/Region Rank Score Rank Score Rank Score Rank Score Rank Score

NORTH AFRICAAlgeria 44 4.91 65 3.95 80 2.93 2 6.19 46 6.56Egypt 64 4.55 50 4.21 56 3.74 111 3.75 51 6.51Libya 45 4.87 75 3.81 100 2.46 1 6.95 81 6.26Morocco 70 4.45 68 3.89 61 3.58 81 4.24 89 6.07Tunisia 33 5.27 26 5.06 37 4.42 39 4.91 33 6.69North Africa average 4.67 4.13 3.53 4.57 6.44

SUB-SAHARAN AFRICAAngola 128 2.48 123 3.02 116 2.07 126 2.40 128 2.45Benin 106 3.74 87 3.57 117 2.06 95 4.04 104 5.29Botswana 82 4.30 38 4.53 67 3.38 41 4.85 115 4.42Burkina Faso 124 3.17 67 3.92 113 2.15 119 3.37 127 3.24Burundi 127 2.73 115 3.20 126 1.71 125 2.51 123 3.50Cameroon 108 3.71 120 3.11 124 1.93 42 4.83 107 4.96Chad 126 2.90 128 2.66 128 1.43 110 3.76 122 3.74Ethiopia 118 3.31 91 3.55 105 2.34 98 3.98 124 3.39Gambia 105 3.84 57 4.11 97 2.62 108 3.77 110 4.85Kenya 109 3.70 92 3.55 89 2.75 102 3.91 113 4.59Lesotho 107 3.72 89 3.56 121 2.00 54 4.64 112 4.69Madagascar 114 3.60 98 3.43 119 2.03 118 3.39 103 5.53Malawi 119 3.30 66 3.94 118 2.06 127 2.31 109 4.89Mali 123 3.19 71 3.84 115 2.09 116 3.48 125 3.34Mauritania 117 3.41 72 3.83 114 2.10 123 2.82 108 4.91Mauritius 50 4.74 43 4.40 42 4.21 107 3.79 44 6.58Mozambique 122 3.25 112 3.25 102 2.41 115 3.50 120 3.85Namibia 72 4.44 49 4.23 45 4.16 45 4.79 114 4.58Nigeria 113 3.60 93 3.53 108 2.26 57 4.62 119 3.98South Africa 57 4.66 31 4.79 50 4.04 48 4.74 106 5.07Tanzania 115 3.56 64 3.95 96 2.65 103 3.88 121 3.76Uganda 121 3.27 103 3.38 122 1.99 69 4.42 126 3.29Zambia 116 3.52 56 4.11 90 2.75 122 3.07 118 4.17Zimbabwe 125 3.09 101 3.39 101 2.44 128 2.20 116 4.32Sub-Saharan Africa average 3.55 3.65 2.45 4.00 4.04

BRICsBrazil 88 4.23 85 3.63 72 3.32 117 3.42 48 6.54China 47 4.82 96 3.51 60 3.62 8 5.72 56 6.44India 63 4.56 33 4.71 63 3.51 91 4.12 96 5.90Russian Federation 68 4.49 119 3.16 62 3.57 35 4.95 78 6.29

Latin America and Caribbean average 4.41 3.69 3.25 4.20 6.51Southeast Asia average 4.53 4.08 3.12 4.61 6.30


Basic requirements 1. Institutions 3. Macroeconomy2. Infrastructure4. Health and

primary education

as Costa Rica, Hungary, and Korea. Representing bothNorth and sub-Saharan Africa, with relatively stronginstitutions by international standards, these countriesprovide examples for other countries in the regionwishing to improve their institutional environments.This is particularly important given that, among the 29countries shown in the table, 13 are in the bottom thirdof all countries covered, pointing to the regionalimprovements needed in this area.

With regard to infrastructure,Tunisia, Mauritius, andNamibia are the three best-performing countries, ranked37th, 42nd, and 45th, respectively—they are betterassessed than some European countries, including Italyand Poland. Particularly high ranked are the quality of

their ports, the quality of railroads (in Tunisia andNamibia), and the electricity supply (particularly inTunisia and Mauritius).The main weakness in all threecountries is the low telephone line penetration rate (aweakness of decreasing importance given the rapid riseof mobile phone penetration).Yet, despite these few rel-atively strong cases, the only other countries assessedwithin the top half of all 128 countries are South Africa,Egypt, and Morocco (ranked 50th, 56th, and 61st).Allother countries are ranked 80th or lower, with morethan half of the countries ranked below 100th place.This emphasizes the importance of upgrading infra-structure on the continent to improve competitiveness.


Country/Region Rank Score Rank Score Rank Score Rank Score

NORTH AFRICAAlgeria 92 3.30 86 3.46 97 3.67 93 2.75Egypt 75 3.63 77 3.73 66 4.15 80 3.01Libya 95 3.25 73 3.88 121 3.39 115 2.48Morocco 77 3.60 87 3.45 75 4.07 70 3.27Tunisia 40 4.34 36 4.72 36 4.65 47 3.65North Africa average 3.58 3.69 4.03 3.03

SUB-SAHARAN AFRICAAngola 126 2.51 128 1.92 123 3.37 124 2.25Benin 107 3.04 104 2.96 96 3.68 114 2.48Botswana 80 3.54 89 3.41 61 4.20 81 3.00Burkina Faso 112 2.96 119 2.51 89 3.81 106 2.57Burundi 127 2.46 126 2.16 126 3.28 128 1.96Cameroon 117 2.91 106 2.85 117 3.45 116 2.43Chad 128 2.35 127 1.99 127 3.07 127 1.99Ethiopia 123 2.69 123 2.39 119 3.41 123 2.26Gambia 103 3.11 109 2.81 88 3.82 94 2.70Kenya 83 3.47 90 3.41 73 4.10 83 2.91Lesotho 122 2.81 118 2.52 120 3.41 112 2.50Madagascar 116 2.92 116 2.55 100 3.63 103 2.59Malawi 119 2.87 122 2.46 91 3.77 121 2.38Mali 121 2.83 121 2.48 104 3.62 119 2.40Mauritania 113 2.94 124 2.33 103 3.62 85 2.88Mauritius 62 3.88 69 3.94 70 4.11 54 3.58Mozambique 124 2.63 125 2.30 125 3.32 122 2.28Namibia 93 3.29 108 2.82 80 4.00 79 3.04Nigeria 90 3.33 103 3.04 71 4.10 90 2.85South Africa 45 4.24 56 4.17 34 4.68 44 3.87Tanzania 96 3.17 115 2.56 76 4.07 87 2.87Uganda 100 3.12 110 2.78 85 3.90 97 2.68Zambia 109 3.01 120 2.48 86 3.87 96 2.68Zimbabwe 108 3.03 99 3.10 115 3.48 110 2.51Sub-Saharan Africa average 3.05 2.84 3.86 2.71

BRICsBrazil 58 3.96 61 4.10 59 4.21 53 3.58China 72 3.66 79 3.68 55 4.23 78 3.08India 41 4.33 49 4.35 20 5.09 56 3.56Russian Federation 59 3.96 43 4.44 60 4.20 72 3.25

Latin America and Caribbean average 3.83 3.92 4.13 3.42Southeast Asia average 4.01 4.09 4.64 3.30


Efficiency enhancers 6. Market efficiency 7. Technological readiness5. Higher education and training

Table 6: The Global Competitiveness Index 2007: Efficiency enhancers

The macroeconomic environment presents aninteresting case, as Africa is home to both the strongestand weakest performances in this area.Table 8 showsthat the two best-rated countries out of all countries inthe region are Libya and Algeria—two countries thathave benefited from windfall oil revenues that have sig-nificantly improved their public finances.These coun-tries have high government budget surpluses, manage-able debt, high national savings rates, and at the sametime they have managed to keep inflation rates low.Thethird highest ranked country is Tunisia (39th), an oilimporter, which has also managed to tame inflation andhas reasonably balanced public finances.A number ofother countries have satisfactory assessments in this area,

such as Botswana (41st), Cameroon (42nd), Namibia(45th), and South Africa (48th), all ranked among thetop 50 countries. On the other hand, the macroeco-nomic environment of most countries is assessed as veryweak, with 18 of the 29 African countries rankedamong the bottom third. In particular we see thatZambia, Mauritania, Burundi,Angola, Malawi, andZimbabwe round out the bottom of all countriesassessed, joined only by Guyana from outside the region(124th). Box 1 looks at recent macroeconomic trends inAfrica.Although much clearly remains to be done tofoster a more stable economic environment in manycountries of the region, the box describes how the over-all picture has been improving in recent years.

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Country/Region Rank Score Rank Score Rank Score

NORTH AFRICAAlgeria 92 3.22 106 3.36 77 3.09Egypt 65 3.63 57 4.22 83 3.04Libya 97 3.16 88 3.57 98 2.75Morocco 73 3.54 80 3.82 61 3.26Tunisia 28 4.42 31 4.80 27 4.05North Africa average 3.56 3.97 3.15

SUB-SAHARAN AFRICAAngola 126 2.52 126 2.74 124 2.30Benin 90 3.23 87 3.58 91 2.87Botswana 98 3.15 98 3.43 92 2.87Burkina Faso 86 3.27 101 3.40 70 3.14Burundi 121 2.66 120 3.01 122 2.32Cameroon 104 3.05 104 3.37 100 2.73Chad 125 2.53 124 2.81 125 2.26Ethiopia 119 2.72 123 2.94 117 2.50Gambia 115 2.89 109 3.30 118 2.48Kenya 59 3.73 68 4.04 48 3.42Lesotho 123 2.59 125 2.80 120 2.37Madagascar 91 3.23 102 3.39 78 3.07Malawi 112 2.93 116 3.16 106 2.70Mali 96 3.17 110 3.29 81 3.04Mauritania 108 2.98 105 3.36 111 2.60Mauritius 47 3.84 44 4.44 65 3.23Mozambique 118 2.86 117 3.13 113 2.58Namibia 88 3.25 85 3.60 89 2.91Nigeria 69 3.60 75 3.87 52 3.33South Africa 29 4.35 32 4.79 29 3.92Tanzania 77 3.49 83 3.68 56 3.30Uganda 83 3.30 93 3.49 73 3.11Zambia 127 2.43 128 2.51 121 2.35Zimbabwe 94 3.18 92 3.50 94 2.86Sub-Saharan Africa average 3.12 3.57 3.05

BRICsBrazil 38 4.09 38 4.61 38 3.56China 57 3.75 65 4.05 46 3.44India 26 4.60 25 5.06 26 4.14Russian Federation 72 3.55 79 3.83 59 3.28

Latin America/Caribbean average 3.75 4.26 3.25Southeast Asia average 3.90 4.33 3.48


Innovation factors 9. Innovation8. Business sophistication

Table 7: The Global Competitiveness Index 2007: Innovation and sophistication factors

Given the importance of basic factors such as pri-mary education and the health of the workforce, theresults in this pillar for the countries of Africa are dis-concerting.Table 8 shows that the three countries bestassessed in this area are Tunisia (33rd), Mauritius (44th),and Algeria (46th).These countries have attained rela-tively high rates of primary enrollment and have healthindicators that compare well with the rest of Africa, andare on a par with economies such as Estonia and HongKong.They are joined in the top half of the rankings byEgypt (51st). Only Libya out of the 25 remaining coun-tries is ranked in the top two thirds.With weak health

indicators; high prevalence rates of diseases such asmalaria, tuberculosis, and HIV/AIDS; and low primaryenrollment rates by international standards, 22 of the 25lowest-ranked countries are from sub-Saharan Africa,and countries from the region fill out all 11 lowestranks. Further, many African countries have experienceda significant deterioration in this area on a comparativebasis in recent decades, as described in Box 2. It is clearthat improving these aspects of the human resourcesbase requires urgent attention to bring the region up tohigher levels of competitiveness.


Table 8: Top three African performers in each pillar of the GCI

Country Rank Rank Rank Rank Rank Rank Rank Rank Rank

Algeria 65 80 2 46 86 97 93 106 77Angola 123 116 126 128 128 123 124 126 124Benin 87 117 95 104 104 96 114 87 91Botswana 38 67 41 115 89 61 81 98 92Burkina Faso 67 113 119 127 119 89 106 101 70Burundi 115 126 125 123 126 126 128 120 122Cameroon 120 124 42 107 106 117 116 104 100Chad 128 128 110 122 127 127 127 124 125Egypt 50 56 111 51 77 66 80 57 83Ethiopia 91 105 98 124 123 119 123 123 117Gambia 57 97 108 110 109 88 94 109 118Kenya 92 89 102 113 90 73 83 68 48Lesotho 89 121 54 112 118 120 112 125 120Libya 75 100 1 81 73 121 115 88 98Madagascar 98 119 118 103 116 100 103 102 78Malawi 66 118 127 109 122 91 121 116 106Mali 71 115 116 125 121 104 119 110 81Mauritania 72 114 123 108 124 103 85 105 111Mauritius 43 42 107 44 69 70 54 44 65Morocco 68 61 81 89 87 75 70 80 61Mozambique 112 102 115 120 125 125 122 117 113Namibia 49 45 45 114 108 80 79 85 89Nigeria 93 108 57 119 103 71 90 75 52South Africa 31 50 48 106 56 34 44 32 29Tanzania 64 96 103 121 115 76 87 83 56Tunisia 26 37 39 33 36 36 47 31 27Uganda 103 122 69 126 110 85 97 93 73Zambia 56 90 122 118 120 86 96 128 121Zimbabwe 101 101 128 116 99 115 110 92 94

Global leader Finland Germany Libya Japan Finland Hong Kong Sweden Germany Japan

The quantity and quality of higher education andtraining becomes increasingly important for countriesaiming to improve the efficiency of their business envi-ronments. In Africa, with the exception of Tunisia (36th)and to a certain extent South Africa (56th), the assess-ment is quite bleak.The third best assessed country isMauritius, at a low 69th rank overall. Except for a coupleof North African countries (Egypt and Libya), all othercountries are ranked in the bottom third of all 128countries. Enrollment rates at the secondary and tertiarylevels throughout the region remain low, educationalsystems suffer from poor quality, and in many countriescompanies are not providing on-the-job training tocompensate for these weaknesses. Upgrading educationalsystems, ensuring higher enrollment levels, and inculcat-ing a stronger culture of training will be important forAfrica as it continues on its path of development.

The efficiency of markets for goods and services,labor, and financial interactions are also important forensuring the proper allocation of resources across theeconomy. In Africa, two countries are evaluated as hav-ing efficient markets: South Africa (34th) and Tunisia(36th), comparing well with countries such as Belgiumand Spain. South Africa is particularly well assessed for

the efficiency of its goods markets (17th) and financialmarkets (27th), despite significant stickiness in its labormarkets.Tunisia, on the other hand, has quite efficientand flexible labor markets (30th) and well functioninggoods markets (32nd), although its financial markets areless developed (45th).There are a number of additionalsuccess stories. For example, Zambia’s labor markets arerated very positively (26th), ahead of all other countriesin the region, and Mauritius’ financial market sophistica-tion is second only to South Africa’s on the continent(38th). However, as indicated by the overall rankingshown in Table 8, market inefficiencies abound withinmost other countries in the region.The greatest weak-nesses are in the areas of goods and financial market effi-ciency, where the large majority of African countries areranked in the bottom third of all countries, with severalall the way at the bottom.

Technology is an important productivity enhancer,especially for those countries aiming to move up thevalue chain.As Table 8 shows,Africa as a whole is notharnessing these tools sufficiently.The three best-rankedcountries from Africa—South Africa,Tunisia, and Mauritius—all receive mediocre assessments in technologicalreadiness (ranked 44th, 47th, and 54th respectively),

1. Institutions 2. Infrastructure 3. Macroeconomy

4. Health and primary education

5. Higher education

and training6. Market efficiency

7. Technological readiness

8. Business sophistication 9. Innovation

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Macroeconomic stability constitutes a key element of nationalcompetitiveness. It is extremely difficult for businesses to makeinformed decisions when inflation is spiraling out of control orwhen large government budget deficits lead to the misalloca-tion of resources and drive up the cost of capital. When therepayment of government debt is devouring a major portion of acountry’s resources, those resources cannot be allocated effec-tively. Often, where debt servicing costs are high, governmentsmust curtail public investment or, worse, vital spending on edu-cation and public health, which erodes the competitive potentialof the country.

The rankings in the macroeconomy pillar in this chapterdemonstrate that many African countries are facing obstaclesin these areas. However, a look at macroeconomic trendsshows that in recent years African countries have come a longway toward improving their macroeconomic stability. This hasbeen in part due to windfall revenues in the oil-producing coun-tries, but it has also been the outcome of more coherent policy-making in many countries, further supported, in some cases, byincreased aid flows and debt relief. Improvements have beenboth fiscal and monetary, concerning both government finance(budget balances and debt) and the curtailing of inflation.

To start with, there has been an overall improvement inpublic finances in most African countries over the past fewyears. Figure 1 shows average trends in the budget balancewithin the countries covered in this chapter. The figure showsthe regional average, as well as those of the oil exporting andimporting countries. On average the trend has been positive forthe past three years for all countries. This is particularly strikingfor the oil exporters, which have seen an explosion in budgetsurpluses (due to windfall oil profits). Of course, it will be impor-tant for these countries to use the gains from the present boomto lay the basis for sustained economic growth, investing in crit-ical areas such as improved infrastructure, health, and humanresource development. In that respect, it is notable that someoil-exporting countries have made efforts to improve the trans-parency of their petroleum-sector operations and introduce fis-cal rules for the use of oil revenue (although there has beensome backtracking which is worrisome, such as in the case ofChad).

Figure 1: Government budget balance (2000–05) for

African countries

Source: African Development Bank, 2006; IMF Country Reports.

The figure also shows that while the oil importers on thecontinent are on average still running deficits, these deficitshave been shrinking since 2003. The IMF expects the fiscalposition in these countries to continue to improve despiteincreased expenditures to meet the Millennium DevelopmentGoals. Expenditures are being financed by efforts to increasedomestic revenue, as well as debt relief.1

As is well known, debt levels have also declined signifi-cantly throughout the continent over the last decade, in greatpart attributable to debt relief initiatives. Table 1 shows theextent of this decline, comparing the external debt (as a per-centage of GDP) between the period 1995–2004 and 2005, onaverage, for the 29 economies analyzed in this chapter. As thetable shows, external debt has come down by close to 30 per-cent in the region, placing most countries on a more stable eco-nomic footing. Only five countries (Burundi, Gambia, Malawi,Namibia, and Zimbabwe) saw increases in this measure ofexternal debt over the period.

Table 1. External government debt as a percentage

of GDP

Subregion 1995–2004 2005

Africa 77.0 55.6North Africa 44.0 30.1Sub-Saharan Africa 83.9 60.9

Source: African Development Bank, 2006.

Besides better fiscal management, a variety of initiatives havecontributed to these improvements in the public finances. Afterdeclining significantly throughout much of the 1990s, aid levelsworldwide have increased in recent years, with Africa as thelargest beneficiary. The launch of NEPAD, the Monterrey con-sensus on financing for development in 2002, the implementa-tion of the Heavily Indebted Poor Countries (HIPC) initiative, andthe commitments made at the G8 Gleneagles summit have allplayed important roles in increasing flows of developmentfinance to Africa.2

Turning to monetary policy, there has also been signifi-cantly better overall control of inflation, as shown in Figure 2.As the figure shows, inflation has been steadily coming down inAfrica (excluding Zimbabwe) since 2000 to historically low lev-els despite increasing oil prices. The figure shows that this isthe case for both the oil exporters as well as the oil importers,although it is most striking for the exporters. Although inflationin Africa remains somewhat high by international standards atover 6 percent in 2006, given that, in 1996, 13 of the 29 countriescovered had at least double-digit inflation (and in many casessignificantly higher), present levels are remarkably low. Inreducing inflation, the region has profited from low inflationworldwide, a weaker dollar, and generally prudent monetarypolicies.3

Box 1: An improving macroeconomic landscape

–10

–5

0

5

10

15

2000 2001 2002 2003 2004 2005

Oil exporters

All countries

Oil importers (excluding Zimbabwe)

Perc

ent o

f GCP

(cont’d.)


Figure 2: Inflation in Africa (2001–06)

Source IMF, 2007.

While much remains to be achieved, the overall sense is one ofcautious optimism for the outlook for macroeconomic stabilityin Africa. Nonetheless, given the potentially temporary nature ofthe recent increased inflows of aid and the surge in debt relief,it is more urgent than ever for African countries to use the pres-ent positive environment to solidify the fiscal and monetaryimprovements already underway.

1 IMF’s Regional Economic Outlook for Sub-Saharan Africa, available athttp://www.imf.org/external/pubs/ft/reo/2006/ENG/02/sreo0906.pdf.

2 Summary of the OECD’s African Economic Outlook 2005/2006, available athttp://www.oecd.org/dataoecd/55/14/36912403.pdf.

3 From http://www.oecdobserver.org/news/fullstory.php/aid/1618/Africa%92s_economy:_Aid_and_growth_.html.

Box 1: An improving macroeconomic landscape (cont’d.)

0

5

10

15

20

25

30

35

2001 20062002 2003 2004 2005

Oil exporters

All countries

Oil importers (excluding Zimbabwe)

Perc

ent

Health and primary education represents one of the key pillarsof competitiveness that, as explained in the text, is particularlyimportant for increasing productivity for countries at earlierstages of development. A healthy workforce is critical to acountry’s competitiveness. Workers who are ill cannot functionto their potential and will be less productive. Poor health signifi-cantly increases costs to business, with workers often absentor operating at lower levels of efficiency. In countries stronglyaffected by the HIV/AIDS pandemic, which primarily affects theworking-age population, the result is an additional cost to com-panies from a shortage of qualified workers brought about byincreasing absenteeism and mortality.

Also critical for national competitiveness is the basic liter-acy of the population, which is increasingly important in today’srapidly evolving economy. Basic education increases the effi-ciency of each individual worker, making the economy moreproductive. A workforce that has received little or no formaleducation can carry out only basic, often manual, work, makingthe transition to more advanced production processes andtechniques more difficult. Lack of basic education can thereforemake it difficult for firms and countries to move up the valuechain by producing more sophisticated or higher-value-addedproducts.

The data show that, over the past decades, the humanresources base—as measured by the health and basic educa-tion components of this pillar—has improved substantially inNorth Africa, as it has also in other developing regions. Sub-Saharan Africa, on the other hand, has been falling increasinglybehind the rest of the world in both areas.

With regard to health, while other developing regions haveseen significant improvements in recent years, in many coun-tries in sub-Saharan Africa there has been an actual deteriora-

tion in the health of the population. This is illustrated by thedeclining life expectancy of the population overall in the region,as shown by Figure 1. The figure shows that while lifeexpectancy has been increasing significantly since 1990 in LatinAmerica, South Asia, and also North Africa, it has been declin-ing in sub-Saharan Africa to an average of just 46 years in 2004,due primarily to the HIV/AIDS pandemic that is ravaging theregion. The rate of HIV/AIDS infection in sub-Saharan Africahas increased greatly over the past decades, much faster thanin other regions, peaking in the late 1990s and leveling off at anextremely high level.1 And this is also the case with other com-municable diseases, the rates of which have been shown to behighly correlated with HIV. As shown in Table 1, tuberculosisrates have decreased significantly over the period in otherregions, including North Africa, while more than doubling insub-Saharan Africa over the same period.

Another important health indicator included in this pillar isthe rate of child mortality. Although coming down in sub-Saharan Africa, child mortality has been doing so much moreslowly than other regions, as shown in Figure 2. In fact, in 1980sub-Saharan Africa had a child mortality rate similar to that ofSouth Asia. But given the much more rapid improvements in thelatter over the decades, by 2004 South Asia’s numbers hadimproved substantially, approaching rates closer to those inLatin America and North Africa, where North Africa—in anopposite trend from sub-Saharan Africa—saw a significantimprovement, falling rapidly enough over the period to matchthe Latin American rates in 2004.

Improving this situation is clearly difficult because mostAfricans depend on public health services that have inadequatebudgets, underinvestment in physical infrastructure, and insuffi-cient numbers of trained health-care providers. Yet the world is

Box 2: Health and basic education in sub-Saharan Africa: Increasing cause for concern

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not standing by idly. Many international and national initiativesare aimed at improving the health of sub-Saharan Africa’s citi-zens. These take a variety of approaches, such as exploringways to stem the spread of communicable diseases, encourag-ing the development of drugs specific to the needs of Africans,increasing the rate of childhood immunization, and so forth.2

Many regional and national efforts are also underway driven bynational governments, NGOs, and regional organizations.

Figure 1: Life expectancy at birth (1990–2004)

Source : World Bank, World Development Indicators Online.

Table 1: Incidence of tuberculosis (per 100,000 people)

Country 1990 2004

North Africa 55.6 46.7Sub-Saharan Africa 162.1 363.1Latin America and Caribbean 102.6 63.6South Asia 179.9 177.2

Source: World Bank, World Development Indicators Online.

Figure 2: Child mortality rate in Africa (1980–2004),

per 1,000 live births

Source : World Bank, World Development Indicators Online.

Another critical aspect of the quality of a country’s humanresources base is basic education, preparing the populationwith a minimum of basic skills. As Table 2 shows, primary edu-cation enrollment rates have been increasing significantly overthe years in all developing regions shown. By 1994 North Africahad attained an average net primary enrollment rate of nearly

94 percent, almost on a par with Latin America, a region knownfor its push to increase educational attainment in recent years.Importantly, sub-Saharan Africa has also seen an impressiveimprovement of more than 20 percentage points over the period,rising from 53 percent in 1991 to over 73 percent in 2004. This isan important achievement, yet rates remain significantly lowerthan in the rest of the world, demonstrating the gap that stillremains to be closed.

Table 2: Net primary school enrollment rates

Country 1991 1999 2004

North Africa 83.7 87.3 93.9Sub-Saharan Africa 53.0 62.6 73.5Latin America and Caribbean 85.5 92.8 94.7South Asia n/a 82.2 87.1

Source: World Bank, World Development Indicators Online.

The primary enrollment figures are mirrored by literacy rates,which have risen significantly in all regions since 1990 but lessquickly in sub-Saharan Africa, where more than 38 percent ofthe population are still illiterate, compared with 33 percent inNorth Africa and less than 10 percent in Latin America.Increasing formal primary enrollment and literacy in the regionis a clear priority in improving its productive potential and com-petitiveness. This will certainly require increased investment inthe education system.

Educational spending, while increasing significantly or atleast remaining flat in other developing regions, has actuallydeclined in sub-Saharan Africa, falling to 3.7 percent in 2004. Infact, in 1990 sub-Saharan and North Africa spent similarly oneducation, which then rose significantly in the North, attaining alevel comparable to that of France by 2004; during the sameperiod it declined in the South. In the same way, although sub-Saharan Africa spent more on education as a percentage ofGNI than both Latin America and South Asia in 1990, by 2004Latin America was far outspending the region, and South Asiahad just about caught up.

In sum, North African countries on average have madegreat strides in improving the health and basic education oftheir workforce. Sub-Saharan African countries, on the otherhand, while increasing educational attainment and literacy,have on average done so far more slowly than other developingregions, and many countries in the region have experienced aserious deterioration in many indicators related to the health ofthe population. This is perhaps the region’s greatest priorityarea in improving its competitiveness going forward, a fact thatis now clearly recognized by international institutions andnational governments. Productivity on the continent simply can-not increase on a sustainable basis until the health and basiceducation of the population is ensured.

1 Avert (an HIV/AIDS charity). Details available athttp://www.avert.org/aafrica.htm.

2 International efforts include the GAVI Alliance; the Bill and Melinda GatesFoundation; and the Global Fund to Fight AIDS, Malaria and Tuberculosis,all of which focus on addressing various aspects of the health problem.

Box 2: Health and basic education in sub-Saharan Africa: Increasing cause for concern (cont’d.)

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The Global Competitiveness Index (GCI) in its present form hasbeen calculated only since 2005, and thus does not provide along-term perspective on the evolution of the Africa’s competi-tiveness landscape. However, the previous Growth Competitive-ness Index has been presented in the Global CompetitivenessReports since 2001, and thus provides a number of years ofcomparable results.1 The Growth Competitiveness Index includesa subset of the factors included in the GCI described in thischapter, focusing on three main issue areas: the quality of agiven country’s macroeconomic environment, the state of itspublic institutions, and the level of its technological readinessand innovative capacity. Results from the Index thus provide asense of how Africa’s competitiveness has evolved in these keyareas since the beginning of the present decade. As the datashow, a number of African countries have not improved theircompetitiveness over the period.

The majority of the 29 African countries discussed in thischapter have been included in the competitiveness work of theWorld Economic Forum only for the past few years. However,eight of them have been included since 2002: these areBotswana, Mauritius, Morocco, Namibia, Nigeria, South Africa,Tunisia, and Zimbabwe.2 An analysis of how their rankings haveevolved over the time period allows us to analyze major trendsin the competitiveness of each of the economies, using theinformation accumulated over the six-year period. Figure 1shows the rankings between 2002 and 2007 of the African countries included in the first year in a constant sample of 79countries, which makes the ranks comparable across time.3

We also show the average rank for all eight countries, whichprovides a sense of the average trend in terms of their competitiveness performance.

The figure shows that the diversity of performances hasbeen quite consistent since the beginning of the decade, withSouth Africa, Botswana, Tunisia, and Mauritius consistently out-performing the other countries on the continent. As the figureshows, Tunisia has been the strongest performer over most ofthe period, with South Africa and Botswana are also well assessed—each of the three was ranked first in the region for one of thesix years. Overall competitiveness has been somewhat steadyor improving in these three countries as well as in Mauritius,the next most competitive of the eight countries assessed.

Figure 1: Growth Competitiveness Index rank for

African countries (2002–06)

Source: World Economic Forum, Global Competitiveness Reports, variousyears; author’s calculations.

For Namibia and Morocco, however, even in a constant samplecompetitiveness has been deteriorating to some extent over theperiod. Nigeria has had a steady performance at a low level. Theweakest performer has been Zimbabwe, which has been one ofthe lowest-ranked countries over all of the years in question.

The figure shows that, on average, the competitivenessperformance of the eight countries remained mediocre and flator slightly deteriorating, not showing an improvement in com-petitiveness since 2002.

Tables 1, 2, and 3 provide the details driving these overallrankings.

Table 1: Macroeconomic environment pillar for Africa

Country 2002 2003 2004 2005 2006

Botswana 27 28 38 31 33Mauritius 48 52 44 48 55Morocco 39 41 41 55 54Namibia 46 49 55 54 52Nigeria 69 65 70 61 69South Africa 37 38 42 27 30Tunisia 31 30 29 29 24Zimbabwe 79 79 79 79 79


Starting with the macroeconomic environment, as discussed inBox 1, there have been improvements in this area in recentyears. On average, excluding Zimbabwe (which was the worst-assessed country in the entire sample of 79 countries across allyears), the macroeconomic environment represents the region’sgreatest competitive strength, with average ranks that are high-er than those registered in the areas of institutions and technol-ogy. On the other hand, the table shows that since 2002 rank-ings for most countries have not really improved, or have evendeclined slightly. This is attributable to the fact that, althoughthe situation has clearly improved in Africa, other countrieshave done even more in terms of lowering inflation, improvinggovernment finances, and such related issues.

The table also shows that the macroeconomic environ-ment is an area in which, as is the case in the overall Index,some countries—such as Botswana, South Africa, andTunisia—are assessed quite well by international standards,with steady or improving assessments over the period fromconsistently better fiscal and monetary management, rising rev-enues from commodity exports, shrinking debt, and much betterevaluations by the business community of how the governmentallocates financial resources.

Namibia and Morocco demonstrate more mixed perform-ances, with deterioration in some areas over the period. On thepositive side, inflation has been coming down to quite low lev-els in both countries as has been the case in many countries ofthe region, and debt levels are also on a downward trend.Interest rate spreads, while remaining somewhat high, havealso been shrinking, indicating greater efficiency in the financialsector. But these positive improvements have not been strong

Box 3: The recent evolution of Africa’s competitiveness

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enough to keep the countries from falling over the period in therankings, as other countries have improved these areas evenmore dramatically. Further, budget deficits have remained rathersignificant, and have actually been growing in the case ofMorocco.

The performances of Nigeria and especially Zimbabwe lagfar behind the other six countries, with increasing fiscal deficitsand debt as well as growing rates of inflation over the period.With regard to perceptions, business leaders in both countrieshighlight increasing difficulties in obtaining access to creditover the period. And given the fiscal and monetary mismanage-ment exhibited in Zimbabwe over the period, it is perhaps notsurprising that the country’s business leaders have been themost pessimistic out of all 79 countries about its economic out-look every single year since 2002.

To summarize, although the macroeconomic picture hasimproved on an absolute basis as highlighted by Box 1, on acomparative basis much remains to be achieved given thatnations in other parts of the world are making great strides inthis area. It is clear that continuing efforts are still required tobring a number of countries in the region up to internationalstandards of macroeconomic stability.

As Table 2 on public institutions shows, there has been alarge range in performances throughout the period. Countriessuch as Botswana, South Africa, and Tunisia have consistentlybeen rated as having higher-level quality institutions than othercountries on the continent, with measurable improvements inSouth Africa and Tunisia over the period. These countriesensure stronger property rights, greater judicial independence,higher general levels of government efficiency, and lower levelsof corruption than many other countries.

Table 2. Public institutions pillar for Africa

Country 2002 2003 2004 2005 2006



Again, the performances of Morocco and Namibia are moremixed and on a downward trend. While aspects such as theprotection of property rights have received improving assess-ments over the period in these countries, their rankings in thisarea have gone down. This is primarily linked to improvementsin other countries rather than a measured deterioration in thequality of institutions in these two countries. However, there area few areas of concern. In Morocco business leaders complainabout increasing government favoritism. In Namibia there is aperception of increasing levels of corruption and organizedcrime in the economy.

Mirroring the overall competitiveness rankings shownabove, Nigeria and Zimbabwe have consistently had poor rat-ings on the quality of their public institutions. Business leadersin both countries have increasingly complained about the highcorruption and lack of independence of the judiciary in metingout justice—in Zimbabwe in particular there has been a meas-ured deterioration in these two areas. Nigeria has also beenplagued by high levels of organized crime. Most strikingly, theconfidence in property rights in Zimbabwe has deteriorated sosignificantly over the period as to place the country last on thisindicator in 2006, way down from more reasonable levels in2002.

The technology index takes into account three compo-nents important to economic development: the uptake of ICTs,the extent of innovation in the economy, and technology trans-fer to the countries.

Table 3 shows that while there are varying performancesacross the region, four countries: Botswana, Mauritius, SouthAfrica, and Tunisia have been doing comparatively better in har-nessing technologies and innovation for development. Andalthough their rankings have remained low, there have alsobeen improvements across different areas in other countries.

Table 3: Technology pillar for Africa

Country 2002 2003 2004 2005 2006



A large part of this index looks at the extent to which countriesare harnessing the new ICTs. On an absolute basis, the uptakeof ICTs has been impressive. For example, over the period thenumber of mobile phones and Internet users in Botswana morethan doubled. In other countries, such as Mauritius and SouthAfrica, mobile phone numbers actually quadrupled, while inTunisia mobile phones increased more than eightfold. Duringthe same period Morocco saw a nearly tenfold increase inInternet users. These are impressive improvements, demon-strating the important uptake of critical ICTs in the region.

However, it must be noted that in terms of trends mostcountries actually witnessed a weakening of their rankings overtime in this area. The lower and in many cases weakening per-formances of most countries demonstrates the extent to whichthe uptake of new technologies, such as personal computersand the Internet, has not kept up with the rest of the world. On apositive note, however, as described in Chapter 1.5, there aremany exciting new developments emerging in the area of ICTthat are enabling new business opportunities and increasing

Box 3: The recent evolution of Africa’s competitiveness (cont’d.)

(cont’d.)


where ICTs in particular could be adopted moreaggressively. Still, these three countries are ranked wellahead of the next best ranked African country,Mozambique (70th), and most countries from theregion fall significantly lower still in the rankings.This isan area, however, where the region has begun to seesome striking improvements: see for example Chapter1.5 of this volume for a discussion of the trends in ICTadoption in Africa.

The sophistication of the business environment andinnate innovative potential are not yet very importantfor the competitiveness of most African countries giventheir stage of development. However, for those countriesapproaching stage 3, these factors will become increas-ingly important in the coming years.This is particularlythe case of Mauritius and South Africa, both of whichare already in stage 2, as shown in Table 3.As Table 8shows, with regard to business sophistication,Tunisia andSouth Africa receive strong assessments (ranked 31st and32nd), comparing well with countries such as Australiaand Chile because of abundant and high-quality localsuppliers and relatively sophisticated production processes.They are followed in the ranking by Mauritius (44th)and Egypt (57th), the only other countries in the tophalf of the ranking. Similarly, in terms of innovation,Tunisia (27th) and South Africa (29th) are assessed ashaving the two most innovative environments in Africa,on a par with the assessments for Estonia and India forexample, with relatively high company spending onR&D, strong collaboration between universities and

industry in research, and good intellectual property pro-tection by regional standards.The top half of the rankingalso includes Kenya (48th), Nigeria (52nd),Tanzania(56th), and Morocco (61st). In the cases of both businesssophistication and innovation, most other countries inthe region receive significantly weaker assessments.Although this is not yet the area with the most urgentneed for improvement, given that their competitivenesscan still be stimulated by improvements in the morebasic areas already discussed, it is encouraging to notethat there are already a number of successful actors in theregion that can provide useful examples going forward.

This section has provided a sense of how Africa’scompetitiveness compares with that of other developingcountries and regions, as well as the comparative per-formance of the individual countries within each of thenine pillars.The analysis has shown the magnitude ofreforms and developments that remain to be achievedon the continent in order to increase competitiveness.At the same time, notable strong performances in thedifferent dimensions of competitiveness provide concreteexamples to be followed by other countries on the continent aiming to improve their competitiveness.

The next section will carry out a more detailedcountry-level analysis.The competitiveness profiles inthe back of the Report provide detailed information onthe country-level performance for each of the Africancountries assessed in this chapter.

productive performance. We would hope to see these trendsreflected in the statistics going forward.

Also explicitly taken into account in this index is the extentof technology transfer. Two countries assessed, Tunisia andSouth Africa, have seen improvements in the harnessing oftechnologies through FDI and foreign technology licensing intheir economies. The other countries have not seen any particu-lar improvements in this area, although they are successful tovarying degrees. In a similar vein, except in South Africa andTunisia and to some extent Morocco, over the period compa-nies have not been perceived as sufficiently aggressive inadopting new technologies and integrating them into their busi-ness processes. Since technological adoption is a critical driverof competitiveness for countries at earlier stages of develop-ment, improvements in this area remain a priority.

Rates of innovation, measured by factors such as patent-ing, are also captured by the aggregate numbers shown in thetable. This is an area where six of the African countries shownhave been lagging significantly behind other regions—with nosigns of improvement over the period—with South Africa and

Tunisia being the exceptions. Although this is not yet of greatconcern for most African countries, because they can stillenhance their productive potential and competitiveness byaddressing the other more basic factors, it should receiveincreasing focus going forward as they strive to move up thevalue chain.

Overall the picture in terms of competitiveness levels overthe past five years is one of stagnation, or even slightly weak-ening performance, on average. It is clear that efforts must bemade to address the obstacles to competitiveness described inthis chapter order to place Africa on a higher sustainablegrowth path.

1 The Growth Competitiveness Index was developed by Jeffrey Sachs andJohn MacArthur for the World Economic Forum.

2 Some of these countries, such as South Africa, were already included forseveral years before 2002. However, that year represents the first onewith a critical number of countries, thus allowing for a regional analysis.

3 Eighty countries were assessed in 2002. However, one country—Haiti—was dropped from subsequent editions due to a lack of Survey data inthe country and is therefore not included in the constant sample analysis.

Box 3: The recent evolution of Africa’s competitiveness (cont’d.)

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The competitiveness of African countriesAs mentioned above, Tunisia is the top-ranked countryin Africa, ranked 29th overall, a full 17 places ahead ofthe second-ranked country on the continent, SouthAfrica (46th), and higher than all other comparators inthe tables.Tunisia displays comparative strengths acrossmany of the areas measured by the GCI.To begin, thecountry has public institutions that are assessed as effi-cient, with low levels of corruption (19th) rather wellprotected property rights (36th), and an independentjudiciary (34th) as well as a strong security environmentin the country (20th). In terms of private institutions,corporate ethics also get quite high marks (29th), on apar with countries such as Spain and Portugal.

Tunisia also has a healthy workforce and providesexcellent access to primary schooling, particularly byregional standards, with the educational system also get-ting good marks. Goods markets in the country arecharacterized by relatively few distortions, with littletime required to start a business (12th), and taxation thatis not perceived as distortionary (19th), although com-petition is not as intense as in some other countries(43rd). Labor markets are quite flexible and efficientwith relative ease for companies in hiring and firing inthe country (32nd), quite strong cooperation in labor-employer relations (29th), and one of the best assessmentsof the participation of women in the workforce (5th).Given that Tunisia is presently in transition betweenstages 1 and 2, all of these strengths, measured in thebasic requirements and efficiency enhancers subindexes,support the country’s strong competitiveness.

Although innovation and business sophistication arenot yet considered to be fundamental for Tunisia’s com-petitiveness, the country also demonstrates some strengthin this area. For example,Tunisian firms tend to produceproducts relatively high on the value chain rather thanbasic products (29th), and intellectual property is quitewell protected (31st). However, actual patenting remainsquite low (70th), suggesting that there is perhapsuntapped innovative potential in the economy.

With regard to competitive weaknesses, althoughinfrastructure as a whole receives a reasonable assessment(37th), there are some areas of concern, most particularlytelephone lines (80th).The macroeconomic environmentis characterized by deficit spending (-2.8 percent ofGDP in 2005) that has led to a substantial buildup ofnational debt.The national savings rate also remains low,placing the country 50th on this indicator.

With regard to education, although as mentionedabove primary enrollment is positively assessed, secondaryand tertiary enrollment rates place the country 74th and61st, respectively. Financial markets are also ranked onlyas average, particularly for their level of sophistication(60th), local equity market access (70th), and the per-ceived soundness of banks (66th).

Finally,Tunisia could be harnessing new technologiesmore effectively for productivity improvements—it is

ranked 47th in the area of technological readiness. Inparticular, laws relating to ICTs are not seen as support-ing their proliferation, and in fact, penetration rates ofnew communication tools (mobile phones, Internetusers, personal computers) remain low by internationalstandards.

South Africa, ranked 46th overall, is the secondhighest ranked country in Africa. It remains the top performer in sub-Saharan Africa, ranking higher than allother comparators in Table 3 except for Tunisia andIndia. South Africa is sub-Saharan Africa’s economicgiant, accounting for a third of its GDP despiteaccounting for only 6 percent of its population.10 Itsstrong performance in the Index reflects this. Relative toits overall rank, the country does particularly well in anumber of areas typically reserved for rich, innovation-driven economies. Its economic sophistication is reflectedin high ranks for property rights (23rd), corporate ethics(30th), and goods (19th), as well as financial market efficiency (27th), business sophistication (32nd), andinnovation (29th). South Africa’s scientific research insti-tutions are assessed as on a par with Hong Kong’s, andthe country has a higher rate of patenting than a numberof European countries, including Greece, Portugal, andRussia.These combined strengths explain South Africa’sposition at the top of the regional ranking.

However, South Africa does face a number ofobstacles to competitiveness. For example, the countryranks 126th in labor market flexibility, encompassinghiring and firing practices, flexibility of wage determi-nation, and union-employer relations. Flexibility of wagedetermination in South Africa is also constrained by theshort supply of skilled labor.This year’s ranking forhigher education and training shows a drop to 57thplace from 47th last year.Tertiary enrollment of 15 per-cent places the country 88th overall.Therefore, theimplementation of education and training programs thatdeliver the skills necessary for a modern economy are akey ingredient to boosting economic performance.

Infrastructure represents another challenge. SouthAfrica experienced a drop in ranking for this pillar, fromlast year’s 35th place to 50th place this year, with partic-ular concerns about the quality of the electricity supplythat has been increasingly plagued by interruptions(73rd) and the low penetration rate of telephone lines(85th).The government is aware of these challenges andthere are a number of efforts underway to address them,with investments planned in the areas of utilities andinfrastructure.

Finally, lack of security remains an obstacle to doingbusiness in South Africa.The business costs of crime andviolence (116th) and the unreliability of police servicesto protect from crime (92nd) are highlighted as particu-lar concerns.These are areas that need to be tackled inorder to improve the country’s competitiveness outlook.

Mauritius is the third most competitive economyin Africa, ranked 58th overall.The country is character-

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ized by strong public institutions, with well-protectedproperty rights (29th), reasonable levels of judicial inde-pendence (43rd), and a security situation that is verygood by regional standards (40th). Private institutionsare rated as accountable, with strong auditing andaccounting standards (34th) and corporate boards (37th),assessed similar to countries such as Japan, for example.

The country’s infrastructure is quite well developed,especially for the region. In particular air transport(38th), ports (33rd), and the electricity supply (37th) areof good quality, and the country has relatively abundanttelephone lines (43rd). Financial markets in Mauritiusare also highly developed (38th) with relatively abundantcapital for business development through a variety ofchannels such as bank loans (36th) from a sound bankingsystem (38th), as well as by issuing shares on the stockmarket (36th).

Mauritius also has comparative strengths with regardto business sophistication (ranked 44th overall in thispillar), an area that will become increasingly importantfor the economy as it moves into the next, innovation-driven stage of development.This includes some controlover the international distribution of its products (43rd)and producing products already quite high on the valuechain (28th).

On the other hand, Mauritius faces some weaknessesin its macroeconomic environment, with a governmentbudget deficit that places the country 110th out of 128,relatively high inflation, and high interest rates.

With regard to human resources, there are low sec-ondary and tertiary enrollment rates (placing Mauritius64th and 83rd, respectively), and the educational systemdoes not get particularly good marks for quality (66th).On a positive note, however, firms provide significanton-the-job training to make up for this shortcoming(34th). Beyond the educational weaknesses, labor marketsare extremely sticky and inefficient, with stringent hiringand firing laws (118th), wages that are not flexiblydetermined (122nd), and little relation between produc-tivity and pay. Further, there are some health concernswith regard to the workforce—particularly the highincidence of tuberculosis—which places the country82nd overall.

Egypt is the second-ranked country in NorthAfrica, at 65th place. Egypt’s main strengths can befound in aspects of market efficiency.With regard togoods market efficiency, the country benefits from lowtaxation, little time required to start a business, and thecountry’s large market size, which allows for economiesof scale. Egyptian businesses also have access to a rela-tively large number of local suppliers (35th) and maintaincontrol over the international distribution of productsproduced in the economy (31st).

There are also some strengths in aspects of thecountry’s labor markets, such as flexibility in wagedetermination (7th), a rather close relationship betweenpay and productivity (31st), and reasonable private-sector

employment of women (38th). However, the labor marketis clearly fraught with some challenges, such as stringenthiring and firing laws (100th) and a lack of cooperationin relations between labor and employers (78th).

With regard to other weaknesses, Egypt’s drop of 12places is attributable in large part to an extremely sharpdecline of 61 places in the macroeconomy pillar, as itstruggled with deteriorating government finances (thegovernment deficit amounted to 10.5 percent of GDPin 2005, the second-highest deficit of all countries cov-ered) leading the country to build up debt of over 100percent of GDP by that year. Inflation has also remainedquite high in the country (11.4 percent in 2005), at atime when inflation is generally low around the world,thus placing it 112th.

Higher education and training is another area ofweakness, with enrollment rates at all levels that couldbe improved, an educational system that gets poor marksfor quality (106th), and a lack of on-the-job training inthe country (84th).This is no doubt related to the lackof technological readiness in the country (80th), withlow penetration rates of ICTs such as mobile phones(94th). Innovation in the country also gets quite poormarks (83rd), although this should be of secondary con-cern given its stage of development, since it can stillbenefit greatly from getting more of the basics right.

Morocco, ranked 72nd, moved up by four placesthis year.The assessment of the country’s public institu-tions has improved, especially in the area of security(47th).There have also been some improvements in thequality of the country’s infrastructure, although moremust be done to bring it up to world standards.

The results also show that Morocco has madeprogress in improving technological readiness (seeChapter 1.5), with big gains in firm-level technologyabsorption and in technology transfer through FDI.Thecountry has seen an increase in Internet users andimproved innovation since the last competitivenessassessment, in particular through stronger university-industry research collaboration and better protection ofintellectual property rights.

Despite the overall positive trend, a number ofobstacles remain.Although public institutions haveimproved, private institutions receive poor marks inareas including corporate ethics (96th), the strength ofauditing and accounting standards (88th), and the effica-cy of corporate boards in the country (102nd).

Further, despite some improvements, health indicators remain worrisome, including infant mortality(placing the country 91st) and tuberculosis incidence(76th). Further, enrollment rates across all education levels (primary, secondary, and tertiary) remain very low.The human resources base is thus in need of an upgrad-ing across a number of fronts.

There are also some weaknesses with regard to howthe country’s markets allocate resources. In particular,Morocco’s goods markets are characterized by a lack of

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local competition (71st) and a prevalence of trade barri-ers (93rd), although setting up a business seems relativelystraightforward (with few procedures and little timerequired for starting a new business in the country).

Libya is included in the Index for the first time inthis Report, and is ranked 73rd overall. Libya’s strengthscan be found in two areas: its security environment andmacroeconomic stability in the country.With regard tosecurity, Libya is characterized by low business costs ofterrorism (19th), low crime and violence more generally(25th), and extremely low levels of organized crime(10th).

In terms of its macroeconomic climate, Libya comesin at an impressive first out of all the 128 countries inthis pillar, due to windfall income from high oil pricesin recent years. In 2005 the country had the second-highest government surplus in the world (just behindKuwait), a negligible government debt ratio of justabove 1 percent, low interest rates, and low inflation.

Beyond these two areas of strength, Libya faces anumber of obstacles to its competitiveness throughoutthe other pillars measured by the Index. Most notablythe country’s infrastructure requires upgrading (100th),primary education enrollment is low (89th), and theeducational system receives extremely poor marks forquality (123rd). Markets overall are not assessed as effi-cient (121st), particularly financial markets (120th) andlabor markets (117th). Finally, the country is not har-nessing new technologies for productivity improvements(ranked 115th in technological readiness), with littletechnology entering the country through FDI and lowuptake of ICTs.

Algeria is the lowest-ranked country in NorthAfrica, ranked 76th overall. Despite its trailing perform-ance in the region, it is experiencing an encouragingtrend. Since last year’s assessment, the country hasmoved up six places as a result of a better assessment ofthe quality of its public institutions and continuingimprovements in its macroeconomic environment.Withregard to public institutions, there have been measurableimprovements in perceptions of government efficiency(now ranked 46th) and evenhandedness of public offi-cials in their dealings with the public (25th).

Algeria’s economy is also characterized by a strongmacroeconomic environment (where it is ranked 2nd,just behind Libya) with its increasing revenues from oiland gas sales boosting its performance relative to thegovernment budget balance and debt, while still manag-ing to bring inflation down to very low levels.

However,Algeria continues to face a number ofobstacles to its competitiveness: for example, in the areaof market efficiency (97th) as well as technologicalreadiness (93rd), both of which are very important forproductivity improvements given its stage of develop-ment. Furthermore, its low rank of 118 for the per-ceived business costs of terrorism suggests that securityis still considered to be a major problem affecting the

business environment, imposing heavy costs that are notconducive to sustained productivity improvements andeconomic growth.

Botswana has been relatively successful, ranking83rd—the third best performance in sub-Saharan Africa,after South Africa and Mauritius.The government hassucceeded in using its wealth from key natural resourcesand diamonds to invest in factors setting it on a moresustainable growth path.Among the country’s strengthsare its reliable and legitimate institutions, ranking a high19th worldwide for the efficiency of government spend-ing, 27th for public trust of politicians, and 25th forjudicial independence. Botswana is known to be one ofthe countries with the lowest levels of corruption inAfrica. Corporate ethics also receive relatively highmarks, ranked 41st overall.

The transparency and accountability of public insti-tutions have contributed to a stable macroeconomicenvironment (41st), with a low government budgetdeficit and one of the highest national savings rates inthe world (although inflation remains a bit high byinternational standards).

Financial markets are also assessed as developed byregional standards, with a sound banking sector (40th),some access to financing through venture capital (45th),and by issuing shares on the local equity market (59th).

With regard to weaknesses, attainment rates at alllevels of the educational ladder remain low by interna-tional standards, and the quality of the educational systemreceives rather poor marks—an area clearly requiringattention.Yet it is clear that the biggest obstacle facingBotswana in its efforts to improve its competitiveness isthe health situation in the country. Botswana has thehighest HIV prevalence rate of all countries covered, aswell as very high malaria and tuberculosis prevalencerates, which has led to one of the lowest life expectanciesin the world (only 40 years in 2004). Improving thehealth and education levels of the workforce are clearlythe main priorities for the government at this stage.

Namibia is ranked just behind Botswana, at 88thoverall. Namibia also demonstrates a number of clearcompetitive strengths: for example, the quality of theinstitutional environment within the country is ranked49th. Property rights in Namibia are well protected(32nd) and the judiciary is perceived as independentfrom undue influence (28th).With regard to privateinstitutions, auditing and accounting standards are quitestrong (39th) and firms are viewed as demonstrating rel-atively good ethical behavior (53rd).

The quality of the country’s infrastructure is alsogood by regional standards. In particular, aspects of thetransport infrastructure such as the quality of railroads(35th) and ports (30th) are highly rated, although tele-phone lines remain scarce (94th).

Financial markets are also sophisticated by regionalstandards (57th), with relatively easy access to loans(45th), a relatively sound banking sector (44th), and

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some venture capital available (50th), although raisingfunds by issuing shares on the local stock market isdeemed difficult (89th).

With regard to weaknesses, as in Botswana, healthindicators are extremely worrisome, including infantmortality (94th), life expectancy (54 years, placing thecountry 108th), and high prevalence rates of malaria andtuberculosis, and high prevalence of HIV. Further, edu-cational attainment rates are extremely low, with pri-mary, secondary, and tertiary enrollment rates placingthe country 106th, 98th, and 102nd, respectively.Thequality of the educational system is assessed as beingamong the worst of all countries in the Index, ranked122nd overall. On a positive note, companies are makingup for this weakness by providing some on-the-jobtraining to staff (65th).

Namibia’s labor markets are not very flexible orefficient, with stringent hiring and firing practices(96th), friction in labor-employer relations (105th), andlittle relation between pay and productivity. On a posi-tive note, the brain drain from the country (55th) doesnot seem to be as severe as in many other countries inthe region. Goods markets suffer from a number of distortions, such as a long time required for starting abusiness (95 days, placing the country 113th) and highagricultural policy costs (97th).

Finally, the country could do more to harness newtechnologies to improve its productivity levels.Companies are not considered sufficiently aggressive inabsorbing new technologies (92rd) and Namibia has lowpenetration rates of new technologies such as mobilephones and the Internet.

Kenya is ranked considerably lower at 97th, the lastsub-Saharan African country within the top 100. Kenyais an interesting case because its strengths lie in thoseareas normally reserved for countries at higher stages ofdevelopment. For example, Kenya’s innovative capacity isranked an impressive 48th, with good scientific researchinstitutions (31st), high company spending on researchand development (34th), relatively strong research col-laboration between universities and industry (50th), andsome availability of scientists and engineers within thecountry (57th). Further, in terms of innovative “output,”after South Africa, Kenya has the highest rate of patent-ing in all of Africa.

Supporting this innovative potential is an educa-tional system that—although educating a relatively smallproportion of the population compared with most othercountries (primary, secondary, and tertiary enrollmentrates are ranked 108th, 102nd, and 107th, respectively)—is rated highly for quality (37th) for those who are for-tunate enough to attend schools.The economy is alsosupported by financial markets that are sophisticated byinternational standards, with relatively easy access toloans (58th) and share issues on the local stock market(43rd).

However, there are a number of basic weaknessesthat are eroding at Kenya’s overall competitive potential.The country’s public institutions are assessed as highlyinefficient, plagued by undue influence (95th), generalgovernment inefficiency and red tape (104th), and withvery high levels of corruption (115th). Similarly, corpo-rate ethics are assessed as lacking among the country’sfirms (91st).The security situation Kenya is also extremelyworrisome, particularly in crime and violence (118th).

As well as the low enrollment rates, workers aresubject to a high incidence of illnesses, with weak healthindicators and a high prevalence of diseases—particularlytuberculosis, which is the highest of all countries coveredand contributes to the low life expectancy of 51 years.Beyond these fundamental institutional and humanresource weaknesses, more could also be done to free up goods and labor markets and to harness new technologies.

All of the other countries from sub-Saharan Africaare ranked below 100.While there are of course somenuances to their performances, all of these countries facesignificant obstacles to improving their competitivenessand productivity levels. Rather than discussing the difficulties facing each of these economies, it is perhapsmore useful to mention some of the key competitive-ness issues facing some of the larger economies in theregion.

Nigeria,Africa’s most populous country, is ranked102nd. It is plagued by weak and deteriorating institu-tions—including a serious security problem—poorassessments for its infrastructure and basic health andeducation, and a significant change for the worse inmacroeconomic management, all of which havedepressed the country’s rank down from 83rd in 2005.More generally, weaknesses abound throughout all ofthe areas measured by the GCI.The rankings show that,despite the country’s windfall revenues from record-highoil prices, the large majority of the population remainswithout access to basic health care and education, andthe basis for sustainable growth is not being put intoplace.

Tanzania and Uganda, two of the region’s largereconomies, have not managed to significantly improvetheir competitiveness in recent years and are ranked108th and 116th, respectively. Even relative to these lowoverall rankings, they do particularly poorly on healthand primary education (121st and 126th, respectively)and on higher education and training (115th and 110th,respectively).Although they do better on some of theinnovation factors, their failure to make a significantimprovement in the basic requirements subindex is like-ly to continue to dent their economic prospects.

Zimbabwe, a country that showed so much prom-ise until just a few years ago, is ranked among the leastcompetitive economies included in the GCI, at 121stoverall.The institutional environment is ranked amongthe worst of all countries, with a complete absence of

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property rights (ranked a rock-bottom 128th), high levelsof corruption (122nd), and a lack of even-handedness ofthe government in its dealings with the public (119th)as well as basic government inefficiency (124th).After anumber of years of mismanagement of the publicfinances and monetary policy, Zimbabwe has sunk tothe bottom of all countries covered with regard tomacroeconomic stability (ranked 128th), with largedeficit spending, a negative national savings rate, andraging hyperinflation that is unparalleled anywhere elsein the world today. Zimbabwe’s weaknesses aboundacross the other areas measured by the Index, with weakhealth indicators, low educational enrollment rates, andvery inefficient markets (particularly goods and labormarkets). It is clear that for Zimbabwe to get back ontrack, improved governance affecting all levels of theeconomy will be necessary to restore confidence in theeconomy and to rebuild what was once one of Africa’sstars.

ConclusionsThis chapter has explored the various factors and policiesdriving the competitiveness and economic performanceof African countries, providing a framework for priori-tizing areas requiring policy attention and enhancedinvestment.The discussion has included an analysis ofAfrica’s competitiveness from a global and regional per-spective, providing a sense of country-level performancescompared with the overall group of 128 economiesincluded in the Global Competitiveness Index (GCI).

Specific comparisons have been made with relevantdeveloping countries and regions, including LatinAmerica, economies of developing Asia, and the fouremerging BRIC countries. By placing individual coun-try performances into an international context in thisway it has been possible to highlight those areas requiringurgent attention within African countries to increasecompetitiveness and to better ensure sustained strongeconomic performance going into the future.

On average, the analysis has shown that the com-petitiveness of most countries in Africa continues to lagbehind the rest of the world and even behind otherdeveloping regions across all areas measured by the GCI.The results thus provide a sense of the magnitude of theefforts required in order to raise competitiveness levels.

Although the specific priority areas vary fromcountry to country, there are some common areas ofconcern. For North African countries, which are alreadyassessed as doing comparatively well in some of themore basic areas measured by the GCI, the focus shouldbe on improving the factors measured in the pillars ofthe efficiency enhancers subindex: most particularly,technological readiness and improved market efficiency.

In sub-Saharan Africa, efforts are needed on allfronts within most countries.This includes upgradinginfrastructure and improvements in the health and edu-

cation of the workforce, as well as tackling weaknessesin the areas of market efficiency and technologicalreadiness. Indeed, as shown by the results of the GCI,several of the big economies in the region are receivinghigh scores in the innovation and business sophisticationpillars relative to their overall ranking, while neglectingmore basic requirements that would help them migrateinto a higher stage of development and achieve moresustainable growth.

Although much remains to be achieved, the factthat there are a number of strong performers on thecontinent in specific areas provides reason for optimism.An analysis of the highest-ranked countries in Africaacross the various pillars of national competitiveness hasshown that that there are strong individual country per-formances throughout the continent in areas as diverseas institutional quality, macroeconomic stability, businesssophistication, and innovation.These countries can serveas benchmarks for other economies in the region, aspoints of reference in their efforts to improve theircompetitiveness.

The relatively positive economic outlook acrossmuch of Africa, coupled with the renewed focus andincreased attention from several institutions from withinthe region and beyond, now provide a promising oppor-tunity to make the institutional and structural changesneeded to put countries in the region on a more sus-tainable growth path and to pave the way for a moreprosperous African future.

Notes1 IMF 2007.

2 NEPAD was set up in 2001 as a strategic framework to address “theescalating poverty levels, underdevelopment and the continuedmarginalisation of Africa” through improvements in the quality ofgovernance and leadership, infrastructure, and regional integra-tion. Specifically, NEPAD aims to find African solutions to the con-tinent’s economic woes, spearheaded by Africa’s leaders. Key forimprovements in Africa’s competitiveness is the potential of theAfrican Peer Review Mechanism (APRM), under which countriesvoluntarily “open their books” to teams of African experts in vari-ous spheres who assess and critique the countries’ political gov-ernance, economic governance, corporate governance, and socio-economic development. See NEPAD in Brief, available online athttp://www.nepad.org/2005/files/inbrief.php.

3 At Gleneagles, under the UK presidency, the G8 governments(Canada, France, Germany, Italy, Japan, Russia, the UnitedKingdom, and the United States) made clear commitments toincrease aid spending, ensure debt cancellation, and improve thetrading environment for developing countries, as well as increaseinvestments in education and health, among other things. Africawill continue to remain high on the G8 agenda under the Germanpresidency, although the focus is likely to shift more towardissues surrounding the investment climate and economic integra-tion, as well as infrastructure and HIV/AIDS.

4 The GCI was developed by Xavier Sala-i-Martin and Elsa Artadi forthe World Economic Forum. For more details on the constructionof the GCI, see Chapter 1.1 in The Global Competitiveness Report2006–2007.

5 In other words, these are the factors and policies supporting higherlevels of productivity and sustainable growth. Technically, theindex aims to measure the determinants of “A” in the productionfunction (or similarly, in classical growth equations).

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6 Further information on the Executive Opinion Survey can be found inChapter 3.1 of The Global Competitiveness Report 2006–2007,which is available from the World Economic Forum on request.Please send requests to [email protected].

7 As explained by Sala-i-Martin and Artadi 2004, “The weights werechosen using a maximum likelihood method of an econometricmodel that had the growth rate of per capita GDP between 1960and 2000 as the explanatory variable, and various proxies for basicrequirements, efficiency enhancers and innovation factors as inde-pendent variables. The regression allowed countries in differentstages to have different coefficients. The coefficients that maxi-mized likelihood, then, were ‘rounded’ and became the weightsfor each stage.”

8 The factor-driven stage includes countries that have GDP per capitabelow US$2,000. The efficiency-driven stage includes countrieswith per capita income between US$2,000 and US$9,000. Theinnovation-driven stage includes countries with GDP per capitahigher than US$17,000. Countries between the categories areconsidered to be in transition, as discussed in the text.

9 All countries that export more than 50 percent of primary exports areconsidered to be to some extent factor driven. The stage ofdevelopment for these countries is adjusted downward smoothlydepending on the exact primary export share. The higher the pri-mary export share, the stronger the adjustment and the closer thecountry will move to stage 1. For example, a country that exports95 percent of primary products and that would be in stage 3based on the income criteria will be in transition between stage 1and 2. The income and primary exports criteria are weighted iden-tically. Stages of development are dictated uniquely by income forcountries that export less than 50 percent primary products.Countries that export only primary products would automaticallyfall into the factor-driven stage (stage 1).

10 As measured by purchasing power parity (IMF 2006).

ReferencesAfrican Development Bank. 2006; Selected Statistics on African

Countries 2006 Volume XXV. Tunis: African Development Bank.

IMF (International Monetary Fund). Various years. Country Reports, vari-ous countries. Washington, DC: International Monetary Fund.

———. 2006. Regional Economic Outlook: Sub-Saharan Africa,(September 2006). Washington, DC: International Monetary Fund.

———. 2007. World Economic Outlook Database, (April 2007).Washington, DC: International Monetary Fund.

Sala-i-Martin, X. and E. V. Artadi. 2004. “The Global CompetitivenessIndex.” The Global Competitiveness Report 2004–2005.Hampshire: Palgrave MacMillan. pp. 51–80.

World Bank. 2007. World Development Indicators Online.

World Economic Forum. 2006. The Global Competitiveness Report2006–2007. Hampshire: Palgrave MacMillan.

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This appendix provides details on how the GlobalCompetitiveness Index is constructed.

1st Pillar: InstitutionsA. Public Institutions

1. Property RightsProperty Rights

2. Ethics and CorruptionDiversion of public fundsPublic trust of politicians

3. Undue InfluenceJudicial independenceFavoritism in decisions of government officials

4. Government inefficiency (red tape, bureaucracy, and waste)Government spendingBurden of government regulation

5. SecurityBusiness costs of terrorismReliability of police servicesBusiness costs of crime and violenceOrganized crime

B. Private Institutions

1. Corporate EthicsEthical behavior of firms

2. AccountabilityEfficacy of corporate boardsProtection of minority shareholders’ interestsStrength of auditing and accounting standards

2nd Pillar: InfrastructureQuality of overall infrastructureQuality of overall railroad infrastructureQuality of port infrastructureQuality of air transport infrastructureQuality of electricity supplyTelephone lines (hard data)

3rd Pillar: MacroeconomyGovernment balance (hard data)National savings rate (hard data)Inflation (hard data)Interest rate spread (hard data)Government debt (hard data)Real effective exchange rate (hard data)

4th Pillar: Health and primary educationA. Health

Business impact of malariaBusiness impact of tuberculosisBusiness impact of HIV/AIDSInfant mortality (hard data)Life expectancy (hard data)Tuberculosis incidence (hard data)Malaria incidence (hard data)HIV prevalence (hard data)

B. Primary education

Primary enrollment (hard data)

5th Pillar: Higher education and trainingA. Quantity of education

Secondary enrollment ratio (hard data)Tertiary enrollment ratio (hard data)

B. Quality of education

Quality of the educational systemQuality of math and science educationQuality of management schools

C. On-the-job training

Local availability of specialized research and trainingservices

Extent of staff training

6th Pillar: Market efficiencyA. Good markets: distortions, competition and size

1. DistortionsAgricultural policy costsEfficiency of legal frameworkExtent and effect of taxationNumber of procedures required to start a business

(hard data)Time required to start a business (hard data)

2. CompetitionIntensity of local competitionEffectiveness of antitrust policyImports (hard data)Prevalence of trade barriersPrevalence of foreign ownership

3. SizeGDP – exports + imports (hard data)Exports (hard data)

B. Labor markets: Flexibility and efficiency

1. FlexibilityHiring and firing practicesFlexibility of wage determinationCooperation in labor/employer relations

2. EfficiencyReliance on professional managementPay and productivityBrain drainPrivate sector employment of women

Appendix A: Composition of the Global Competitiveness Index


C. Financial markets: sophistication and openness

Financial market sophisticationEase of access to loansVenture capital availabilitySoundness of banksLocal equity market access

7th Pillar: Technological readinessTechnological readinessFirm-level technology absorptionLaws relating to ICTFDI and technology transferMobile telephone subscribers (hard data)Internet users (hard data)Personal computers (hard data)

8th Pillar: Business sophisticationA. Networks and supporting industries

Local supplier quantityLocal supplier quality

B. Sophistication of firms’ operations and strategy

Production process sophisticationExtent of marketingControl of international distributionWillingness to delegate authorityNature of competitive advantageValue chain presence

9th Pillar: InnovationQuality of scientific research institutionsCompany spending on research and developmentUniversity/industry research collaborationGovernment procurement of advanced technology

productsAvailability of scientists and engineersUtility patents (hard data)Intellectual property protectionCapacity for innovation

Appendix A: Composition of the Global Competitiveness Index (cont’d.)

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Combining hard data and Survey dataThe responses to the Executive Opinion Surveyreferred to as “Survey data,” with responses rangingfrom 1 to 7.The hard data were collected from varioussources, described in the Technical Notes and Sourcesat the end of the Report.All of the data used in thecalculation of the Competitiveness Index can be foundin the Data Tables section of the Report.The standardformula for converting each hard data variable to the1-to-7 scale is:

6 x (country value – sample minimum) + 1(sample maximum – sample minimum)

The sample minimum and sample maximum are thelowest and highest values of the overall sample, respec-tively. For some variables, a higher value indicates aworse outcome. For example, high levels of budgetdeficits are bad. In this case, we “reverse” the series, bysubtracting the newly created variable from 8. In someinstances, adjustments were made to account forextreme outliers in the data.

How we treat inflationSince no consensus yet exists in the literature on thespecific threshold at which lower levels of inflationbecome detrimental, and in order to capture the ideathat both high inflation and deflation are detrimentalto the economy, inflation enters the model in a U-shaped manner as follows: for values of inflationbetween 0.5 and 2.9 percent, a country receives thehighest possible score of 7. Beyond this range, bothinflation and deflation receive negative scores. Scoresbecome more negative as they move away from thesevalues, in a linear fashion.

How we measure the impact of diseaseWithin the 4th pillar of the Global CompetitivenessIndex, the impact of a disease on competitivenessdepends not only on its incidence, but on how costlythis incidence is for business.Therefore, in order toestimate the economic impact of disease, we combinehard data on incidence (on malaria, tuberculosis, andHIV) with Survey questions on the cost of these diseases to business.

To combine these data we first take the ratio ofeach country’s disease prevalence, relative to the high-est prevalence in the world.We then multiply theinverse of this ratio (to take into account that low values are “good”) with the Survey average.This product is then normalized to a 1-to-7 scale. Note

that countries with a zero prevalence rate will alwaysobtain a 7 in the ranking, regardless of what theSurvey data says.

How we measure domestic and foreign competitionWithin the goods market efficiency subindex of the6th pillar of the Global Competitiveness Index, thecomponent called competition is weighted in a particularfashion: the Survey data provide an indication of theextent to which competition is distorted in both thedomestic and the foreign market. However, the relativeimportance of these distortions depends on the relativesize of domestic versus foreign competition. In orderto capture this interaction, we create two new variablesthat indicate this relative importance. Domestic com-petition is the sum of consumption (C), investment (I),government spending (G), and exports (X), while foreign competition is equal to imports (M).Thus,we assign a weight of (C + I + G + X)/(C + I + G +X + M) to those Survey questions related to local competition, and M/(C + I + G + X + M) to thoserelated to foreign competition.

How we measure market sizeWithin the goods market efficiency subindex of the6th pillar of the Global Competitiveness Index, thecomponent called size measures the size of the market,to which local firms have access.This has two compo-nents: the size of the local market and the foreignmarket (exports).The local market should be the sumof consumption (C), investment (I), and governmentspending (G).Although we lack data on these threemacro components, we do have data on exports (X),imports (M) and GDP. By definition, GDP = C + I +G + (X – M).Therefore, we compute the local marketas GDP + M – X.

Appendix B: Technical notes on the construction of the Global Competitiveness Index


CHAPTER 1.2

From Benchmarking to Impact:Identifying Which DimensionsMatterREYES ATERIDO

MARY HALLWARD-DRIEMEIER

GIUSEPPE IAROSSI

at the World Bank

Chapter 1.1 has laid out a methodology for benchmark-ing the competitiveness and business climate of Africancountries. In setting priorities for reform, benchmarkingis an important place to begin—but it is not the laststep. Priorities should be set by an issue’s impact. Issueswith the greatest impact are often ones characterized bythe longest delays or highest regulatory costs, althoughthis is not necessarily always the case.What also mattersis how central the issue is to firm operations—to produc-tivity and job creation—and what alternative copingmechanisms are available to the firm. Linking investmentclimate conditions to firm performance reinforces theimportance of finance, skills, infrastructure, and the ruleof law. However, such linking also underscores the ideathat that the impact of these conditions varies by whoyou are and where you are.

The investment climate’s impact on job creationand productivity is substantial. Costs and delays in transportation, electricity, and crime alone can raiseoverall costs by 20 to 30 percent, undermining whateveradvantage firms enjoyed by lower labor costs or greaterproductive efficiency.1 In addition, weak property rightsand unpredictable enforcement of regulations weakensincentive to invest and work hard. Improving the invest-ment climate is recognized as one of the most importantways to increase growth and expand opportunities—particularly for poor people.2 In tackling the agenda of economic growth, the challenge is to identify the priorities for reform.

To be able to address this challenge better, the WorldBank’s program of Enterprise Surveys has interviewedover 70,000 entrepreneurs and senior managers in 104countries (see Appendix A for further information onthese surveys).The focus for this chapter are the 11,600interviews in 34 countries in Africa.The EnterpriseSurveys program has four distinguishing features:

• First, the program can benchmark not only subjec-tive rankings of investment constraints to businessperformance (for example, the extent to whichelectricity is rated as a problem), but also objectivemeasures of these constraints (for example, the frequency and duration of outages, production lostfrom outages, and the use and cost of generators).

• Second, it covers a wide range of issues—fromaccess to financial and infrastructure services, tocrime, corruption, and government regulations—allowing a ranking of these issues.

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The views expressed here are those of the authors and do not neces-sarily reflect the views of the Board of Executive Directors of the WorldBank or the governments they represent.


• Third, the data can also go beyond benchmarkingto test directly the impact of these objective conditions on the actual performance of the firm,for example, how the actual investment climateconditions affect the productivity and employmentgrowth of respondents.

• Fourth, large, randomly selected samples of firmsallow for results to be compared across types of firms, with particular attention paid here to firm size.

For many of the countries in the region, theEnterprise Surveys are the only source of detailed infor-mation on firm performance and disaggregated objec-tive indictors of a wide variety of business environmentindicators.

The next section demonstrates the range of pro-ductivity and employment growth outcomes across theregion, including the results from Brazil, China, andIndia, for comparison. It then moves to identify keydimensions in the investment climate across countries inthe region that can help account for these patterns. First,it examines the top constraints as reported by firms, linksthem to objective measures of these constraints, andlooks at how these patterns vary across different group-ings of countries. Second, it examines ways to prioritizeconstraints from among obstacles in a longer list and toidentify which measures account for greater differencesacross groups of countries.Third, it links the objectivemeasures of the investment climate directly to produc-tivity and job creation across countries, illustrating thepotential gains from reform.While most of the chapteranalyzes the impact of the investment climate acrosscountries, the last section disaggregates the effects of thevarious dimensions of the investment climate by types of firm, focusing on firm size, ownership, and exportorientation.Access to finance, electricity, tax rates,regulatory uncertainty, and corruption emerge as keyareas for reform—with specific priorities varying notjust across countries, but within countries too.

Firm performance across AfricaGrowth rates in Africa have been rising in recent yearsas greater macroeconomic stability has been achieved inmore countries and additional reforms have been under-taken. But the key to maintaining growth is not simplymobilizing more capital or labor.What is needed isgreater productivity—being able to produce more withthe same inputs.3 Productivity growth in Africa has beenlower than in other regions.The average productivitygrowth from 1970 to 2000 was stagnant or even mildlynegative.4 Returns to investment have also been relativelylow. Investment rates are lower and the returns averageabout half those of other developing countries.5 What isencouraging is that the recent trends have been more

positive. Regional growth rates over the last five yearshave been higher than in Latin America and theOrganisation of Economic Co-operation andDevelopment (OECD) countries, with the averagegrowth rate in Africa of just under 5 percent.

Within Africa, productivity varies tremendously—both across countries and within countries. Some of this is simply the result of differences of entrepreneurialtalent across individuals. Some of the variation reflectsdifferences in endowments or geography, but at least asmuch mirrors differences in investment climate conditionsas illustrated in Figure 1 (see also Appendix B). Figure 1shows how there are more productive firms in locationswith better investment climates or business environments.The figure plots the share of firms in each country withlabor productivity above a benchmark against the GlobalCompetitiveness Index (GCI) discussed in Chapter 1.1.6

As the GCI captures many dimensions of the businessenvironment, it is a suitable summary measure to corre-late against firm performance. Figure 1 uses as its bench-mark the median labor productivity of all the small andmedium size firms (11–150 employees) combined into aregional sample.

The first thing to note is that every country hassome firms that are above the regional median.Productive firms exist in every location.The very bestfirms do not operate only in the biggest economies orthe countries with the highest standards of living. Firmscan succeed even in poor investment climates.This isnot to say that reforms are unnecessary. Clearly, morefirms can achieve greater productivity when they oper-ate in a stronger business environment. Based on thesesamples of firms, over three-quarters of firms in Mauritiusand Namibia and two-thirds of firms in Algeria andBotswana operate above the regional median, while only10–15 percent of the firms in Gambia or Burundi doso. Putting this into a broader international context,about 80 percent of firms in a comparable study inBrazil surpass the median African productivity level. InChina this is about 60 percent and, in India, 55 percent.Thus, several countries in the region—includingAlgeria, Botswana, Cameroon, Mauritius, Morocco,Namibia, Senegal, Swaziland, and South Africa—have ahigher share of productive firms than China has.7

The relationship between productivity and the GCIis not perfect. Egypt has a lower share of productivefirms than would be expected given the quality of itsbusiness environment; Cameroon has a higher share.8

But correlations will almost never be perfect whenusing a composite index.The investment climate is notthe only determinant of productivity—and an overallindex can underemphasize a particular dimension that isconstraining to a particular country.As the analysis hereshows, elements of the GCI have relatively more or lessimpact for different groupings of firms and countries.Aggregate analysis is very useful at highlighting the

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broad patterns, but it cannot explain all the variations atthe micro level.

Turning to employment growth, there is a largeamount of dynamism among incumbent firms (theEnterprise Surveys cannot capture the effects of entryand exit), with relatively high shares of firms that areexpanding. Fully half of all the incumbent firms reporthaving increased the number of workers they employ.Between 20 and 25 percent of firms reduced their num-ber of workers, with the remaining 25 to 30 percent offirms maintaining the same number of workers.Withincountries, beyond the smallest or micro firms (which arerelatively more stable), employment growth is bothmore likely and at a higher rate for small and mediumfirms, while very large firms have the lowest rates ofgrowth.9 The correlation, however, between employmentgrowth and the GCI is less strong than with productivity.

The next section turns to the indicators of thebusiness environment to investigate which dimensionsmake the most significant contributions to productivityand job growth.

How to identify priorities for reformUltimately, the aim in benchmarking and measuring allthe dimensions of the investment climate is to identifyareas where improvements can make a real difference.Benchmarking investment climate conditions, particularlyof more objective measures, makes a significant contri-bution. But if one cares about assessing their impact,

such benchmarking measures still need to be combinedwith additional information.

Going beyond simple costs or delays to capture the impacton performanceIt is straightforward to use benchmarks on costs, delays,number of procedures, and so on to identify those areaswhere a country’s scores are weak—either across issueareas within a country or relative to neighboring orother comparator countries. Priority can then be givento improving those scores where a country is particularlyweak.Targets for reform can then be very specific.

However, because certain costs or delays are highdoes not necessarily imply that these are areas of actualimportance to firms or that they have a particularlyonerous impact.This is particularly true if firms can eas-ily adapt to or circumvent the problems, or if the costsor delays occur in areas of only marginal importance tofirm operations.Thus, delays in getting a new telephonelandline may be long but have minimal impact, particu-larly if mobile telephones are available. Likewise, outagesfrom the public electricity grid can be disruptive.However, choosing technologies that are less energyintensive or using a generator can mitigate some ofthese costs.

There are three approaches that can shed light onthe impact of investment climate conditions.The first isto compare the list of constraints as reported by firms.Implicitly, this ranking of constraints captures the impactof an issue; respondents are balancing their assessment of

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Ethiopia

Morocco Kenya

Gambia

Benin

Uganda

Tanzania

Egypt

Figure 1: More-productive firms are in locations with better investment climates

Source: World Bank Enterprise Surveys, 2002–2006; World Economic Forum.

Note: Firms are categorized as ‘productive’ if their value added per worker is above the region’s median level for firms with 11 to 150 workers.

Global Competitiveness Index rank

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an issue with the perceived importance of that issue totheir operations. Combining these rankings with moreobjective measures of the issue can corroborate thevalidity of these responses.A second approach is to usecorrelations amongst the variables themselves to deter-mine the optimal grouping of variables and the relativeweights assigned to them so as to account for the mostinformation in the data.A third is to conduct econometricanalysis of the impact of investment climate conditionson firm performance directly.This tests for the extent ofimpact of each variable directly.All approaches have thebenefit of allowing for variations in impact across differ-ent types of firms or in different types of locations.

There is an important caveat to keep in mind wheninterpreting any of these three types of results from firmsurveys.10 These approaches all focus on the benefits sideof reforms. None of these methods takes into accountthe costs associated with reforms—either financial orpolitical. Clearly policymakers would have to weighpossible benefits against the costs of reforms as well asthe feasibility of securing the reform against the politicalcapital spent in its attempt.

Measuring impact: Ranking constraints by firmsRespondents are asked in the Enterprise Survey to ranka list of issues based on how constraining they are to the“operations and growth of their business.”Access tofinance, tax rates, and electricity are the constraints mostlikely to be reported as “major” or “very severe”—although the list varies substantially across different

countries (see Figure 2). Overall, half of respondentsreport “access to and cost of finance” as a top constraint,although the share is closer to one-quarter in upper-middle-income countries.The gap with electricity iseven higher, with firms in low-income countries almostfour times as likely to report it as a significant constraint.It is noticeable that in upper-income countries theoverall levels of complaints are lower. However, for thosecountries the issues related to labor—available skills aswell as labor regulations—raise more concern.

How well do these subjective rankings reflectobjective measures? Within 16 issue areas, we testedwhether the firms that report longer delays, greater costs,or lower-quality service are the same ones that reportthat issue as being more constraining. For all but oneissue, the answer is “yes.” Firms with worse objectiveexperiences are more likely to report the issue as repre-senting a bigger constraint. Firms that pay higher bribesare more likely to report corruption as a problem; firmswith more frequent outages are more likely to reportelectricity is an important constraint.The one exceptionis finance. In this case, firms with some access to financealready are the ones most likely to complain that accessand costs of finance are problematic. However, restrictingthe sample to just those with some access, it is true thatas the share of external finance rises, complaints decrease.

Table 1 provides a crude measure of the impact ofimproving the objective conditions (that is, monetaryand time costs of interacting with officials and obtainingservices). It reports the predicted change in the share of

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Figure 2: Top constraints reported by firms: Variation across countries

Source: World Bank Enterprise Surveys in Africa (sub-Saharan Africa and North Africa), 2002–2006.

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firms reporting the issue as a “major” or “very severe”constraint if objective conditions underlying it were toimprove.As the investment climate measures are all indifferent units, the size of the improvement is taken asone standard deviation to have the same relative magni-tude change across the issue areas.Another benefit ofthis choice is that, as the extent of improvement is basedon the range of conditions experienced in the region, itrepresents a level of change that has already beenachieved by at least some countries in the region.

Looking at these results, the issues with the mostrobust relationship in the region are electricity, corrup-tion, regulations, and crime.A one standard deviationincrease in the days of outages is associated with anincrease of 34 percent of electricity being reported as a“major” or “very severe” constraint.

For each category, a number of objective measuresare collected, giving more detailed insights into whichaspects of an issue are particularly problematic. Forexample, the constraint “tax administration” is moreclosely associated with “gifts during tax inspections” thanto the time spent with tax authorities.“Skills availability”is constraining because of the increased time needed tohire skilled workers rather than the need to train workers.

All the results in Table 1 are highly statistically sig-nificant.Within an issue area, those firms experiencinggreater costs or delays are more likely to rank that issueas constraining. However, when you compare acrossissue areas, those issues with the longest delays or highestcosts are not necessarily identified as the top constraints.There are long delays associated with new access tolandline telephone service, but this is not ranked as a topconstraint. Managers can also spend a lot of time withgovernment officials.This is time that might have beenmore productively spent—and often raises concerns thatthere may be higher demands for “gifts”—yet it is notusually reported as a top complaint.

The two areas where changes in objective conditionstranslate into smaller changes in subjective rankings aretaxes and finance.As mentioned earlier, these are thetwo areas that almost all firms like to complain about.And although the link between actual access to financeand the level of complaint is less strong, the latter analy-sis does show that there is significant variation in theexternal finance available to different firms—and thatthis can have significant impact on firm performance.

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Table 1: Level of firms’ complaints: Impact of a one standard deviation change in objective conditions

Improvement in Change in percentage of Objective investment objective condition Perception investment firms ranking issue as

Issue area climate indicator (one standard deviation) climate issue “major” or “very severe”

Infrastructure Days of power outages (log) ............................................................3.7 ......................Electricity......................................................................13.8

Losses due to lack of power (percent sales)..............................12.6 ......................Electricity......................................................................24.9

Use of email with clients ......................................................No to Yes ......................Telecommunications ....................................................6.0

Use of Web with clients........................................................No to Yes ......................Telecommunications ....................................................7.0

Days to obtain phone line (log)........................................................5.4 ......................Telecommunications ..................................................18.3

Losses in transportation (percent sales) .......................................5.2 ......................Transportation................................................................8.1

Corruption Sales on bribes (percent) .................................................................6.7 ......................Corruption.....................................................................16.6

Firms involved in bribes (percent)....................................................49 ......................Corruption.....................................................................22.3

Gift at inspections ..................................................................Yes to No ......................Corruption.....................................................................15.6

Government contracts in gifts (percent)........................................7.6 ......................Corruption.....................................................................17.7

Regulations Days obtaining licenses (log)...........................................................3.6 ......................Business licensing......................................................15.7

Days tax inspection (log) ..................................................................2.6 ......................Tax administration.......................................................11.3

Gifts during tax inspection ..................................................Yes to No ......................Tax administration.......................................................19.6

Days to obtain exports (log) .............................................................2.5 ......................Customs ..........................................................................7.7

Days to obtain imports (log) .............................................................3.1 ......................Customs ........................................................................11.8

Labor Days labor inspections (log).............................................................2.5 ......................Labor regulations ........................................................13.6

Training employees................................................................No to Yes ......................Skills shortage ...............................................................4.1

Time to hire skilled workers (weeks)..............................................7.3 ......................Skills shortage .............................................................11.4

Crime Cost security (percent sales) ...........................................................4.2 ......................Crime ...............................................................................4.3

Loss due to crime (percent sales)...................................................5.7 ......................Crime .............................................................................12.4

Finance Overdraft facility.....................................................................No to Yes ......................Finance access and cost.............................................3.0

Working capital externally financed (percent) ...........................21.2 ......................Finance access and cost.............................................5.6

Investment externally financed (percent) ...................................33.5 ......................Finance access and cost.............................................7.1

Source: World Bank Enterprise Surveys in Africa, 2002–2006.


Do constraints vary across groups of countries?The physical geography and natural endowments of acountry raise particular challenges to firms.Two geo-graphically based features of economies receive particularattention.The first is whether a country is landlocked ornot.Access to ports helps reduce transportation costsand gain access to additional markets; ports also facilitateimporting capital goods that can help raise productivityand provide access to export markets.A second feature isthe extent to which an economy is endowed with natu-ral resources, particularly oil.These endowments havebeen called a “curse” in part because they generate suchpotential for concentrated wealth that governments’incentives are distorted in their attempts to control therents from these resources—as well as destabilizing thecountry in the form of fighting between groups tobecome the governing party.They can also suffer from“Dutch disease” whereby rising prices of the resourceserves to appreciate the currency, making other goodsless competitive internationally.With the focus on theresource sector, priorities for building up the manufac-turing or services sectors may get little attention.

The results shown in this chapter show that thesegeographic and geological characteristics do have someimpact on reported constraints—and on the impact thatthe underlying objective conditions have on productivityand growth at the firm level. But a firm’s prospects arenot determined by these conditions.Among landlockedor resource-rich countries, locations with better invest-ment climates are more likely to have productive firms.What constitutes a good investment climate, however,can vary somewhat by country grouping (see morebelow).

Infrastructure matters even more in landlockedcountries than in countries with direct access to seaports.Firms in landlocked countries are up to 25 percent morelikely to report transportation to be a major or signifi-cant constraint.This makes sense given the additionalchallenges of reaching markets. It is also no surprise thatgetting goods through customs is significantly more of achallenge for these firms.

Access to finance appears to matter more inresource-rich areas. Gaining access to finance can be achallenge anywhere. But it appears that in resource-richcountries, financial systems can be less developed or lessoriented to helping finance manufacturing enterprises—which would be consistent with higher risks stemmingfrom potential Dutch disease or less stable environmentsin which to operate. Interestingly, resource-rich countriesreport corruption to be less of an issue—except forexpanding firms, which see corruption as more of anissue.

Another country grouping, which is not based ongeography, geology, or income, is the distinctionbetween countries that are more or less manufacturingintensive (defined as countries whose exports of manu-factured goods are at least 10 percent of GDP).

Comparing these groups can shed light on whether particular features of an economy help explain currentmanufacturing success.What is striking is that firms incountries that have already achieved a high level ofmanufacturing exports reported significantly fewer constraints than nonmanufacturing-intensive countries.The one exception is labor issues, where both labor regulations and access to skilled labor are reported asgreater constraints in manufacturing-intensive countries.

Overall, the constraints reported by firms are signif-icantly correlated with objective measures that try tocapture the monetary or time costs of investment climateissues.They also vary by country groupings that showthat priorities for reform will interact with broadercountry characteristics.These findings should bolsterconfidence in the use of reported constraints in identi-fying areas for reform.

However, critics of such data raise doubts about thereliability of comparisons of subjective assessments. It istrue that there can be differences across individuals intheir willingness to complain, and in what their thresholdis for a “major” constraint.As a result, this work takesadvantage of the fact that the list of issues is presentedtogether in a comparable format so that it is possible tonet out such individual effects and to rescale responsesso that they reflect relative rankings.Thus, they measure“how much more” an individual firm complains about aparticular issue than all the other issues. Furthermore,perceptions themselves can also be important in a firm’sdecision of whether to undertake investments, hireworkers, or expand production. Managers make thesedecisions with an eye to what they expect in the future,including their assessment of the investment climate.Perceptions can thus have real effects. On the otherhand, it is important to keep in mind whose perceptions—and preferences—are being reported. Firms’ interestsand society’s interests are not necessarily aligned; man-agers or entrepreneurs do not represent society as awhole.Almost all firms want lower taxes and interestrates—but this does not necessarily mean these shouldbe priority goals for policymakers.There may be verygood public policy reasons for some of the tax or regu-latory policies in place that managers may not like. Partof the job of the government is precisely to balancecompeting views and to safeguard the public interest.

Measuring impact: Combining variables into thematicgroupsAnother approach to identifying which dimensions mat-ter to a better business climate is to narrow the set ofvariables by aggregating them into thematic blocks andthen examining which blocks account for differencesacross groups of countries.The aggregating tool we useis principal components analysis.This approach lets the cor-relation in the data determine the optimal groupings ofvariables (see Appendix C).This method also reports theshare of the variation each grouping represents, which

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Figure 3: Relative weightings of variables within themes

0

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we use as weights in aggregating the variables. Here,principal components analysis helps identify which vari-ables are most associated with three important thematicareas—institutions, infrastructure, and inputs—and howthey vary across countries in the region.

Using principal components, 11 objective variableswere used to construct a composite measure of institu-tions.Among these variables, those that were most high-ly correlated and accounted for the greatest variationwithin the set of measures were those associated with alack of security.As such, they receive the highestweighting in the aggregation procedure.The corruption-related variables received the second largest weighting.The efficiency of government services variables weregiven somewhat lower weightings.Within infrastructure,days of power outages and insufficient water supply and

days of inventories (a proxy for the quality of trans-portation) were most highly correlated and thus weight-ed.Within inputs, trade credit, proximity to customers,and share of firms adopting new technology were morestrongly weighted.

Figures 3a and 3b plot the different groupings ofvariables as predicted by the principal componentsmethodology against the relative difference in the aver-age values of these variables across two sets of countries.The focus here is on countries that are manufacturingintensive and those that are not. For the “institutions”variables, Figure 3a, there is actually little differencebetween manufacturing-intensive and nonmanufacturing-intensive countries on the variables given the mostweight, that is, security and corruption. Rather, the dif-ferences in the efficiency of government services in

Source: World Bank Enterprise Surveys, 2002–2006.

Lower Higher

Lower Higher


delivering infrastructure services are more pronounced,although overall these variables are less well correlatedwith the overall set of variables and so receive lessweight in the principal components analysis. In contrast,Figure 3b illustrates the importance of differences inpower outages within the infrastructure variablesbetween manufacturing intensive countries. Similarly,trade credit stands out within the “input” variables.

The measures of institutions, inputs, and infrastruc-ture can then be aggregated again into an overall com-posite measure of the investment climate.11 Figure 4illustrates how this composite measure varies acrosscountry groupings.The first interesting result is thatgeography and geology have little impact on the overallcombined measure of the investment climate. Resource-endowed countries and countries with direct access tothe sea have aggregate scores very similar to those ofcountries that are land locked or resource poor. If any-thing, the less well endowed appear to have a slightlybetter investment climate.

Figure 4 also demonstrates the importance of policies.Countries with a higher level of economic freedomaccording to the Freedom House12 and countries with a better formal regulatory environment (according tothe World Bank’s Doing Business 2007 report) show asignificantly better investment climate composite meas-ure. Similarly, more-developed countries, countries thatare more manufacturing intensive, and larger economiesalso record a more friendly business climate. However,the effect of the size of the economy is not as significant

as earlier categories. Clearly the quality of the investmentclimate in Africa is associated with the quality of thepolicies adopted by the individual countries.

Looking more closely at manufacturing-intensiveversus nonmanufacturing-intensive countries, the com-ponent categories that explain the most differencebetween them are inputs (finance and skills) and institu-tions (regulations, efficiency of government services, andgovernance).The same variables explain the differencesbetween countries in weak versus strong formal regula-tory environments (as defined by Doing Business). Onthe other hand, for countries with less income per capita,infrastructure (energy, transportation, and telecommuni-cations) variables explain most of the difference betweenresults for lower- and middle-income countries.

The discussion has focused on the constraintsreported by firms, how they reflect real differences inunderlying objective conditions, and how these objectivemeasures vary across groupings of countries.Access tofinance and infrastructure services and, to a lesser extent,corruption and consistent regulations have shown to beimportant issues.The next section turns to test directlythe impact of these issues on job growth and firm productivity.

Measuring impact: What matters for firm productivity andjob creation?One of the real strengths of the Enterprise Survey isthat it combines information on subjective rankingswith objective rankings as well as with measures of firm

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Figure 4: Differences in overall investment climate measure by country groupings

Source: World Bank Enterprise Surveys, 2002–2006; Doing Business: World Bank, 2006; Economic freedom: Freedom House, available at www.freedomhouse.org/.

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performance. One can thus test whether there is a statis-tically significant relationship between the investmentclimate conditions and outcomes of concern to the pri-vate sector and policymakers. Such an analysis has theadded benefit of indicating the extent of possible benefitsthat could be realized if conditions were improved.

However, this approach of relating objective measuresto firm performance is considerably more analyticallyintensive. It also relies on econometric assumptions, thevalidity of which can be tested in most cases.13 There aretwo sources of variation that can be exploited, differencesin the average performance across countries and differ-ences based on deviations from the average withincountries. Explanations for the variations between coun-tries are presented graphically.The contributions of different factors in understanding variations withincountries are presented as bar charts.

What matters in explaining differences in averageperformance across countriesHaving more-developed financing services is stronglyassociated with higher productivity (see Figure 5) andemployment growth.A one standard deviation improve-ment in access to finance is associated with an increasein productivity of 16 percent across countries.This con-firms that access to finance is one of the key variablesthat can facilitate better performance.

The importance of access to financial services raisesadditional questions worth exploring in future work (seeBox 1).A lack of access to finance could represent a

legitimate problem of a lack of supply of funds. But it isalso possible that the lack of lending is a symptom of adeeper problem of insecure property rights. Banks arethemselves a type of enterprise.And they may beunwilling to lend at higher volumes if they do not feeltheir investments will be protected.Alternatively, theoutcome could be explained as a lack of sufficientdemand on the part of firms.The cumulative impact ofa weak investment climate, the higher indirect costs, andchallenges of production and delivery may make therequired rate of return too high to demand additionalfunds.

The results show that weak infrastructure (combin-ing losses from power and transportation) is associatedwith lower productivity. In regressions controlling forfirm characteristics and country and sector dummies, theeffect of a one standard deviation deterioration in infra-structure is associated with a decline in productivity ofmore than 5 percent.The impact on employmentgrowth is also strong; better infrastructure is associatedwith 7 percent more firms expanding their employment(see Figure 6).

Interactions with government have strong effects onboth productivity and employment, underscoring theimportance of consistency of regulations and their effi-cient enforcement.The time spent with officials ininspections is associated with lower productivity.Theoverall time management has to spend dealing with offi-cials has an even larger effect on lowering employmentgrowth. Figure 7 shows the effect of greater protection

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Figure 5: Across countries, more highly developed financial systems are associated with higher labor productivity


Note: Regression controls for GDP per capita, age, export status and ownership. The figures display partial regression results, so the axes are expected valuescontrolling for GDP per capita and firm characteristics. Firms are categorized as ‘productive’ if their value added per worker is above the region’s median levelfor firms with 11 to 150 workers.

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Figure 6: Across countries, stronger infrastructure is associated with higher employment growth


Note: Regression controls for GDP per capita and the share of firms in different sectors, size categories, export status, and ownership. The figures display partialregression results, so the axes are expected values controlling for GDP per capita and firm characteristics.

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tBox 1: Making finance work for Africa

Firm competitiveness in Africa continues to be constrained bythe high cost of finance and limited access to it. The financialsector is largely failing to meet the private sector’s needs.Financial markets on the continent are less developed than theworldwide average, even after taking into account average percapita income and inflation. Africans also have disproportionatelyhigh offshore deposits. Interest margins are high; internationalcomparison pinpoints small scale, property rights institutions,and a lack of competition as being among the important causalfactors. Most organized securities markets are small and inac-tive; institutional investors often concentrate on bank depositsand real estate instead. Microfinance has improved its outreach,though access rates in African countries remain behind those inother regions.

However, things are changing for the better in Africanfinance. Credit growth is under way after a long pause. Solidnew intermediaries are entering the marketplace, and the reachof microfinance is growing steadily. Strengthened by an extendedwave of reforms over the past decade, financial systems inmany African countries have begun to diversify their activities,deepen their lending, and increase their reach with new productsand new technologies. Financial repression and the practice of

directed credit are both much diminished, and there has beenextensive privatization of state-owned banks—often to foreign-owned banks, the re-entry of which represents only one aspectof a growing potential in internationalization and regionalization.

But there is still much left to do. The continued shallownessof finance, and the limited access by small firms and house-holds to any formal financial services—especially in ruralareas—means that these developments represent just a turningof the corner. The environment for financial firms remains diffi-cult, and progress has not been as fast as had been hoped.With the entrance of mobile phones, satellite phones, portablecomputers, and smart cards into the African market, there isgreat potential for technology to help overcome remotenessand process-cost barriers to providing payments and makingdeposits, as well as other types of financial services. Many success stories are already in the making—the developmentchallenge lies in identifying these success stories and scalingup their outreach to full potential.

Source: Honohan and Beck, 2007.


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Figure 7: Across countries, stronger property rights are associated with more employment growth


Note: Regression controls for GDP per capita and the share of firms in different sectors, size categories, export status, and ownership. The figures display partialregression results, so the axes are expected values controlling for GDP per capita and firm characteristics.

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of property rights on employment growth.A similarpicture emerges on measures of property rights regard-ing courts as well as crime.

Geographic groupingsThese basic findings corroborate that infrastructure,finance, and institutions matter for firm performance.But is the impact of these variables themselves related tobroader country characteristics? The impact can vary fortwo reasons. First, the average level of conditions can beworse in a location. Second, the impact of the same levelof conditions has a bigger effect on firm performance.We have seen that landlocked countries report greaterconstraints with infrastructure and that access to trans-portation services (including ports) is less reliable. Is theimpact on firm performance also greater in these coun-tries? The answer is yes. Controlling for the variouscountry characteristics, landlocked countries are up to40 percent less productive, a disadvantage that is furtherexacerbated by weak infrastructure that can reduce pro-ductivity by a further 10 percent.This reinforces thattackling infrastructure issues is particularly pressing inlandlocked countries.

Countries with greater manufacturing exports aresignificantly more productive, and to a lesser extent soare those with natural resources (all controlling for GDPper capita).Weak infrastructure and custom delays arealso particularly damaging in more manufacturingintensive countries—both environments where access tomarkets are at a premium (see Box 2).

Having more-developed financing services is stronglyassociated with higher productivity, raising productivityby almost 15 percent. However, this potential benefit isreduced by a third in landlocked countries and in natural resource intensive countries.The effect is closerto 25 percent in middle-income countries.

What matters in explaining differences in averageperformance within countriesThe large sample sizes and rich variation in conditionsfaced by firms in the same location make it possible to test for how investment climate conditions impactemployment growth and productivity based on within-country variations.The results are based on including awide set of objective indicators into regressions.Theylook at variations within countries, controlling for firmcharacteristics. Box 3 summarizes results from country-specific analyses of the impact of the investment climateon firms.

Figure 1 demonstrated variations in productivityacross countries; there is also a large range of productivi-ty levels within each country. In general, smaller firmstend to have lower labor productivity.The comparison ismost dramatic in the case of South Africa; while largefirms are among the most productive in the region,most small firms’ labor productivity is close to theregion’s overall average. In Botswana, Mali, andSwaziland, productivity also rises dramatically with firmsize. In countries with low overall value-added perworker, the absolute differences are smaller. But even

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Box 2: Improving prospects for exports

Recently, there has been much concern about Africa’s exportperformance. Africa’s share of world exports has declined inrecent decades, and most countries in Africa are still highlydependent upon a narrow range of primary commodities fortheir export earnings. The poor performance of manufacturingexports has been a particular concern—especially as exportingcan help improve productivity.1

There are a number of dimensions in which policies canhelp. Easing restrictive trade and customs regulations appearsto encourage exporting. In recent years, many countries—including most of the countries in this study—have reduced tariff and nontariff barriers to trade. However, other problemsremain. For example, customs administration is slow and proneto corruption in many African countries—enterprises inTanzania reported that on average it takes about 12 days for exports and 19 days for imports to clear customs. In comparison, it takes only 2 and 3 days for exports and importsrespectively to clear customs in the Philippines. Steps toimprove customs administration could therefore be helpful. For example, reducing physical inspections of goods whenappropriate and minimizing contacts between customs adminis-tration staff and importers and exporters could reduce both processing times and opportunities for corruption.2 Programs

to encourage exports, such as duty-drawback schemes, areoften poorly administered with long delays for payments andrefunds.

Improving infrastructure is often highlighted as a way toimprove exports. However, in an eight-country study in Africa,the empirical results provide only relatively weak support forthe assertion that the quality of domestic transportation infra-structure affects export performance. Instead, improving communications facilities held greater promise. Enterpriseswith Internet connections are more likely to export than enter-prises without. The Internet provides an important tool to contact suppliers and customers, to learn more about overseasmarkets, and to publicize a firm’s products. In addition, increasing the use of information technology—and improvingprocedures so that it is used efficiently—can often acceleratecustoms processing. A recent program in Ghana reduced average processing times from weeks to only a few days.3

Source: Clarke, 2005.

1 See Bigsten et al., 2003; Mengistae and Pattillo, 2004.2 See De Wulf, 2003; De Wulf and Finateu, 2002.3 World Bank, 2004.

there, proportionately some of the differences are large.In Burundi and Uganda, median large firms are twice asproductive as median small firms.

Which dimensions of the investment climate areassociated with these differences in productivity withincountry? Figure 8 shows the relative contributions ofthe most significant variables, taking into account differ-ences in capital intensity, firm age, firm ownership, andsector.The most significant impact is associated with thecontrol of corruption. Reducing irregular payments andthe discretionary interpretation of regulations by 10 per-cent is associated with a 2 percent rise in productivity.Regulations, particularly inefficient delivery of services,were also important. Improving the efficiency of servicesby 10 percent would be associated with a rise in pro-ductivity of 1 percent.The role of finance was, surpris-ingly, not always significant. If it was entered on its own,it did indeed have a large and significant impact on productivity. However, once all the other dimensionswere included simultaneously, variables such as the shareof financing from formal external sources only remainedsignificant in certain country groupings (especially manufacturing-intensive, middle-income, and resource-rich countries).

Turning to employment growth, a somewhat differ-ent set of variables is important. In this area, improving

access to finance would have the largest impact. Increasingby 10 percent the extent to which firms have overdraftsor use formal external sources to finance investmentswould be associated with a 4 percent increase inemployment growth. Improving the availability ofskilled workers had the second biggest impact, followedby regulations (efficiency of government services), infra-structure (electricity and transportation), and propertyrights (see Figure 9).

It is striking that the objective measures associatedwith firms’ reported top constraints are all statisticallysignificantly associated with firm performance, whetherthat is higher productivity or higher employmentgrowth. (The one exception is tax rates, for which theEnterprise Survey did not include objective indicatorsin all countries.) Access to finance, electricity, regulatoryuncertainty (property rights and consistency of enforce-ment), and corruption are repeatedly identified as thekey variables impacting performance outcomes.

Does “who you are” affect what matters to you?The discussion so far has focused on comparisons at thenational level. But the data reveal that there is a greatdeal of variation across different types of firms withincountries too. More than export status or ownership, thesize of the firm matters.


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Box 3: Impact of investment climate issues at the country level (selected countries)

The specific investment climate issues for each country have been reported in the respective Investment ClimateAssessments, published regularly by the World Bank Group. The Investment Climate Profiles, which draw on the same World Bank data, are available at the end of this Report. Hereare some of the highlights for selected countries from differentcountry groupings.

South Africa has the highest average firm productivity levels.Production tends to be capital intensive and shows high laborcosts compared with China, Malaysia, and Poland. Labor costsare disproportionately high for managers. The main investmentclimate constraints are lack of skills, macroeconomic instability,labor regulations, and crime. Exporting firms complain specifi-cally about the lack of macroeconomic instability, which isunderstandable given the extent of the fluctuations of the randin recent years. Domestic firms report greater concerns aboutthe lack of access to and cost of financing. Firms are often self-reliant, particularly with regard to financing and to training.The cost of crime is high. In contrast with many other countriesin southern Africa, losses due to power outages are modest andthe cost of power is low. Tax rates are also relatively low, butcosts associated with crime are high. Employment growth forpermanent workers is higher in some specific sectors, mostly inlarge firms. The construction sector is expanding significantly,an indication that there is optimism about South Africa’s continued prospects.

Kenya has a comparable share to that of China and higher than India of firms performing above the region’s median levelof value-added per worker. But its labor costs are higher thanboth of these countries. And China and India produce the samevalue-added per worker with lower levels of capital. Exportshave grown in Kenya, but much of this has been driven by a few successful firms. It has a well-developed financial sectorand a falling cost of capital. But its interest rate spreads remainhigh and there are high transaction costs of capital for smallerfirms, both contributing to relatively low rates of investment.The main investment climate constraints are corruption, crime,and infrastructure.

Only 40 percent of Zambia’s firms achieve a level of labor productivity above the region’s median. It has relatively capital-intensive industries, about three times higher than itsEast African comparators. Nominal wages are low, but they are offset by low productivity, poorly educated workers, andcostly labor regulation requirements. The main constraints ofinvestment climate include four elements.

1. The high cost of capital depresses incentives for investment,especially for smaller firms with no access to microfinance.The average surveyed firm with a loan paid an annual interest rate of over 28 percent. It is not uncommon for collateral requirements to well exceed the value of the loan being sought.

2. Despite reform, taxation and tax administration continue toinhibit profitability. The tax burden in Zambia is high relativeto that of comparator countries. Frequent and unpredictablechanges in procedures and badly trained officials with wide discretionary powers invite corruption and arbitrarypractices.

3. Of the firms in Zambia, 57 percent cite regulatory uncertain-ty as an important problem, compared with only 28 percentof Ugandan firms. Inconsistent policies—such as the recentchange in immigration laws requiring all non-Zambians torenew unexpired permits at high costs—increase firms’ perceived risk in investment.

4. Perceptions of weak law enforcement and fierce corruptionhinder investment. Although 77 percent of Zambian firmsclaimed losses from theft or other crimes in the previousyear, less than half of these cases were reported and only a quarter of these were solved.

Source: World Bank Investment Climate Assessments for the respectivecountries, 2002–2006.

Note: For additional examples, please visit http://www1.worldbank.org/rped/index.asp.


Size matters both in objective measures of investmentclimate conditions and in the actual impact of theseconditions. Larger firms are significantly more likely toreport more issues as constraining than micro or smallfirms, and there are differences in relative priorities.Figure 10 shows the differences in constraints acrosssizes of firms. It looks at the probability that small,medium, and large firms rate a constraint as “major” or“very severe” in comparison with the average rate atwhich micro firms rate the same constraints.The firstcolumn of bars shows the overall level of complaints.Compared with micro firms, the levels of complaintsrise with firm size in almost all areas.

The areas with the strongest pattern by size are theavailability of skills and labor regulations. Large firms are60 percent more likely to report these as constraining.Since large firms have large workforces and face greaterrequirements regarding hiring and firing practices, this isnot too surprising. Nor is it surprising that customs reg-ulations are also seen as more important for large firms.

The one area where the smallest firms do register agreater level of complaint than larger firms is the lack ofaccess to finance. Large firms are almost 60 percent lesslikely to see that as a top constraint.And, indeed, theyare significantly more likely to have access to formalexternal financing.

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Note: Based on regressions controlling for firm size, capital intensity, age, ownership, export status, sector and country, and controlling for possible endogeneity ofinvestment climate measures. The bars represent the joint contribution of objective variables in each category, with all groups included simultaneously. All aresignificant at the 5 percent level except for finance.

*Finance is significant when included on its own; with other investment climate variables, it is significant for most country groupings.

Corruption Regulations Infrastructure Finance*

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Note: Based on regressions controlling for firm size, age, ownership, export status, sectors, and country, and controlling for possible endogeneity of investment cli-mate measures. The bars represent the joint contribution of objective variables in each category, with all groups included simultaneously. All are significant atthe 5 percent level.

Finance Skills Regulations Infrastructure Property rights

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The objective numbers indicate that the smallestfirms experience more frequent power outages.Yetmicro firms are less likely to complain. It is the largestfirms that complain the most—this despite the fact thatthe majority of these firms have generators.This is anexample where firms are likely to have adapted theirproduction process or way of doing business to theexisting conditions. Precisely because it is hard to getreliable access to electricity and because the unit costs ofgenerated electricity are so high for small amounts, mostsmall firms have less automated processes—and thusdon’t see the issue as constraining.

What is somewhat surprising is that micro firms areonly 10–15 percent less likely to be concerned witheither taxes or tax administration than their larger coun-terparts. Particularly because many are informal firms—and so they do not comply with tax regulations—onemight have expected a bigger jump with size. However,the data also show that compliance with the tax author-ities is a matter of degree across the entire size spectrum.Many firms of all sizes report that “firms like theirs” donot report substantial shares of their income to taxauthorities, and that they give “gifts” to inspectors.Corruption payments are higher for micro firms thanfor small firms.

Turning to a firm’s export status, exporters sharemany of the same concerns as large firms. Controllingfor firm size too, one area where exporting firms reportsignificantly lower constraints is tax rates.This would beconsistent with various programs that aim to promote

exporting, including several that provide tax breaks orrebates to exporters.

Foreign firms are relatively more concerned abouttelecommunications and customs than domestic firms.However, controlling for size and export status, theremaining significant result is that foreign-owned firmsare less constrained by finance. Given that many can tapinto funds of the parent firm or have greater access tointernational financial markets, this result is as expected.

A firm’s performance itself can also affect whatissues are most constraining, even after taking intoaccount firm characteristics, the firm’s objective experi-ence, and country characteristics. Compared with firmsthat maintained stable levels of employment, bothexpanding and contracting firms report greater con-straints—but they complain about different things.

Contracting firms report constraints that on averageare 10 percent higher than stable firms, while expandingfirms’ complaints are 4 percent higher.Two issues standout for contracting firms: corruption and labor regula-tions. Firms that are reducing their workforce are 21percent more likely to report that corruption is a majoror severe constraint, controlling for firm characteristicssuch as size, ownership, sector, country dummies, andobjective measures of the issue.There are differentexplanations for why contracting firms see corruption asmore problematic.The first is that they see competitorsbeing able to get ahead by paying bribes or they see thatvested interests have rigged the rules of the game intheir favor.They are either not willing or unable to pay

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Figure 10: Constraint perception and firm size (variation within countries)


Note: Based on regressions controlling for firm characteristics, sector dummies, and country dummies. This is the variation within countries rather than acrosscountries.

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to secure these benefits, and so they are not able tothrive in this environment—and identify the corruptsystem as being in part to blame. Second, the potentialbenefits to a firm of paying bribes are not the ones ofgreatest importance to declining firms. If bribes areintended as speed money to obtain licenses or govern-ment services, these may be more beneficial to expandingthan contracting firms. So corruption is more of a costwithout a benefit.A third explanation is that officialsmay seek out declining firms for additional payments.These firms are likely to be less well positioned to seekrecourse, and so may reinforce the firm’s decline.Contracting firms are also 19.5 percent more likely toreport labor regulations as a major or severe constraint.As many labor regulations aim to protect workers andoften restrict a firm’s ability to fire people, this is notsurprising.

In contrast, firms that are expanding and hiringworkers see the lack of finance and crime as key con-straints. Expanding firms are 10 percent more likely toreport finance as a major constraint, even though mostof these firms do have access to some external finance.The fact that the issues that constrain expanding firmsare not always the same that constrain contracting firmsreinforces the message that priorities can vary by whoyou are.

Does the impact of objective measures also vary by “whoyou are”?That subjective rankings of constraints can vary by whoyou are—for example, small or large firms—could bethe result of differences in the objective conditions facedby different firms, or could be because the same condi-tion has differential effects by type of firm.This sectiontests for the latter effects.There is some evidence for thisdifferential effect in terms of corruption and propertyrights, although less so for finance and infrastructure.The results are more pronounced in their effect onemployment growth than on productivity.

Lessening regulatory burdens, including the timespent with officials, are associated with higher growth,particularly for small firms.These interactions could beproviding openings for bribes—and indeed the impactof corruption is greater on small firms. It could also bethat officials are more likely to be providing beneficialservices to larger firms. Consistent with this too is theimportance of strengthening property rights. Suchreforms would benefit all firms, but particularly thesmallest firms.

Greater access to finance and reliable infrastructurehelps all firms. Smaller firms report less access to reliableservices. Looking at individual measures of infrastruc-ture, the same improvement in electricity would have anadditional impact on smaller firms, but the effect is only1 percent of employment growth.

Within finance, the effects vary somewhat oversources of finance. For micro firms, access to an over-

draft accounts for much of its boost to employmentgrowth. For larger firms, there is an additional boost of3 percent to employment growth based on access toformal loans. Overall, smaller firms do complain moreabout access to finance as an obstacle to the growth oftheir firm.As they are significantly less likely to haveaccess to external finance and finance is positively asso-ciated with employment growth, improving access tofinance will benefit the smaller firms the most.

ConclusionThe factors that firms report as being constraining areindeed those that have the greatest impact on productiv-ity and job growth.Access to finance is the top con-straint overall.Across countries this variable is stronglyassociated with higher productivity, while the effectwithin country is stronger for employment growth.Infrastructure ranks as the second constraint. It is highlycorrelated with employment growth, across and withincountries, and also affects productivity within countries.Property rights are also correlated with employmentgrowth, particularly for smaller firms.

The results of the Enterprise Surveys also confirmthat the prescriptions are not universal.Top constraintsvary by country (see the Investment Climate Profiles inPart 2.2) and they vary within country by firm charac-teristics and by a firm’s performance. Unreliable or cost-ly infrastructure is particularly constraining in land-locked countries, where it hampers access to markets,and in countries with greater concentration of manufac-turing exports, where timely delivery is increasinglyimportant.A more-developed financial system and con-sistent regulations are associated with better outcomes,particularly in lower-income countries.And addressingskills and improving access to finance are most helpfulto expanding firms, while labor regulations and corrup-tion are most constraining to contracting firms.

Notes1 Eifert et al. 2005.

2 World Bank 2004.

3 The chapter looks at two measures of productivity. Labor productivityis value-added per worker, while total factor productivity also con-trols for the capital intensity of production. The figures in thechapter that illustrate outcomes across country use the simplerlabor productivity. However, the variations within country look attotal factor productivity.

4 Bosworth and Collins 2003, p. 122.

5 Ndulu et al. 2007, p.50.

6 Labor productivity is measured as value-added per worker. As pro-ductivity can vary by firm size and the size distribution variesacross country samples, this chart is restricted to small and medi-um sized firms between 10 and 150 employees. It does notweight country samples, but treats each observation equally.Figures are converted to 2005 US dollars. Note that the choice ofbase year can affect the results of countries with volatileexchange rates, such as South Africa.

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7 The results are based on the survey samples. If census data wereavailable, these proportions could be estimated more precisely.

8 Some of these differences can be the result of differences in sam-pling. The guidelines for sampling were the same for all countries.However, in some cases the available population frame had differ-ent size cutoffs (that is, firms had a minimum of 5, 10, or 20employees), or the key sectors selected had slightly different sizedistribution of firms. How recently the sampling frame was con-structed also had some impact, as smaller firms were more likelyto move or close down. The figures in this chapter are restrictedto firms in the 11–150 employee range to improve comparability.

9 For many small business owners, these microenterprises are not thestart of an ambitious entrepreneurial endeavor, but rather repre-sent the only opportunity available. And, because many of themwould face increased costs of complying with regulations if theywere to expand in size, it is natural that employment growth islower among these firms.

10 On the technical side, the representativeness of the respondents isimportant. It should be noted that although firms were randomlyselected, the size distribution of firms does vary slightly acrosscountries because of differences in available sample frames. Toensure that the size distribution is not driving results, most of thecross-country comparisons use only small and medium firms.

11 A fourth dimension of aggregate indicators (for example, inflation,trade openness, and so on) was also added at this stage, butreceived the lowest weighting.

12 See www.freedomhouse.org/.

13 One potential concern is the extent of reverse causation: that it isthe firm’s performance that determines the investment climatecondition. For many of the issues this is improbable, but for someit is a possibility. For example, measures of regulatory burden,corruption, and finance could all be affected by how well the firmis doing. More-productive firms should face an easier timeaccessing finance. The effect on corruption could actually goeither way—officials could target better performing firms as theyare on the radar screen and would have a greater ability to pay,but they could also have greater recourse against such officials.

To control for possible endogeneity, investment climate conditionsare averaged by firm size-sector-location. This approach makesthe indicator exogenous to the particular firm while representingthe broader environment in which it operates. This is equivalentto using size-sector-location dummies as instruments. The test ofover-identifying restrictions shows one cannot reject their validityas instruments.

Another potential concern is omitted variable bias. The resultsshown here control for all the investment climate variables simul-taneously. The variables cover many dimensions of the broaderinvestment climate, making it less likely that a significant variableis omitted. The variables are all jointly significant at the 1 percentlevel.

ReferencesBigsten, A. and M. Soderbom. 2006. “What Have We Learnt from a

Decade of Manufacturing Enterprise Surveys in Africa?” WorldBank Research Observer 26: 241–65.

Bigsten, A., P. Collier, S. Dercon, M. Fafchamps, B. Gauthier, J. W.Gunning, A. Oduro, R. Oostendorp, C. Patillo, M. Söderbom, andA. Zeufack. 2003. “Credit Constraints in ManufacturingEnterprises in Africa.” Journal of African Economies 12: 104–25.

Bosworth, B. and S. Collins. 2003. “ The Empirics of Growth: AnUpdate.” Brookings Papers on Economic Activity Issue 2:113–206.

Carlin, W., M. Schaffer, and P. Seabright. 2006. “What Are the RealBottlenecks? A Lagrangian Approach to Identifying Constraints onGrowth from Survey Data.” CEPR Discussion Paper No. 5719.London: Center for Economic Policy Research.

Clarke, G.R.G. 2005. “Beyond Tariffs and Quotas: Why Don’t AfricanManufacturers Export More?” World Bank Policy ResearchWorking Paper 3617. Washington, DC: World Bank.

De Wulf, L. 2003. “Uganda: Issues and Lessons in Customs Reforms.”Washington, DC: World Bank.

De Wulf L. and E. Finateu. 2002. ”Best Practices in CustomsAdministrative Reform —-Lessons from Morocco.” World BankPREM Note 67. Washington, DC: World Bank.

Dollar, D., M. Hallward-Driemeier, and T. Mengistae. 2005. “InvestmentClimate and Firm Performance in Developing Countries.”Economic Development and Cultural Change 54 (1):1–31.

Eigert, B., A.Gelb, and V. Ramachandran. 2005. “Business Environmentand Comparative Advantage in Africa: Evidence from theInvestment Climate Data.” Center for Global DevelopmentWorking Paper 56. Washington, DC.

Honohan P. and T. Beck. 2007. Making Finance Work for Africa.Washington, DC: World Bank.

Mengistae T. and C. Pattillo. 2004. ”Export Orientation and Productivityin Sub-Saharan Africa.” International Monetary Fund Staff Papers51 (2): 327–53.

Ndulu, B., L. Chakraborti, L. Lijane, V. Ramachandran, and J. Wolgin,2007. “Challenges of African Growth: Opportunities, Constraintsand Strategic Direction.” Washington, DC: The International Bankfor Reconstruction and Development/World Bank.

Söderbom, M. and F. Teal. 2004. “Size and Efficiency in AfricanManufacturing Firms: Evidence from Firm-Level Panel Data.”Journal of Development Economics 73: 369–94.

Van Biesebroeck, J. 2005. “Firm Size Matters: Growth and ProductivityGrowth in African Manufacturing.” Economic Development andCultural Change 53 (3): 545–83.

World Bank. Various years. Investment Climate Assessments.http://www1.worldbank.org/rped/index.asp.

———. 2000. Can Africa Claim the 21st Century? Washington, DC:World Bank.

———. 2004. The World Development Report 2005: A BetterInvestment Climate for Everyone. New York: Oxford UniversityPress.

———. 2006. Doing Business 2007: How to Reform. Washington, DC:World Bank.

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Firm-level data have been collected in Africa since theearly 1990s through the Regional Program onEnterprise Development (RPED) within the AfricaPrivate Sector Group of the World Bank. Started as aprogram funded by the multidonor community, RPEDcarried out a number of surveys of formal manufactur-ing enterprises in Africa using local universities andresearch organizations teamed with well-known inter-national universities.The program’s principal objectiveswere (1) to develop a better understanding of Africanprivate enterprise behavior and performance and (2) todetermine the extent to which specific aspects of the“enabling business environment” (that is, the prevailingstructure of incentives, institutions, and business sup-port infrastructure and services) hinder the potentialfor industrial success.

Over the years firm-level survey data collectionwas adopted by all the regions of the World Bank, firstthrough the Investment Climate Surveys program in2002, and later through the Enterprise Survey initia-tive in 2006.At that time RPED participated in aBank-wide effort to standardize firm-level data collec-tion in order to ensure the collection of comparabledata throughout the world.

The objectives of the Enterprise Surveys andInvestment Climate Assessments are to:

• evaluate the determinants of firm productivity;• determine firms’ access to finance;• review the characteristics of the labor market

including investment in training;• estimate the impact of HIV/AIDS on the private

sector in Africa;• evaluate the business environment, including the

impact of regulatory and administrative barriers tothe cost of doing business; and

• identify the obstacles to increasing exports in theregional and international marketplace.

The methodology adopted in these surveys con-sists of face-to-face interviews with managers of firmsin the manufacturing and services sectors in the formalsector.A group of informal firms is also included inthe sample.Around 400 establishments are surveyedfrom the population of firms through stratified sam-pling.The questionnaire is administered to generalmanagers or owners, accountants, and human resourcemanagers.The core questionnaire collects both objec-tive and subjective indicators of the business climateand it is organized into two parts.The first part seeksmanagers’ opinions on the main constraints in thebusiness environment.The second part focuses on productivity measures and is often completed with

help from the chief accountant or human resourcemanager.

The Enterprise Surveys sample from the universeof registered businesses and follow a stratified randomsampling methodology. Informal firms are sampledthrough area sampling.A small number of sectoral sub-samples are included to provide measures of productiv-ity that can be compared internationally. Because thedistribution of establishments in most countries isoverwhelmingly populated by small and mediumenterprises, surveys generally oversample large estab-lishments. More information about the surveys is avail-able at http://www.worldbank.org/rped orhttp://www.enterprisesurveys.org.

In this chapter we have used the most recent datafor 34 countries in Africa covering over 11,590 firms.Table 1 describes the sample composition and year ofdata collection.

Table 1: Sample composition of Enterprise Surveydata in Africa

Country Survey year Observations

1 Algeria 2002 5572 Angola 2006 5403 Benin 2004 1974 Botswana 2006 4445 Burkina Faso 2006 516 Burundi 2006 4077 Cameroon 2006 1198 Cape Verde 2006 479 Congo, Dem. Rep. 2006 44410 Egypt 2006 99611 Eritrea 2002 7912 Ethiopia 2002 42713 Gambia 2006 30114 Guinea-Bissau 2006 29615 Guinea-Conakry 2006 32716 Kenya 2003 28417 Lesotho 2003 7518 Madagascar 2005 29319 Malawi 2005 16020 Mali 2003 15521 Mauritania 2006 36122 Mauritius 2005 21223 Morocco 2004 85024 Mozambique 2002 19425 Namibia 2006 42926 Niger 2006 12527 Nigeria 2001 23228 Rwanda 2006 34029 Senegal 2003 26230 South Africa 2003 60331 Swaziland 2006 42932 Tanzania 2006 48433 Uganda 2006 66334 Zambia 2002 207

Appendix A: The Enterprise Surveys


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Low-income countries Countries with no oil/no resources1 Nonmanufacturing-intense2 Landlocked countries

Benin Benin Algeria BotswanaBurkina Faso Burkina Faso Angola Burkina FasoBurundi Burundi Benin BurundiCameroon Cameroon Botswana EthiopiaCongo, Dem. Rep. Cape Verde Burkina Faso LesothoEthiopia Egypt Burundi MalawiGambia Ethiopia Cameroon MaliGuinea-Bissau Gambia Cape Verde NigerGuinea-Conakry Guinea-Bissau Congo, Dem. Rep. RwandaKenya Kenya Egypt SwazilandLesotho Lesotho Ethiopia UgandaMadagascar Madagascar Gambia ZambiaMalawi Malawi Guinea-BissauMali Mali Guinea-ConakryMauritania Mauritius KenyaMozambique Morocco MadagascarNiger Niger MalawiNigeria Rwanda MauritaniaRwanda Senegal MozambiqueSenegal South Africa NigerTanzania Swaziland NigeriaUganda Tanzania RwandaZambia Tunisia Tanzania

Uganda UgandaZambia

Middle-income countries Countries with oil or resources1 Manufacturing-intense2 Coastal countries

Algeria Algeria Lesotho AlgeriaAngola Angola Mali AngolaBotswana Botswana Mauritius BeninCape Verde Congo, Dem. Rep. Morocco CameroonEgypt Guinea-Conakry Namibia Cape VerdeMauritius Mauritania Senegal Congo, Dem. Rep.Morocco Mozambique South Africa EgyptNamibia Namibia Swaziland GambiaSouth Africa Nigeria Tunisia Guinea-BissauSwaziland Zambia Guinea-ConakryTunisia Kenya

MadagascarMauritaniaMauritiusMoroccoNamibiaNigeriaSenegalSouth AfricaTanzania

1 Oil or resource rich: share of ore or stones exports (percent GDP) is ≥10 percent or share of fuel exports (percent GDP) ≥ 20 percent.2 Manufacturing-intensive: share of manufacture exports (percent GDP) ≥10 percent.

Appendix B: Country classification


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We start from the assumption that entrepreneurs lookat and compare a wide range of features of the busi-ness climate in each country when deciding to invest.More specifically, we assume that investors take intoaccount not only the general business environment(inflation, growth rate, market size), but they also con-sider other factors more closely related to the produc-tion process such as inputs (cost of finance, availabilityof skilled workers, and so on), infrastructure (reliabilityof energy, transport, and so on) and institutions (secu-rity, efficiency of government services, and so on).Allthese variables come from the Enterprise Survey data.To simplify the comparisons across variables, they aregrouped into four clusters that reflect these dimensionsof the business environment.The results presented herehave focused on the more objective measures, but asimilar exercise could be carried out using more sub-jective data.

Our aggregation approach of principal compo-nents is one of the many that can be used. Differentindexes can be built with the same set of variablesdepending on which aggregation method is adopted.From a methodological point of view, a critical deci-sion in any aggregation of variables is how to weightthe individual components.

The methodology chosen enables us to achievetwo main objectives. First, it uses information in the datathemselves to choose the relative weights across indicators.Albeit all the available investment climate indicatorsare important to an investor, we postulate that not allof them are equally important in the characterizationof the investment climate in a country.That is, forinstance, while access to credit and to the Internet areboth important factors of the business environment,investors will value improving access to credit differ-ently than they will value improving access to theInternet. Second, because the individual componentsof the index do not have the same unit of measure-ment, an index is needed that converts the measure intocomparable units.

Principal component analysis meets these two cri-teria. It converts all the indicators in the same unit sothat they can be easily aggregated.The methodologythen identifies groups of indicators or “factors” that arecorrelated across countries and that together explainthe greatest amount of overall variation.These factorsare finally aggregated, using as weights the share of thetotal variance explained by each factor.As the proce-dure generates many factors, the number of factorsselected is that which is necessary to account for atleast 75 percent of total variation.

The analysis is carried out in two stages. First,principal components are used to aggregate indicatorsin each area of the investment climate.A second stageuses principal components to combine the aggregatedindicators into a composite measure.As factors tend toemphasize particular variables, factors are often associ-ated with a small number of indicators. Looking at thefactors, particular those explaining the largest shares ofthe variance, helps identify the indicators that are par-ticularly important in the composite series.

Appendix C: Principal components methodology


CHAPTER 1.3

Competitiveness andInvestment Climate in SANE Economies LOUIS A. KASEKENDE

TEMITOPE W. OSHIKOYA

PETER O. ONDIEGE

BERNARD Z. DASAH

at the African Development Bank

This chapter analyzes the four largest economies inAfrica (South Africa,Algeria, Nigeria, and Egypt—calledthe SANE). It explores the structure, performance, andcompetitiveness of the SANE economies.The chapteralso examines the major investment constraints facingfirms in these countries and discusses the policy impli-cations of the findings. In addition, this chapter makessome comparisons of competitiveness and investmentclimate in the SANE economies and the BRICeconomies (Brazil, Russia, India, and China).

The SANE economies in contextAfrica is a vast continent with 53 countries. However,the SANE group of four countries represents almost afifth and a third of the continent’s land mass and popu-lation, respectively, and accounts for slightly more thanhalf of Africa’s total GDP in both nominal and purchasingpower parity terms.The remaining 49 countries, withtwo-thirds of the region’s population, have 45 percent ofAfrica’s GDP. Remarkably, the SANE group also shareshalf or more of Africa’s exports, total trade, foreigndirect investment, and foreign reserves (Tables 1 and 2and Figure 1).

The relative economic size and importance of theSANE is even more pronounced at the subregional levels. South Africa accounts for four-fifths of the totaloutput in Southern Africa.Within its immediate subre-gion, Nigeria is one of 15 countries in West Africa thatmake up the Economic Community of West AfricanStates (ECOWAS) but it accounts for half of its popula-tion and more than two-thirds of the subregional output.Algeria and Egypt also account for more thanhalf of the total output in North Africa.

As a group, SANE compares relatively well withglobal emerging economies that make up BRIC.Theaverage per capita income in 2005 was higher in theSANE economies (US$1,841) than in the BRICeconomies (US$1,669).Although the population of theSANE is about 26 percent of India’s population, thenominal GDP of the SANE represents 70 percent ofIndia’s GDP.The SANE’s population and GDP are 22percent and 24 percent of China’s population and nomi-nal GDP, respectively. In 2005 SANE attracted US$16.2billion worth of foreign direct investment (FDI), whichwas two and half times the FDI to India (Table 2). FDIto the SANE as a group were also higher than FDI toBrazil or Russia.

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The authors would like to acknowledge the service provided by SanaHarrabi and Lobna Bousrih, research assistants at the AfDB. The chap-ter reflects the views of the authors, and not necessarily of the AfDB.Bernard Z. Dasah is a consultant at the AfDB.


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Table 1: The relative importance of SANE economies

2006 or most recent year (unless otherwise specified)

SANE ECONOMIES REST OF AFRICA

Landlocked Coastal TotalIndicators South Africa Algeria Nigeria Egypt SANE countries countries Africa

1. Area (thousand km2) 1,221 2,382 924 1,001 5,528 10,324 14,455 30,307

2. Population (millions) 48 33 134 75 291 284 349 924Share of Africa (percent) 5 4 15 8 32 31 38 100

3. Nominal GDP (US$ billions) 262 128 120 104 613 95 385 1,093Share of Africa (percent) 24 12 11 10 56 9 35 100

4. GDP (US$ billions PPP) 605 256 186 327 1,373 326 905 2,605Share of Africa (percent) 23 10 7 13 53 13 35 100

5. Annual GDP growth rate 1997–2006 (percent) 3 4 4 5 4 3 5 4

6. Investment ratio (gross capital formation, percent of GDP) 19 31 20 18 21 21 20 21

7. Gross national savings (percent of GDP) 13 56 36 20 28 17 26 23

8. Foreign reserves (US$ billions) 23 82 49 23 176 15 122 314Share of Africa (percent) 7 26 16 7 56 5 39 100

9. Trade balance (US$ billions) 4 40 33 –11 57 2 17 72

10. Current account balance (US$ billions) 14 31 19 2 38 3 24 35

11. Share of African exports (percent) 16 16 16 5 52 6 42 100

12. Share of African imports (percent) 23 8 10 10 50 9 41 100

13. Export growth 1997–2006 (percent) 4 5 3 10 4 5 6 5

14. Import growth 1997–2006 (percent) 7 12 6 7 6 5 7 9

15. FDI (US$ millions) 6,379 1,081 3,403 5,376 16,239 3,459 10,971 30,669Share of Africa (percent) 21 4 11 18 53 11 36 100

Source: Oshikoya, 2007.

Table 2: Economic indicators for the SANE and BRICeconomies (2005)

Nominal GDP perPopulation GDP (US$ capita FDI (US$

Economies (millions) billions) (US$) millions)SANE ECONOMIES

South Africa 48 240 5,100 6,379Algeria 33 102 3,086 1,081Nigeria 134 99 678 3,403Egypt 75 93 1,315 5,376

SANE total 290 534 10,178 16,239

SANE average per capita income 1,841

BRIC ECONOMIES

Brazil 184 792 4,315 15,066Russia 143 763 5,348 14,600India 1,094 775 714 6,598China 1,308 2,225 1,703 72,406

BRIC total 2,729 4,555 12,080 108,270

BRIC average per capita income 1,669

Source: FDI data are from UNCTAD Database, http://stats.unctad.org/FDI. Therest of the data are from IMF World Outlook Database, September 2006.

The indicators that have often been found to bepositively correlated with FDI in Africa are economicopenness, especially to international trade; the quality ofinstitutions and physical infrastructure in the host econ-omy; and economic growth and macroeconomic stabili-ty.Although the SANE economies have a competitiveadvantage over the other African countries in theseindicators, natural resources—especially hydrocarbonand minerals—have influenced the flow of FDI intotheir economies. In the case of South Africa, an addedmotivation for FDI is the size of its local economy (it isthe largest in Africa), which is seen by many investors tobe pivotal for regional production and trade.The creationof a functioning free trade area is likely to provide theeconomies of scale needed for profitable production, andthus should encourage more direct investment in theregion.Another key location-specific determinant ofFDI in South Africa is its superior infrastructure, bothphysical and financial.

Africa’s competitiveness could be enhanced by theproductivity of the SANE economies, which in turn isdetermined by the productivity of their firms. Morethan two-thirds of the largest 1,000 African companiesare in the SANE economies.Thirty of the largest 50African banks are in the SANE economies.A few ofthese companies are beginning to tap into the muchlarger African markets.Therefore SANE economies have


the potential to serve as essential “growth poles” forother African countries.

The concept of growth poles suggests that econom-ic development is not uniform over an entire region,but instead takes place around a specific pole such as akey industry or country. Both directly and indirectly,industries or countries that are linked then developaround this pole. SANE has four distinct comparativeadvantages that could facilitate these countries tappinginto an integrated global economy and becomingpotential regional growth poles for Africa: geography,resource endowments, market size, and an active privatesector. First, they are resource-rich countries, with natu-ral resource rents accruing from relatively diversifiednatural endowments in both agriculture and mining.Recent and projected commodity booms have enabledthe SANE economies collectively to amass foreignreserves of US$175 billion.Algeria and Nigeria havereserves of US$130 billion, equivalent to half of theirGDP and about the same as those of the remaining 49countries; on a per capita basis this is equal to China’s.Algeria and Nigeria have also learned some lessonsabout managing commodity booms and busts as macro-economic volatility has dampened.

The second potential factor in favor of SANE isphysical geography.The SANE economies are strategi-cally located on the continent. Egypt is a country innortheastern Africa and southwestern Asia. Most of itlies in Africa, but its easternmost part, the SinaiPeninsula, is traditionally regarded as part of Asia.

Through this peninsula, Egypt forms the only landbridge that connects Africa to Asia. Nigeria is well posi-tioned in the hub of West Africa and borders CentralAfrica. South Africa too is expediently situated in thesouthernmost part of the continent, where it plays animportant and effective role in both the MaputoCorridor1 and the Southern African Power Pool.2

Algeria stands at the entrance to northwestern Africa.The SANE economies could take advantage of theirimmediate regional surroundings to enhance their com-petitiveness and broaden their influence in Africa.

The SANE economies are all coastal states.This factcould generate positive externalities by providing accessto external markets, allowing landlocked neighboringcountries to reduce the cost of exporting.Although theSANE economies together account for about 20 per-cent of Africa’s land area, their access to the sea couldact as a natural advantage that could foster openness toboth intra-African trade and global trade. SANE’s coastalstructure could lend itself to the future development ofindustrial concentration and an agglomeration of citiessimilar to that in the eastern seaboard of the UnitedStates and the southeastern seaboard of China.

The third possible factor in favor of SANE is marketsize, which could provide opportunities for firms to reapincreasing returns of scale and network effects. Per capitaincome is three times higher in the SANE economiesthan in the rest of Africa, and the growing middle classin these countries could provide a market size on whichto capitalize.Africa’s population is roughly divided

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Egypt

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Equatorial Guinea

Tunisia

Figure 1: The 10 largest recipients of FDI from DAC donors, as percent of net total to Africa (1998–2005)

Source: AfDB, Statistics Department.

Note: Total FDI to Africa from DAC donors was US58.7 billion for 1998–2005.


equally among the SANE economies, the 16 landlockedcountries, and the remaining 33 spatially dispersedsmaller coastal countries.

Although SANE has one-third of Africa’s total population, their combined economies, in terms of US$GDP, are six times those of the landlocked countries andone-and-a-half times those of the smaller coastal coun-tries.Apart from three of the SANE economies, onlythe Democratic Republic of Congo and Ethiopia havepopulation of more than 40 million in Africa. Largepopulation size could contribute to the labor force ofthese countries, as well as grant them the advantage ofbig internal and regional markets.Twenty-seven Africancountries have populations under 10 million, with halfof these having populations below 2 million.

Finally, the private sector in the SANE economiesis relatively well established and diversified comparedwith that of the rest of Africa. Private-sector businessesare diversified across sectors, which include agriculture,industry, financial services, trade, and commerce.Thesesectors could facilitate the ability of the SANE economiesto shape the development of their respective subregionalnetworks of economies for attracting capital flows, facili-tating regional infrastructure, and developing skills in theworkforce that Africa needs to compete in the globaleconomy. In spite of these potential advantages, severalinvestment climate constraints continue to underminethe competitiveness and productivity of private businessesin the SANE, rendering them unsuccessful in movingup the value chains.

Structure, performance, and competitiveness of SANEeconomiesAs noted in Chapter 1.1, the World Economic Forumprovides a measure and ranking of national competitive-ness with the Global Competitiveness Index (GCI).TheGCI measures both the macroeconomic and microeco-nomic drivers of productivity including institutions,policies, and structural factors across a large number ofcountries.The GCI also takes into account the variousfactors affecting productivity and competitiveness incountries at different stages of development.Thus, theGCI separates countries into three specific stages:factor-driven, efficiency-driven, and innovation-driven.

This section discusses the structure and performanceof the SANE economies and their competitiveness inthe global economy.The section reviews the drivers ofrecent economic performance and examines the sustain-ability of improved economic growth by looking at thestructure of these economies and their stages of devel-opment, which in turn has an impact on their productivity and competitiveness.

South Africa With a nominal gross domestic product (GDP) of US$261.7 billion—a quarter of the total African

GDP—South Africa is the largest economy on the continent.The country leads the continent in industrialoutput (40 percent of total output) and mineral produc-tion (45 percent), and it generates over 50 percent ofAfrica’s electricity. Manufacturing—which includes steelproducts, chemicals, electronics, automobiles, textiles,paper, and food processing—plays a more important rolein the South African economy than it does in theeconomies of any of the three other SANE countries.Figure 2 shows that the manufacturing sector is the second leading contributor to GDP, after financial andbusiness services, accounting for nearly a fifth of GDPin 2005. Other important sectors contributing to GDPare government services; wholesale and retail trade,hotels, and restaurants; and transportation, storage, andcommunications.

Economic performance in South Africa hasimproved in the past four years, with an average realGDP growth rate of 4.5 percent between 2003 and2006, up from 3.25 percent during 1999–2002 (Figure3). The South African economy experienced GDPgrowth rate of 5.1 percent in 2005 and 5 percent in2006, its highest since the end of apartheid.Theimproved performance reflects the impacts of a favorableinternational environment and the implementation,since mid-1990s, of the Growth and Employment andRedistribution (GEAR) strategy.Although growth inthe post-apartheid era has been higher than it wasbefore apartheid ended, it has been slow compared withgrowth in other SANE economies, and it has not beensubstantial enough to reduce the high level of unem-ployment. South Africa also remains a dual economy,with large sections of the population in the informalsector living in poverty and co-existing with the moresophisticated formal economy.

In the GCI described in Chapter 1.1, South Africaranked 46th overall, higher than the three other SANEeconomies.The competitiveness and sophistication of itsformal economy is reflected in high rankings for prop-erty rights, corporate ethics, goods markets, financialmarket efficiency, business sophistication, and innovation.However, the country does face a number of obstaclesto competitiveness as a result of the dual structure of itseconomy.The social sector, especially health and primaryeducation, scored low on the competitiveness indexbecause of high rates of communicable diseases and lowlife expectancy. Lack of security remains an obstacle todoing business in South Africa.The high level of unem-ployment, combined with poor social services in theinformal sector, has fuelled the business costs of crimeand violence.The country’s labor market, although moreefficient than those of the other SANE economies,remains inflexible and constrained by the short supply of skilled labor.

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Agriculture Mining Industry Construction Services Agriculture Mining Industry Construction Services

Figure 2: Sector contribution to the GDP of SANE economies (2005)

Source: Reserve Bank of South Africa; Algerian Ministry of Finance; Central Bank of Nigeria, December 2005; Central Bank of Egypt; AfDB Statistics Department.

Note: Industry excludes petroleum. * Mining (petroleum).

0

2

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Figure 3: SANE’s average real GDP growth rates (1999–2002 and 2003–06)

Source: Economic Indicator: AfDB Statistics Department; World Bank Africa Live Database, IMF World Economic Outlook September 2006.

Note: For the BRIC economies, the average of real GDP growth is calculated for the period 2003–05.

Perc

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South Africa Algeria Nigeria Egypt Brazil Russia India China


AlgeriaAlgeria’s economy is heavily dependent on oil, withpetroleum accounting for 45.3 percent of GDP in 2005(as shown in Figure 2).The services sector contributed33.8 percent toward GDP and agriculture accounted for8.3 percent.After almost a decade of economic stagnation—partly the result of internal conflicts and politicalinstability—in the past four years Algeria has begun toexperience significant economic growth. During2003–06 annual average real GDP growth rate of 5.6 percent has been recorded because oil and gas production and revenue were boosted by the surge ininternational prices of these commodities. Prudentmacroeconomic management of oil windfalls hasincreased foreign reserves sixfold to over US$82 billionin 2006 compared with US$12 billion at the end of2000.At the same time external debt, which representedtwo-thirds of exports in 1990, declined to 15 percent ofexports in 2006.The government has also succeeded incurbing inflation to very low levels.

Algeria’s strong macroeconomic environment isranked 2nd in the GCI even though the country ranked76th overall.There is also an encouraging trend withregard to improvements in public institutions, especiallyperceptions of government efficiency, and evenhanded-ness of the government in its dealings with the public.However,Algeria remains a factor-driven economy, withconsiderable lag in productivity drivers including marketefficiency, access to financial markets, technologicalreadiness, and innovation. Sustained improvements inproductivity and economic growth are also affected bythe high business costs of security and terrorism con-cerns and by high rates of unemployment.

NigeriaNigeria’s economy reflects a dichotomy between the oiland non-oil producing sectors.With estimated oilreserves of 35 billion barrels, Nigeria is the largest oilproducer in Africa and the world’s sixth largest oilexporter.The country also has an estimated 180 trillioncubic feet of gas, and the gas and oil reserves are expectedto last 110 years and 40 years, respectively.As depictedin Figure 2, agriculture accounts for the largest share ofnon-oil GDP, serving as a major source of employmentand occupying a pivotal role in poverty alleviationefforts.With 70 percent of Nigeria’s poor living in ruralareas, agriculture accounts for some 60 percent of thetotal labor force. However, the services sector, includingthe financial subsector and information and telecommu-nications, is one of the rapidly growing sectors of theeconomy. In the past five years Nigeria has had one ofthe fastest growing mobile telecommunications sectorsin the world, and now has 20 million subscriber bases(13 percent of the population), up from less than500,000 in 2001.

The growing importance and dynamism of theservices sector has been encouraged by recent economic

reforms and the privatization of government enterprises.The increase in oil prices has also helped to boost foreignreserves to US$48 billion in 2006 as well as the overallperformance of the economy, with GDP growth averag-ing 7.3 percent between 2003 and 2006 compared withonly 2.8 percent during 1999–2002 (Figure 3).This rateof economic growth has enabled Nigeria to reach adebt deal with the Paris Club, which reduced the debt-to-GDP ratio from 66.1 percent in 2000 to 4 percent in2006, leading to the payment of the total debt inFebruary 2007.

Nigeria has made considerable progress with respectto improving macroeconomic reforms, financial marketsefficiency, and business innovation.The country alsoscores well on labor market flexibility in hiring and firingpractices and employment of women. However, overallNigeria is the lowest-ranked country among the SANEeconomies, at 102nd in the GCI, reflecting the poorquality of its institutions, infrastructure, basic health, andeducation.The ranking shows the paradox of povertyamidst plenty; growth with inequality.A large part of thepopulation remains without good access to basic healthcare and education, infrastructure remains dilapidated,and security concerns remain a major issue—all ofwhich affect long-term competitiveness and sustainablegrowth.

EgyptThe Egyptian economy is largely dominated by theservices sector. However, industry, and the petroleumand mining sector accounted for 30.4 percent of GDPin 2005 (Figure 2). Crude oil production was about600,000 barrels a day in 2005 and the country currentlyhas about 2.5 billion barrels reserves.The other majorsectors of the economy are trade, finance, and insurance;government services; and agriculture.

Egypt experienced rising real GDP growth ratesfrom 2002 to 2006. GDP grew at 3.1 percent in 2003and 4.1 percent in 2004, rising to 4.9 percent and 6.8percent in 2005 and 2006, respectively.An economicliberalization program instituted in 2004 generatedunprecedented foreign investment in 2005, which is agood sign for long-term growth prospects. However,fertile land for agriculture under current technology islimited.Arable land constitutes only 2.85 percent of itstotal land of 1,001,400 km2, making the economy heavily resource dependent.

Egypt is the second ranked country among theSANE economies after South Africa, at 65th place inthe GCI.The country’s competitive strengths revolvearound markets efficiency; low taxation; access to a rela-tively large number of local suppliers; and the flexibilityof its labor markets, pay, and productivity. In spite ofthese positive factors, Egypt’s macroeconomic environ-ment has worsened with high government deficits, publicdebt, and inflation. Other efficiency-enhancing factors

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—including higher education, training, and technologicalreadiness—also remain weak.

SANE economies in aggregate In summary, the structure and performance of the SANEeconomies shows that all four have experienced strongeconomic growth within the last four years. However,with the exception of Brazil, economic growth rateswere much higher in BRIC than in the SANEeconomies. It also shows that oil is vital to theeconomies of three SANE countries:Algeria, Nigeria,and Egypt.The contribution of the oil sector to SouthAfrica’s economy is relatively low because of the domi-nance of the financial and manufacturing sectors ingross national output. Unlike Algeria, Nigeria, andEgypt, the structure of the South African economy isrelatively diverse, enabling several sectors to contributesubstantially to GDP.

In terms of competitiveness, South Africa rankedthe highest among the SANE economies at 46th; fol-lowed by Egypt,Algeria, and Nigeria at 65th, 76th, and102rd, respectively (Table 3).Although the rankings ofAlgeria and Nigeria are lower than those of the BRICeconomies, the rankings of South Africa and Egypt arecomparable. Nigeria,Algeria, and Egypt remain factor-driven economies, although Algeria is beginning tomake the transition to the efficiency-driven stage.Attheir present stage of development—comparable to thatof China and India—the economies of the SANE coun-tries depend significantly on natural resources and lowlabor cost to compete in the global economy. But theyalso require strong institutions, adequate infrastructure, astable macroeconomic environment, and sufficientlyhigh human development indicators to raise productivity.

Among the SANE economies, South Africa—especially its formal economy—has transitioned into thesecond, efficiency-driven stage of development. Brazil

and Russia within the BRIC economies are also at thisstage of development.As competitiveness at this stage islargely driven by efficient production practices, SouthAfrica must strive to improve its labor and financialmarkets, its education and training programs that preparethe workforce for more streamlined production (highereducation and training), and its access to and use of thelatest technologies (technological readiness). None of theSANE economies has yet entered the third, innovation-driven stage, where countries compete through innovation, producing new and differentiated products,using the most sophisticated techniques of production.

Major investment constraints in the SANE economiesThis section analyzes investment constraints in theSANE in four broad categories: macroeconomic policyframework (inflation, exchange rates, interest rates, andtaxation); microeconomic framework (regulation,enforcement, and corruption); enabling infrastructure(access to finance and physical infrastructure), andhuman capital (labor markets, skills shortages, crime,and HIV/AIDs).

The key investment constraints discussed here areanalyzed from the perspective of objective constraintsand perception constraints.The objective constraints aremeasures of business regulations that cover 10 activitiesusually reported in the annual World Bank DoingBusiness reports.The cost, procedures, and time requiredto complete each activity are quantified.The perceptionconstraints are based on investment climate assessments(ICA) obtained directly from representative sample offirms.These constraints relate to factor markets, productmarkets, infrastructure services, and firm performance.

Table 4 contains firms’ reported (perceived) majorconstraints to business in the four SANE economiesbased on investment climate assessments (ICA) obtaineddirectly from 603 firms in South African, 217 in

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Table 3: GCI ranks in the nine pillars of competitiveness in the SANE and BRIC economies

SANE ECONOMIES BRIC ECONOMIES


Global Competitiveness Index rank 46 76 102 65 67 61 42 55

Basic requirements 57 44 113 64 88 68 63 47Institutions 31 65 93 50 85 119 33 96Infrastructure 50 80 108 56 72 62 63 60Macroeconomy 48 2 57 111 117 35 91 8Health and primary education 106 46 119 51 48 78 96 56

Efficiency enhancers 45 92 90 75 58 59 41 72Higher education 57 86 103 77 61 43 49 79Market efficiency 34 97 71 66 59 60 20 55Technological readiness 44 93 90 80 53 72 56 78

Innovation and sophistication factors 29 92 69 65 38 72 26 57Business sophistication 32 106 75 57 38 79 25 65Innovation 29 77 52 83 38 59 26 46

Source: World Economic Forum, 2006.


Nigeria, 977 in Egypt, and 550 firms in Algeria.Thetable indicates the percentage of firms citing a particularobstacle as either major or very severe hindrance todoing business in the country. For example, 88 percentof the 603 firms surveyed in South Africa identifiedskilled labor shortage as either a major or very severeobstacle to business.Therefore, the totals in the variouscells may exceed 100 percent.

Macroeconomic frameworkThe macroeconomic framework encompasses policyuncertainties on a macroeconomic scale as well as taxa-tion and interest rate issues.All play a vital role in theeconomic development of the SANE economies.

Macroeconomic policy uncertaintiesAmong the SANE economies the burden of macroeco-nomic policy uncertainties is most serious in Egypt (seeTable 4). Fifty-eight percent of respondents in thatcountry identified macroeconomic uncertainty, especiallyinflation and exchange rate, as the greatest obstacle tothe business environment. Egypt’s poor macroeconomicsituation is partly explained by an erratic growth inmoney supply and consistent budget deficits—for example, the budget deficit rose from around 6 percentof GDP in 2001 to 9.3 percent in 2005.

In addition, the Egyptian pound depreciated againstthe US dollar from 3.86 Egyptian pounds in 2001 to 6.22Egyptian pounds in 2005, a decline of 61 percent (evenwith the depreciation of the US dollar worldwide).Thesedevelopments accelerated the rate of inflation from 2.4percent to 9.7 percent within the period. In 2004 Egyptinitiated policies to promote access to foreign currencies,

transparency in monetary policy, and closing the signifi-cant gap between the official and parallel exchangerates.These policies led to a unified foreign exchangerate regime by the end of 2004 and a sharp decline inthe rate of inflation to 4.9 percent in 2006.

There is a degree of macroeconomic uncertainty inNigeria too, but there it strongly correlates with uncer-tainty and lack of confidence in future economic policydirections as the country is preparing for transition toanother civilian administration in 2007. However, only 4 percent of the managers surveyed viewed the macro-economic environment as too unstable to plan for thefuture with confidence.The uncertainty rather surroundsthe swings in oil prices, as the overbearing nature of oilin the Nigerian economy overexposes the economy tonegative oil price shocks. In Algeria and South Africa as well, under 10 percent of the managers reportedmacroeconomic uncertainty to be a serious constraint to business environment.

TaxationThe tax burden in all the SANE economies is competi-tive with global levels. Nevertheless, 47 percent and 40percent of the firms in Egypt and South Africa, respec-tively, cited either tax regulations or high tax rates as adistressing business concern.The comparable figures forNigeria and Algeria are 25 percent and 24 percent,respectively.

South Africa has five sets of personal income taxrates;3 the lowest is 18 percent and the highest is 40 percent.Annual incomes of between 40,001 and100,000 rand attract 18 percent, while income earnersof 400,001 rand and above pay 40 percent on their

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Table 4: Major perception constraints to doing business in the SANE economies, as percent of responding firms

SANE ECONOMIES

South Africa Algeria Nigeria EgyptMajor obstacles (603 firms) (550 firms) (217 firms) (977 firms)

Human capital obstaclesSkilled labor shortage 88 11 0 5Labor regulations 72 15 0 5

Microeconomic obstaclesCorruption 28 31 0 35Crime and theft 37 0 0 0Unfair competition from imports and illegal business 36 57 0 42

Enabling infrastructural obstaclesPower failure 0 0 94 8Poor infrastructure other than power 0 0 59 0Lack of working capital 0.2 39 58 20Obtaining land or building 30 29 0 5

Macroeconomic framework problemsMacroeconomic uncertainty (inflation, exchange rate) 5 9 4 58Tax regulations and/or high tax rates 40 24 25 47High interest rates 21 32 42 22

Source: Data from the World Bank Productivity and Investment Climate of Private Sector Enterprise Survey.

Note: 0 indicates that a very small percentage of the firms reported on the obstacle.


earnings. Non-gold mining corporations and long-terminsurance companies pay 29 percent on their taxableincomes, and nonresident companies trading with abranch or agency in South Africa are taxed at the rate of34 percent.A different tax rate is applied to gold miningcompanies.

Across the board reduction in tax rates was imple-mented in Egypt in 2005. Previously, corporationsattracted a tax rate of 32 percent for industry, 40.55 percent for the Suez Canal and the oil industry, and 40percent for other businesses.4 Personal income tax wasset at 16 percent for annual incomes of less than 16,000Egyptian pounds and 36 percent for higher incomes.Anew income and corporate tax law, implemented in2005, reduced corporate tax reduced by 12 percent to20 percent. However, the tax rate for strategic sectorssuch as the Suez Canal and the oil industry still remainsat its pre-2005 level of 40.55 percent.

Currently the tax wedge for a single person withaverage earnings accounts for 41 percent of total laborcosts in Algeria,5 which is comparable to those of thetransition economies of Estonia, Latvia, and Lithuania at40 percent, 42 percent, and 43 percent, respectively. Onthe other hand, Nigeria’s marginal effective tax rate of27.1 percent is relatively competitive internationally.

Although the tax rates of the SANE may be globallycompetitive, the burden of tax administration is highlybureaucratic, cumbersome, and time consuming.Nigerian business managers spent 1,120 hours in 2005attending to tax matters.6 Egyptian and Algerian man-agers spent about half that amount of time, while theirSouth African counterparts spent 350 hours in the samepursuit during the same period.This cumbersomeprocess constrains the ability to do business in the SANEeconomies, thereby reducing their competitiveness.

Tax revenues, as a percent of GDP, have remainedfairly stable in all the SANE economies from 1998 to2004.7 From a base of 22.9 percent of GDP, SouthAfrica’s tax revenue rose to only 23.6 percent in2002/2003 and declined to 22.9 percent in 2003/2004before increasing to 24.3 percent in 2004/2005.Increased company profitability, improved enforcementand compliance, and a considerable increase in companyregister accounted for the rise in tax revenue. Egypt’s taxrevenue fluctuated from 13.2 percent of GDP to 12.8percent during the period 1998–2004.The tax revenuesof Nigeria and Algeria, though much higher because ofoil taxes, were also relatively stable at an average of 34.2percent and 35.7 percent of GDP, respectively.

High interest ratesHigh interest rates also constitute one of the most fre-quent concerns of firms in all the four SANE economies.Four out of ten firms in Nigeria and one-third of firmssurveyed in Algeria identified high interest rates as amajor obstacle to business growth and development(Table 4). In Egypt and South Africa, however, the

comparable figures are lower: two out of ten firms findinterest rates to be obstacles to growth.

Although high interest rates in the SANEeconomies are of concern to all firms, they are more ofa constraint to small and medium-sized enterprises(SMEs), especially in Nigeria. Most of these enterpriseshave been regarded in Nigeria as highly unattractiveprospects for banks, as they want to minimize their riskprofile. Even the intervention of a Bankers’ Committeein setting up the Small and Medium Industries EquityInvestment Scheme (SMIEIS) in June 2001, requiring allbanks to set aside 10 percent of their profit before tax(PBT) for equity investment in small and medium-scaleindustries, has not adequately addressed the problem.Though this is a laudable idea for SMEs financing, anenterprise must have a maximum asset base of 200 mil-lion naira excluding land and working capital and a staffof not less than 10 or more than 300 to qualify for thescheme.These restrictions and the requirement for theenterprise to operate in certain specific activities tend todisqualify many SMEs from taking part in the scheme.

To summarize, the macroeconomic frameworkproblems of doing business in the SANE economiescomprise macroeconomic policy uncertainties, bureau-cratic tax systems, and high interest rates.Taxation andmacroeconomic policy uncertainties are of particularconcern to business managers in Egypt. Interest rates area key issue for Nigerian businesses. High interest ratesand bureaucratic tax systems in all the SANE economiesraise the cost of doing business, which affects the abilityof the country to effectively compete internationally.

Microeconomic frameworkOn the microeconomic front, issues of regulatory andadministrative structure, unfair competition, and corrup-tion each have an impact on the SANE economies’ability to compete.

Regulatory and administrative structureTable 5 presents the major objective constraints to doingbusiness in the SANE and BRIC economies as identifiedin the World Bank’s 2007 Doing Business in Africa report.The table shows that it is easier to start a business in theSANE economies than in BRIC economies. On aver-age, entrepreneurs in the SANE economies go through10.5 steps to launch a business; launching a business inthe BRIC requires 12 procedures. On the individualcountry level, it takes fewer steps to start a business inSouth Africa, Nigeria, and Egypt than it does in Brazil,China, and India. Similarly, the average number of days(286) taken to license a business in the SANEeconomies is far less than the 407 days required in theBRIC.While it takes 531 days to register a business inRussia, it takes 465 days to do so in Nigeria, the countrywith the most obstacles to licensing businesses in theSANE group. However, the SANE’s average number ofdays for registering property is almost three times the

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average number for the BRIC. In any case, SouthAfrica’s registration period is lower than the requiredperiod in any of the BRIC, while Algeria’s period of 51 days is just below that of Russia’s 52 days and India’s62 days.

The BRIC economies perform better than theSANE economies on protecting investors. China,Russia, and India have higher rankings in this categorythan any country in the SANE.This implies that, onaverage, there is less transparency of business transactions—including shareholders’ inability to sue business managers and directors for misconduct—in the SANEeconomies, especially in Egypt and Algeria, than in theBRIC economies. Egypt and Algeria also score poorlyon the “getting credit index.” However, on average theSANE economies are better ranked for getting creditthan the BRIC.The index ranges from 0 to 10, withhigher scores indicating that collateral and bankruptcylaws are better designed to expand access to credit.Thescores of 1 and 3 for Egypt and Algeria, respectively,suggest that business operates under poor collateral andbankruptcy laws in those countries.This conclusionappears to be confirmed by the results of the investmentclimate assessment surveys shown in Table 4: 58 percent,39 percent, and 20 percent of the firms in Nigeria,Algeria, and Egypt respectively, specified lack of workingcapital among their major constraints.

The challenges of doing business are more pro-nounced at the country level. It takes 14 procedures and244 days to register a business in Algeria;8 10 procedures,410 days, and 18.4 percent of the debt to enforce a debtcontract in Egypt; and 21 procedures, 274 days and 27percent of the property value to register property inNigeria. Consequently, these countries scored poorly onthe “ease of doing business” rankings. South Africa, witha ranking of 29 out of 175 countries on the “ease ofstarting a business” index, places within the secondquintile of the Global Competitiveness Index discussedin Chapter 1.1, while Algeria and Egypt are in the thirdquintile, and Nigeria is in the fourth quintile.This clear-

ly indicates that, in spite of their glaring potentials in theAfrican environment, the individual economies of theSANE countries show a lackluster performance whenmeasured against comparable economies on the globalstage.The challenges of doing business in these countriesare key priority areas for reform in order to improvetheir competitiveness.

Unfair competitionAnother major microeconomic impediment to competi-tion in the SANE economies relates to the operations ofillegal business. Unfair competition is the greatest concernof 57 percent of the business firms in the Algerian surveysample (Table 4).The firms cited competition from theinformal sector, the smuggling of large quantities ofconsumer goods into the country, and public oligopoliesas key activities seriously affecting the growth of legitimate business and their ability to compete.

Public enterprises in Algeria tend to be oligopolistic,dealing with fewer competitors, clients, and suppliers.Therefore they enjoy oligopolistic profits. For example,private firms’ average revenue from sales to state andlocal government and state enterprises was about 26.9percent. In contrast, the average revenue of public enterprises was 49.7 percent, which is almost twice theaverage revenue of the private firms.Although it isarguable that the public enterprises’ profits may accruefrom economies of scale because of their large size,nevertheless these profits, which amount to pure rents,confirm the unfair nature of competition in the Algerianbusiness environment.The profits also indicate a highdegree of state involvement in the economy.

Smuggling large quantities of consumer goods intoa country does not promote the benefits of tradingacross borders such as technology transfer and knowledgeadaptation through the importation of capital goods.Furthermore, unlike the legal export of goods and services, smuggling does not enhance competition andefficiency in production. By subjecting exporting firmsto competitive pressures, the export of goods and services

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Table 5: Major obstacles to doing business in the SANE and BRIC economies (2006)

2006 or most recent yearSANE ECONOMIES BRIC ECONOMIES

South SANE BRICMajor obstacles Africa Algeria Nigeria Egypt average Brazil Russia India China average

Starting a business: Procedures 9 14 9 10 10.5 17 7 11 13 12

Dealing with licenses: Time (days) 174 244 465 263 286.5 460 531 270 367 407

Registering property: Time (days) 23 51 274 193 135.3 47 52 62 32 48.3

Protecting investors: Disclosure index (from 0 to 7) 6 2 6 2 4 5 7 7 10 7.3

Enforcing contracts: Cost (percent of debt) 11.5 10.3 27 18.4 16.8 15.5 13.5 35.7 26.8 22.9

Getting credit: Legal rights index (from 0 to 10) 5 3 7 1 4 2 3 5 2 3

Closing business: Recovery rate (cents on the dollar) 34.4 41.7 32.1 16.6 31.2 12.1 28.7 13 31.5 22.3

Paying taxes: Total tax rate (percent of profit) 39 76.4 31.4 59.6 51.6 71.7 54.2 81.1 77.1 71

Source: Oshikoya, 2007; AfDB Statistics; World Bank Doing Business Database, 2006.


promotes the efficient utilization of scarce productiveresources, which can induce a change in market structureand reduce markups as well as lead to a rise in per capitaGDP.9 Consequently some estimates suggest that raisingthe ratio of trade to GDP by 1 percentage point wouldincrease income per capita between 0.5 and 2.0percent.10 These forgone benefits mean that smuggling—the illegal trading across borders—is a great threat tocompetitiveness and socioeconomic development.

The SANE economies rank better than India andRussia on the legal trading across borders index, as shownin Table 6. Both South Africa and Algeria are rankedabove 100 out of 175 countries, far above India’s andRussia’s rankings of 139 and 143, respectively.11 Onaverage, the SANE economies also rank better than theBRIC economies in three other categories. It takesabout 23 and 26 days to export goods in the SANE andthe BRIC, respectively, and it costs more to export acontainer of goods in the BRIC (US$1,082) than in theSANE (US$1,067).Also, the average number of docu-ments needed to import goods in the SANE is margin-ally smaller than the number needed in the BRIC.However, the BRIC’s average cost of US$1,250 to importa container and 7.75 average number of documentsrequired to export goods are better indicators than theSANE’s US$1,311 and 8.25 number of documents.

Two important implications can be drawn fromthese indicators regarding competitiveness in the SANEand the BRIC economies. First, on average, the SANEeconomies face higher import costs than the BRICones face.The higher import costs are a direct burdenon their competitiveness.These costs can significantlydelay the time it takes for firms in the SANE economiesto receive ordered inputs, thus raising the cost of inputsand the general price levels of outputs.The indicatorsfurther imply that the SANE economies may be moreprice takers than the economies of the BRIC.The high-er costs of imports and lower costs of export (both in

time and monetary terms) in the SANE are consistentwith the view that they have very little control over theprices of their products.

Generally, there is very little intra-African trade bythe SANE economies other than South Africa. Only1.54 percent of Egypt’s total exports and 1.07 percent ofits total imports12 were within Africa in 2005. Similarly,9 percent of Nigeria’s total exports13 in that year wentto African countries: Côte d’Ivoire received 2.9 percent;South Africa, 2.4 percent; Ghana, 1.8 percent; Cameroon,1.2 percent; and Senegal, 0.7 percent. Meanwhile, onlythe 2.6 percent of total imports each from South Africaand Côte d’Ivoire were significant enough to be reportedas Africa’s share of Nigeria’s imports.

Almost two-thirds of Algeria’s export trade is withthe European Union;14 the United States and Japan takemuch of the remainder.While intra-African tradeaccounted for 14.6 percent of South Africa’s exporttrade in 2005,15 over two-thirds of it was within theSouth African Development Community (SADC).Exports to West Africa amounted to 2.2 percent; to EastAfrica, 1.4 percent; and to North and Central Africa, 0.7percent and 0.3 percent, respectively. Imports followed asimilar pattern. Only 2.5 percent of imports were fromWest Africa; 2.3 percent were from SADC and a total of0.4 percent were from Central and East Africa.Thecompelling implication of this situation is that theSANE economies will surely have to augment theirintra-African trade before they can be seriously regardedas potential growth poles.

Corruption as an impediment to investmentCorruption is a pervasive microeconomic obstacle tobusiness in the SANE economies.About 35 percent ofthe firms in Egypt identified corruption as a major concern, while 31 percent and 28 percent of firms inAlgeria and South Africa, respectively, regarded it as asevere problem (see Table 4).Though Nigerian firms did

Table 6: Trading across borders: Rankings of the SANE and BRIC economies

Documents Time to Cost to export Documents Time to Cost to exportneeded to export (US$ per needed to export (US$ per

Economy/region export (number) (days) container) export (number) (days) container)

South Africa 67 5 31 850 9 34 850Algeria 83 8 20 1,014 8 25 1,049Nigeria 137 11 25 798 13 45 1,460Egypt 109 9 15 1,606 9 22 1,886SANE average 8.25 22.75 1,067 9.75 31.5 1,311

Brazil 53 7 18 895 6 24 1,145Russia 143 8 39 2,237 8 38 2,237India 139 10 27 864 15 41 1,244China 38 6 18 335 12 22 375BRIC average 7.75 25.5 1,082.75 10.25 31.25 1,250

Source: World Bank, 2007a.

Exports

INDEX

Imports

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Trading across borders


not cite corruption among their major causes of distressto doing business, Nigeria ranks very poorly onTransparency International’s corruption perceptionindex (CPI).16

Figure 4 presents the corruption perception indexof the four SANE and four BRIC economies for 2004,2005, and 2006 (see also Box 1).The 2005 rankingswere out of 159 countries while 163 were ranked in2006.About 210 countries were ranked in 2004 butbecause several of the rankings were tied, 145 was theworst-ranked position. By these measures, South Africa,with a ranking of 46 in 2005 and 51 in 2006, is regardedas the least corrupt country among the SANE. Egyptranked second while Algeria was third. Nigeria was theworst-ranked country, placing only 7 places from thebottom of the global list in 2005. Its ranking, however,improved in 2006 to 21 places above the least-rankedcountry, Haiti.Among the BRIC economies, China,Brazil, and India were all ranked 70 in 2006, which is atpar with Egypt, while Russia had a ranking of 121—worse than Algeria’s ranking of 84. South Africa remainsthe least corrupt in both SANE and BRIC economies,while Russia and Nigeria are perceived as the most corrupt.

Bribery—defined as the payment of money to getthings done that should be done without such payments—is common in Algeria. It is not unusual to payUS$210 to get a telephone line installed, and US$540 toobtain a construction permit.There is also a high degreeof nepotism or government favoritism in all the SANEeconomies. Usually, personal connections in the public

service and public utilities can get fast results.Throughthis avenue, 51 percent of firms got their telephone linesrepaired, 49 percent had their telephones installed, 34percent obtained construction permits, and 36 percentwere connected to the electric grid.17 Yet Algeria is thebest-ranked country among the SANE in the GCI onfavoritism.With a ranking of 100 out of 128 countries,Nigeria has the worst ranking in the GCI for this indi-cator. It is preceded by South Africa (ranked 55th) andthen Egypt, which ranks 48th.18 These rankings suggestthat nepotism or government favoritism is common inthese countries.Though nepotism is not illegal, it gener-ates inefficiencies in the general economy, preventingthe achievement of full potential growth and ultimatelypreventing effective global competition.

Enabling environmentAn enabling environment is another vital component ofsustainable competitiveness.Access to finance, infrastruc-ture, and industrial land are all elements of the environ-ment that need to work together to enhance growth.

Access to finance More than one in three (39 percent) firms in Algeriawere concerned about access to capital in their country,whose financial sector is heavily dominated by the state(see Table 4).The seven public banks account for 90percent of all bank assets.These banks are generallybureaucratic, insensitive to customer requests, and notinnovative.They also have very little incentive to assumeresponsibility or manage risk. In addition, bankers in

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With Nigeria’s low rankings on the CPI, it is difficult to explainwhy firms did not cite corruption as an impediment. A plausibleexplanation is that corruption may be so endemic that mostfirms have grown to view it simply as a fact of life. However, itmust be emphasized that the government has made fightingcorruption a priority and has taken significant steps to curtailthe problem. An independent international firm was appointedin March 2005 to audit oil and gas accounts of the industry for1999–2004 under the Nigeria Extractive Industries TransparencyInitiative (NEITI). Corruption is also being attacked through theEconomic and Financial Crimes Commission (EFCC). There havebeen several high-level arrests, and assets that have beendetermined to have been obtained through corrupt means havebeen seized. In undertaking these measures, the governmenthas also begun to tackle the perception of the acceptability ofcorrupt practices. It will probably take a while before the gov-ernment’s actions have an impact on the private sector, wheresuccess will most likely be gradual.

The government of South Africa has also undertaken anumber of bold, important, and far-reaching anticorruptionmeasures. They range from the adoption of the Public ServiceAnti-Corruption Strategy (PSACS) to combat and prevent cor-ruption in public service through to the promulgation of a rathercomprehensive anticorruption-related legislative frameworkand the development of investigating and prosecuting anticor-ruption capacities, to efforts to develop partnerships with busi-ness and civil society. In 2004 the Preventing and Combating of Corruption Activities Act (PCCAA) was passed. This Act pro-vides for the criminalization of corruption, puts a duty on certainpersons to report corruption, and provides for a register of cor-rupt businesses. Also, where corruption is suspected to haveoccurred, the government has been swift to take action, as evi-denced by the dismissal of the deputy president in 2005 overallegations of corruption. All departments are obliged accordingto the Public Finance Management Act (PFMA) and treasuryregulations to conduct risk assessments and to implement fraudprevention plans informed by such risk assessments.

Box 1: Fighting corruption in Nigeria and South Africa


Algeria face an underdeveloped risk and credit system, alack of reliable market information, few trained judgesin commercial matters, an underreporting of sales, and alack of certified balance sheets.All these elements have adirect impact on the ability to obtain bank financing.Consequently, access to financing is highly constrained—to the point that the value of collateral needed for aloan is about 168.6 percent of the loan amount.Therefore, bank credit in Algeria finances as little as 11percent of working capital on average, and 16 percent ofinvestment.About 74 percent of all business financingderives from firms’ internally generated funds.Thisundermines Algerian firms’ competitiveness.

In the case of Nigeria, 58 percent of the surveyedfirms identified a lack of working capital as one of theirmost severe impediments to doing business.The financialsectors of both Nigeria and South Africa have the scopeand depth lacking in other African countries. However,the Nigerian financial system had not been responsiveto the needs of setting up a strong and committedmicrocredit system to cater for the funding needs ofSMEs until the recent financial sector reforms.Thesereforms increased capitalization requirements and reducedthe number of banks from 89 to 25. In spite of thesereforms, however, many conventional financial institutionsare still reluctant to advance credits to most SMEsbecause their profiles do not meet general risk acceptancecriteria.Therefore, though banks have excess liquidity, alarge share of it is not being channeled into productiveinvestments to enhance Nigeria’s competitiveness.

About 20 percent of Egyptian firms cited the lackof working capital as a severe obstacle to their develop-ment and growth.The government of Egypt has recentlytaken steps to enhance the financial sector, a move thatis being supported by the African Development Bankand other development partners (see Box 2).

Infrastructural facilityFigure 5 illustrates the rankings of the SANE economiesin the quality of general infrastructure as presented bythe Global Competitiveness Index in Chapter 1.1.Therankings were out of 128 countries, with 1 indicatingthe country with the best infrastructure and 128 indi-cating the country with the worst infrastructure. SouthAfrica is ranked the best in all areas except in telephonelines category, where it is surpassed by Egypt, the secondoverall best-ranked country.Algeria ranks third ahead ofNigeria. Nigeria,Algeria, and Egypt have something tolearn from South Africa, which ranks ahead of at least84 countries globally in the overall infrastructure cate-gory as well as in the railroads and quality of ports subcategories.

Among the SANE economies, only 8 percent ofthe firms in Egypt regard power failure as an impedimentto their operations, and most of the firms in SouthAfrica and Algeria did not indicate it as a worrisomeissue. However, in Nigeria over nine in ten firms surveyed indicated frequent power failure as the mostpressing issue in their operations (Box 3).

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50

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Figure 4: Corruption perception index (CPI) rankings of SANE and BRIC economies

tSource: Transparency International, 2005, 2006.

Rank

■ 2004 ■ 2005 ■ 2006



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In 2006, the AfDB Board of Directors approved a loan of US$500million in favor of the Arab Republic of Egypt in support of thecountry’s Financial Sector Reform Program (FSRP). This is thelargest single loan ever approved by the Bank Group since itsinception.

The FSRP is a comprehensive and far-reaching program ofreforms designed to improve the depth, efficiency, and function-ing of the Egyptian financial sector. It addresses identifiedweaknesses in the banking and nonbank financial sectors,including the insurance sector, the capital market, and the mort-gage industry. Its main objective is to develop a market-based,efficient, competitive, and sound financial system that couldbetter serve Egypt’s development and growth objectives. Theprogram seeks to enhance the efficiency of financial intermedi-ation and risk management in the economy, and to build safeand sound banking and nonbanking financial sectors throughcomprehensive structural and financial reforms that will accel-erate economic growth and development.

Through the FRSP, the AfDB will assist Egypt to strengthenits enabling environment for financial intermediation, resourcemobilization and risk management, and increased private-sectorparticipation in providing financial services. It will support poli-cy reforms to strengthen the domestic banking system, developthe contractual savings system, and strengthen the regulatoryand supervisory framework for bank and nonbank financialinstitutions in order to ensure compliance with internationalstandards. In particular, the loan will support activities to:

• Increase private-sector participation and enhance competition in the financial sector.

• Undertake the financial, institutional, and operationalrestructuring of state-owned banks to improve their com-mercial orientation and the scope and quality of financialservices.

• Upgrade the regulatory and supervisory capabilities offinancial sector regulatory agencies.

• Restructure the insurance industry and reduce the domi-nance of the state in the sector through privatization.

• Deepen the capital market.

Within the context of the program, Egypt has a strong pub-lic commitment to pursue economic reforms that will encourageprivate-sector development and accelerate economic growthand employment creation.

The program is expected to give a big impetus to econom-ic development in Egypt and to contribute to the comprehen-siveness of the economy. The program will help build a soundand more efficient financial sector, improve savings mobilizationand access to finance by small and medium-sized enterprises(SMEs)—the key drivers of investment and growth—so thatthey can invest and create the conditions for enhanced produc-tivity. It will help modernize the Egyptian economy and enhanceits competitiveness, so that it can better integrate into the glob-al economy.

The program is supported by several other developmentpartners, including the World Bank, the European Union, andUSAID.

Source: AfDB, 2006d.

Box 2: The Arab Republic of Egypt: Financial Sector Reform Program (FSRP)

The 2002 Regional Program for Enterprise Development (RPED)’ssurvey of Nigerian manufacturing concluded that firms considerpower failure to be their most severe constraint. Managersspend more time attending to electricity problems than to otherbusiness problems. The power problem is more than twice aslarge an obstacle as either of the next two problems—accessto credit and general uncertainty. The survey remarked that thepower problem applies to “all types of firms (for example, large,SME, foreign) and across all regions of the country.” The caus-es of the problem include government subsidies as well as inef-ficient and poor services. Government subsidies tend to distortthe prices of both publicly and privately provided power. TheNational Electric Power Authority’s production cost of electrici-ty is 11 US cents/kWh. In contrast, the international average

cost is between 5 and 6 US cents/kWh. The Authority charges3.5 cents/kWh and the government subsidizes the rest.

In the case of privately provided electricity, the govern-ment subsidizes the cost of fuel, which represents 75 percent ofthe cost of electricity. The National Electric Power Authority(NEPA) has billions of naira in accounts receivable. Paymentsare often not made because of frustration with poor servicesand frequently inaccurate billing. The inability of NEPA to meetthe power supply of the country has made some Nigerians referto NEPA as “Never Expect Power Always.”

Box 3: Power shortages in Nigeria


Table 7 shows that nearly all firms have their owngenerators, regardless of their location.This implies thatbusinesses take the problem of power failure very seri-ously by providing their own generators. Some of themoperate their generators even when the public supply ofelectricity is available to prevent product damage thatresults from the switch-over process from one powersource to another.

The cost of privately provided electricity in Nigeriais about 242 percent of that provided by the NationalElectric Power Authority (NEPA). Damage to equipmentand machinery accounts for 3.3 percent of the totalvalue of the equipment. Sources indicate that Nigerialoses about 66 billion naira annually from power failure.19

Some firms have adopted factor substitution by modify-ing their production process in favor of less electricity-intensive inputs, while others have resorted to reducingoutput to resolve the frequent power failure.

Although power shortage has not been cited as amajor obstacle in South Africa, the country faces ashortage of peak-load generating capacity as growth indemand has continued to outstrip growth in supply.Eskom, the national power utility, significantly underes-timated the growth in demand: the growth rate of GDPhas risen from an average of 2.6 percent per year in1995–99 to 3.5 percent in 2000–03 and 4.5 percent in2004–06. Consequently, the margin of spare capacityover normal peak-demand levels has fallen to around 8percent—well below the accepted norm of 15 percent.This has created difficulties even for regular maintenance,

and has rendered the supply system vulnerable to short-ages. Such power outages occurred in the Western CapeProvince in 2006, followed by countrywide powerblackouts in January 2007 despite assurances from thenational power utility and the government that supplieswere secure. Delayed efforts to increase capacity threatenincreased risks of further disruption in supply, with thepotential of decreasing productivity and growth.

Scarcity of industrial landLand is an important factor in many business operations.It is a necessary element of infrastructure for the super-structures of several businesses. Besides, the right to landencourages investments and facilitates trade.These rightsalso enable entrepreneurs to obtain mortgages on their

0

20

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60

80

100

120

Figure 5: Rankings of SANE economies in quality of infrastructure

Source: World Economic Forum.

Rank

■ Overall infrastructure■■ Quality of port infrastructure■ Railroad Infrastructure■ Telephone Lines, 2005

South Africa Algeria Nigeria Egypt

Table 7: Firms with private generators in Nigeria(percent)

Location

Number of employees East North South All

20–49 99.3 91.7 94.1 93.450–99 100 100 100 100100–199 100 100 100 100200–499 100 100 100 100500–999 100 100 100 1001,000 and over 66.7 100 100 94.1All 95.7 98.2 97.7 97.4

Source: World Bank, 2002b.

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homes or land to start businesses. Hence the lack of land can be a severe obstacle to social development andeconomic growth. It can thwart wealth creation andthereby frustrate poverty reduction efforts. Scarcity ofland can also be a source of internal social discord andpossible open conflicts. It may also lead to environmen-tal degradation through factors such as overgrazing andurban concentration.Therefore, the lack of industrialland can seriously hinder the effective global competi-tiveness of a country—by limiting investment, trade, andeconomic growth, and by promoting social instability.

Lack of industrial land is of particular concern tomany firms in Algeria and South Africa.About half ofthe industrial land in Algeria belongs either to bankruptpublic enterprises or to speculative private owners; thisland lies idle without being put to use.As a precursor ofits development strategy,Algeria created industrial parkson public lands in the 1970s and early 1980s. Since thelocations of many of these parks were determined moreon political than economic grounds, some industrialland has been converted into public parks. Consequentlythe availability of such land became severely limited.Additionally, it is often common for several publicorganizations to share responsibility for owning, devel-oping, managing, and rehabilitating industrial land. Dueto these complexities, acquiring industrial land is timeconsuming and expensive. It takes 51 days to registerproperty in Algeria (see Table 5), compared with 47 daysin Brazil and 32 days in China.

Table 4 suggests that 30 percent of South Africanfirms cited difficulties in acquiring land as a constrainingfactor to doing business.The major land issue is about

ownership.Traditionally, the country’s white minorityhas owned a much larger portion of the land since 1913(see Box 4).A poor handling of the South African landissue could have a negative impact on its competitive-ness and investment climate.

While about 75 percent of Nigeria’s land is arable,of which about 40 percent is cultivated, high populationgrowth has put pressure on the availability of industrialland, especially in urban centers, making the lack ofaccess to land a major contributing factor to poverty.20

The pressure on land is likely to persist until Nigeria isable to curb its annual urban population growth rate of4.1 percent.21

Human capital: Skilled labor as a crucial element of growth Managers are more concerned about the lack of skilledlabor in South Africa than in Algeria, Nigeria, or Egypt.While 88 percent of South African firms regardedscarcity of skilled labor as a prime hurdle to business,only 11 percent and 5 percent of the firms in Algeriaand Egypt, respectively, listed it as an impediment (Table4).Therefore other constraints—such as power failure inNigeria and lack of industrial land in both Algeria andEgypt—supersede the need for skilled labor in thesecountries.

South African businesses face an abundant supply ofunskilled labor but a shortage of skilled workers.Thescarcity of skilled workers—especially engineers, scientists,health-care workers, and artisans—is a constraining fac-tor to productivity, growth, and competition. Skilledworkers attract high pay.Although an additional year ofeducation may attract a 5 to 7 percent increase in wages

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The problem of land in South Africa started in 1913 with the pas-sage of the Native Land Act (NLA), which attributed about 87percent of the country to the white population. Therefore, only 4percent of commercial farmland and 16 percent of the total areaof the country are currently owned by blacks.

Redistribution of land was a major campaign theme of theAfrican National Congress (ANC). So, upon coming into office in1994, the ANC government enacted the Restitution of LandRights (RLR) Act. Under this Act, essentially anyone who couldclaim to have lost land because of the 1913 Native Land Actwas entitled to restitution in court if a complaint was lodgedbefore December 31, 1998. Such land was to be bought from thewhite owner with financial assistance to the new tenant. It washoped that 30 percent of the land would be redistributedthrough a “willing buyer, willing seller” program by 2014.However, the program has proved ineffective in addressing theproblem. The selling process is protracted and marked by pooradministration, excessive bureaucracy, and a lack of communi-

cation on the part of the government. By some estimates, a will-ing seller takes up to 22 months to sign a deed.

Another part of the problem relates to the buyers’ or thedemand side of the equation. The new owners never have theworking capital, and often lack the necessary skills, to developtheir new estate. So they abandon the land after a few years.Currently many people are requesting a more affirmativemethod of land redistribution, obliging the white owners to cedetheir property. The land redistribution process is causing ten-sion and unhappiness on all sides. This is affecting the produc-tivity of farmers because many of them are very apprehensivethat a Zimbabwean-style takeover of land could occur. If thetransition to black ownership is not managed through peacefulmeans, it could easily degenerate into a major economicupheaval and the loss of South Africa’s competitive edge inagricultural production, or even in manufacturing as well.

Source: Adapted from AfDB, 2006b.

Box 4: The problem of land in South Africa


in many developing countries, one more year of educa-tion in South Africa can lead to an 11 to 12 percent risein wages. Consequently there is a large wage disparity inSouth African industry.The median monthly salary of aSouth African manager in 2002 was about US$1,850. Incontrast, the median monthly wage for an unskilledworker in that year was only US$240.22

Table 8 suggests that the scarcity of skilled labor inSouth Africa will persist for a while because of highretirement and mortality rates. For example, 14.4 percentof academics and 16.6 percent of nurses are lost fromthe workforce each year because of death or retirement.To overcome the high cost of skilled labor and meet thepressure to produce high-quality products in order toremain competitive in the global market, firms haveresorted to capital-intensive modes of operation.Thishas exacerbated the unemployment situation, which hasthe potential for social destabilization.

The causes of the skilled labor shortage includeinefficiencies in the educational system, which lead todropouts and repeaters; poor working conditions; lowsalaries; brain drain of skilled workers to developedcountries; difficulties in obtaining work permits for for-eign skilled workers because of stringent immigrationpolicies; and the impact of HIV/AIDS. South Africaranks 124 and 125 out of 128 countries on the impactof HIV/AIDS and HIV prevalence on business, respec-tively, on the Global Competitiveness Index (see Box 5).

Many firms have aggressively embarked on providingon-the-job training to alleviate the shortage of skilledlabor.This has enabled South Africa to rank 26 and 30on the “extent of staff training” and “local availability ofspecialized research and training services,” respectively, inthe Global Competitiveness Index.The correspondingrankings for the other SANE economies are 61 and 66for Nigeria, 80 and 84 for Egypt, and 103 and 100 forAlgeria.Also, in spite of the implications of HIV/AIDS,the South African economy has the highest proportionof companies employing women as senior managers,with 75 percent of these companies having women in

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The scourge of HIV/AIDS in South Africa is not just a tragedy interms of lost lives. It also undermines the country’s economicdevelopment and reduces its supply of skilled labor. The overallestimated HIV prevalence rate1 in South Africa is approximately10.8 percent on average, but as high as 33 percent in someyounger female age groups, especially women aged 25 to 29years. The impact of HIV/AIDS is not limited only to the dimin-ishing life expectancy at birth—from 51 years in 2001 to 47.1years in 2005—it also includes more people.

The normal death rate, taking into account of populationgrowth for the periods 2000 to 2010, is estimated at 3.6 percent;HIV/AIDS-related deaths are estimated at 150 percent.2 It hastherefore been estimated that three million lives would havebeen lost to HIV/AIDS by 2010.3 The general implication of thisloss is that fewer skilled people will remain in active employ-ment, further worsening the current situation of scarcity ofskilled labor. Also the low life expectancy and the eroding effectof HIV/AIDS will mean fewer people with skills will be in activeemployment. This will have an adverse impact on levels of pro-ductivity and the international competitiveness of South Africa.Apprentice programs and vocational training will be seriously

affected because of the lack of master artisans to transfer theirexpertise to learners. However, the incidence of HIV/AIDSamong white South Africans who are generally more skilled ismuch lower than the incidence among blacks. This calls for aprudent engagement of their skills to mitigate the impact ofHIV/AIDS. Finally, because of the impact of HIV/AIDS, largernumbers of youths will enter the job market more rapidly than inprevious years under current labor policies. However, theseyoung people will lack the requisite skills needed for private-sector operations. Ultimately this can stifle entrepreneurshipbecause the abundant supply of jobs will make self-employment,with its high uncertainties and risks, a less-attractive venture.

Source: AfDB, 2006b.

1 AfDB 2006a, p. 11.2 AfDB 2006b, p. 78. 3 Ibid.

Box 5: HIV/AIDS and the scarcity of labor in South Africa

Table 8: Number of people needed to meet new andreplacement demand in South Africa (2001–06)

Mortality AnnualNumber (percent, Retiring shortage

High-skills occupation in 2001 2001–06) (percent) (percent)

Academics 37,237 5.5 8.9 3.2Doctors 34,370 6.2 2.2 3Nurses 155,516 8.3 8.3 4.6Computer professionals 75,841 4.9 2.8 4.1Science technologists 4,729 4 5.3 n/aScientists 4,647 4.2 5.4 n/aEducators 354,469 11 2.2 4.1Engineers 29,824 4.5 5.4 3.4Engineering technologists 32,132 6.2 2.6 3.7Managers 280,298 6.1 5.6 3.2

Source: AfDB, 2006b, p. 84. n/a, not available.


senior positions, compared with the global average of 59percent. 23 South Africa ranks as the 8th highest economyin this regard, with a high proportion of women in senior management positions globally.

In summary, the Doing Business 2007 report’s rankingsof the ease of doing business index ranked South Africa,Algeria, Nigeria, and Egypt 29th, 116th, 108th, and165th, respectively, out of 175 countries.The compara-tive rankings for the BRIC were Brazil (121st), Russia(96th), India (134th), and China (93rd).Therefore, theSANE economies ranked very favorably compared withthe BRIC economies. South Africa ranked ahead of allthe BRIC economies, and Nigeria and Algeria rankedabove Brazil and India.Table 9 presents a summary ofthe five major factors that contributed to these rankingsfor SANE.

Policy implications and recommendationsThe preceding analysis illustrates the investment con-straints that prevent SANE economies from reachingtheir full potential in global competitiveness and socioe-conomic development and inhibit their ability to act asserious growth poles for African economies.Aspects ofthese investment climates—which could be enhancedthrough reform—restrain firms from meeting theirobjectives, leading to inefficiencies in the economies ofthe SANE.This stresses the need for reforms in severalareas to make the SANE economies more competitiveglobally.

Reforms in the area of competition from importsand illegal business operations are needed in Algeria.There is the need to create a level playing field for allfirms through antitrust laws. Import duties should alsobe reduced to attract compliance and thereby enlargethe general tax base.

The next reform area falls under labor regulation.Labor reforms are needed to address the problem ofscarcity of skilled workers, particularly in South Africa.South Africa has to place high on its agenda the need to

increase the output of the educational system and pro-fessional training organizations to enhance the overalllevel of qualification of the workforce.Though stepshave already been taken in this direction, they have tobe sustained to achieve results. Labor laws also have tobe amended to permit the employment of foreignskilled workers in the short to medium term, until theeducational system has begun producing enough skilledlabor. Implementing such laws will demand a strongpolitical will because of the prevailing 25.6 percentunemployment rate.24

Tax regulations are an issue requiring redress by allfour SANE economies.This calls for tax reforms and taxcode simplifications to encourage sustainable businessgrowth and simultaneously lessen one of the majorcauses of corruption and insecurity.The reforms shouldinclude reviews of tax rates. Most governments are hesi-tant to lower tax rates because of possible reductions intax revenues. However, tax rate reductions could augmenttax revenues through generated investment incentivesand higher levels of compliance.The reforms should alsoembrace enhancing the capacity of tax administrationthrough additional training for staff and providing newequipment, which would help to improve revenue col-lection and reduce the bureaucratic burden for firms.

Several studies have established that better access tofinance is associated with greater sales growth, investment,and productivity for firms.25 Yet the analysis has shownthat the financial sectors of the SANE economies havenot done well in improving access to finance.Therestructuring of the financial sector should be a priorityof all the SANE economies. Emphasis should be placedon strengthening the technical infrastructure of thefinancial sector and modernizing general banking opera-tions.The development of an economic and financialinformation system and credit bureaus to enhance theknowledge of credit applicants and the assessment ofcredit should form part of the process. Banks need tohave loan officers trained in SME-lending skills. SMEsneed to be made aware of the importance of credit

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Table 9: Top five business constraints identified by firms in the SANE economies

South Africa Algeria Nigeria Egypt

Skilled labor shortage Unfair competition from Power failure Macroeconomic uncertainty (inflation, imports and illegal business exchange rate)

Labor regulations Lack of working capital Poor infrastructure other Unfair competition from imports than power and illegal business

Crime and theft Corruption Lack of working capital Corruption

Unfair competition from imports High interest rates High interest rates High interest ratesand illegal business

Obtaining land or building Obtaining land or building Macroeconomic uncertainty Lack of working capital(inflation, exchange rate)

Source: Authors’ calculations.


track records and financial management, and the neces-sary support mechanisms—such as credit scoring systemsand credit bureaus—need to be introduced to the SMEsector.Additionally there is a need for increasing thenumber of judges specialized in business and fiscal issuesand promoting the development of business courts aswell as enhancing creditors’ rights. Small claims courtsshould also be established to reduce the backlog of cases.

Corruption should be addressed at all levels in thesecountries. Judicial autonomy should be improvedthrough budget allocation and greater political commit-ment. Furthermore, microeconomic measures—such aslimiting employment duration for selected sensitivepositions and reinforcing a corruption punishment system with high penalties—should be developed andimplemented.

Finally, this approach of analyzing Africaneconomies could be used in conducting similar studies.A study of the four small and competitive economies of Africa (namely, Botswana, Mauritius, Namibia, andTunisia) to identify the sources of their success andestablish lessons learned for other African countriescould be conducted.Another study could be done onTunisia, Morocco, Libya,Angola, and Sudan—the nextfour biggest African economies after the SANEeconomies. On a broader scale, this approach could be extended to do a similar analysis of other Africancountry groupings.

The SANE economies have the size and the scaleto be drivers of Africa’s economic growth, regional economic cooperation, and integration into the globaleconomy. However, the SANE economies would needto address key obstacles to competitiveness and invest-ment climate before their potentials in both the regionaland global economies can be fully realized.These coun-tries also have the potential to serve as poles for growthand investment and contribute to the reduction of thepopulation living in poverty in Africa.

Notes1 The Maputo Corridor runs from Pretoria and Johannesburg to the

Mozambican deepwater ports of Maputo and Matola, after pass-ing through one of the most highly industrialized and productiveregions of southern Africa.

2 The Southern African Power Pool (SAPP) was created with the pri-mary aim of providing a reliable and economical electricity supplyto the consumers of each of the SAPP members.

3 See IMF 2006b.

4 AfDB 2006c, p. 37.

5 The tax wedge is the difference between workers’ take-home payand the costs of employing them, including income taxes andsocial security contributions. See IMF 2007.

6 World Bank 2006c.

7 OECD/AfDB 2006.

8 See Table 4 and World Bank 2006d, Country Tables, pp. 95–109.

9 Jonsson and Subramanian (2000) find a robust significant positiveeffect of increased trade on total factor productivity growth inSouth Africa in the 1990s.

10 See Frankel and Romer 1999.

11 In this index, the lower the ranking is the better the standing of thecountry.

12 See http://www.tpegypt.gov.eg/TradeSt.aspx. The primary source ofdata is the Central Agency for Mobilization and Statistics of Egypt.

13 See http://www.rba.co.uk/sorces/stats.htm at 15-Sept-06 DG TradeStatistics.

14 See http://www.arab.net/algeria/aa_trade.htm.

15 http//www.thedt.gov.za/econdb/report/Region.

16 See World Economic Forum, 2006, p. 312. Also see TransparencyInternational (2005, 2006).

17 World Bank 2002a, p. 23.

18 World Bank 2007a.

19 See http://nm.onlinenigeria.com/template/?a=293&z=2, “NigeriaLoses N66bn Yearly Through Power Failure.”

20 IMF 2005, p. 30.

21 AfDB Statistics Division Database, 2005.

22 See World Bank 2006c, p.32.

23 AfDB 2006b, p. 86.

24 See www.southafrica.info/doing_business/economy/development/unemployment.htm.

25 See Chen 1997.

ReferencesAfDB (African Development Bank). 2006a. Republic of South Africa

Country Strategy Paper 2006–2010. June. Tunis: AfricanDevelopment Bank.

———. 2006b. Republic of South Africa Private Sector Country Profile(PSCP), Intermediate Report, September 30. Tunis: AfricanDevelopment Bank.

———. 2006c. Arab Republic of Egypt Private Sector Country Profile,July. Tunis: African Development Bank.

———. 2006d. Annual Report 2006. Tunis: African Development Bank.

———. Statistics Department. Various years. African Live Database.Tunis: African Development Bank.

Arab News, Algeria: Trade and Industry. Available athttp://www.arab.net/algeria/aa_trade.htm.

Chunlai, Chen. 1997. “The Location Determinants of Foreign DirectInvestment in Developing Countries.” The University of AdelaideWorking Paper Series No. 97/12. Adelaide, Australia: University ofAdelaide.

Dollar, D., M. Hallward-Driemeir, and T. Mengistae. 2005. “InvestmentClimate and Firm Performance,” Developing Economies,Economic Development and Cultural Change 54: 1–30.

Frankel, J. A. and D. Romer. 1999. “Does Trade Cause Growth?”American Economic Review 89 (June): 379–99.

IMF (International Monetary Fund). 2005. Country Report No. 05/433(May). Washington, DC: International Monetary Fund.

———. 2006. World Economic Outlook Database (September).Washington, DC: International Monetary Fund.

———. 2006b. South Africa: Selected Issues, Country Report No.06/328 (September). Washington, DC: International MonetaryFund.

———. 2007. Algeria: Selected Issues, Country Report No.07/61(February). Washington, DC: International Monetary Fund.

Jonsson, G. and A. Subramanian. 2000. “Dynamic Gains from Trade:Evidence from South Africa.” IMF Working Paper 00/45.Washington, DC: International Monetary Fund.

Ministry of Trade and Industry. Egyptian International Trade Point.Available at http://www.tpegypt.gov.eg/TradeSt.aspx.

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OECD/AfDB (Organisation for Economic Co-operation andDevelopment/African Development Bank). 2006. AfricanEconomic Outlook, 2005/2006. Tunis: African Development Bank.

Oshikoya, T.W. 2006. “Nigeria’s Competitiveness in the GlobalEconomy.” Zenith Economic Quarterly 1 (6).

———. 2007. “The SANE as Africa’s Growth Poles.” AfDBDevelopment Briefing Note 1.

South Africa: Alive with Possibility. Available atwww.southafrica.info/doing_business/economy/development/unemployment.htm.

TI (Transparency International). 2005. Corruption Perception Index.

———. 2006. Corruption Perception Index.

UNCTAD Database. Available at http://stats.unctad.org/FDI.

World Bank. 2002a. Pilot Investment Climate Assessment: AlgeriaInvestment Climate Assessment, June. Washington, DC: WorldBank.

———. 2002b. Pilot Investment Climate Assessment of the PrivateSector in Nigeria, September. Washington, DC: World Bank.

———. 2006c. The Investment Climate in Brazil, India, and SouthAfrica: A Contribution to the IBSA Debate, September.Washington, DC: World Bank.

———. 2006d. Doing Business in 2006: Creating Jobs. Washington,DC: World Bank.

———. 2006e. World Bank Doing Business Database.

———. 2007. Doing Business 2007: How to Reform. Washington, DC:World Bank.

———. 2007b. Doing Business in Africa. Washington, DC: World Bank.

———. Various years. Productivity and Investment Climate of PrivateSector Enterprise Survey. Washington, DC: World Bank.

World Economic Forum. 2006. The Global Competitiveness Report2006–2007. Hampshire: Palgrave MacMillan.

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CHAPTER 1.4

Gender, Entrepreneurship, andCompetitiveness in AfricaELENA BARDASI

C. MARK BLACKDEN

JUAN CARLOS GUZMAN

at the World Bank

An appreciation of gender issues is important whenconsidering strategies to improve Africa’s competitive-ness in the world and ways to promote private-sectordevelopment.There are three main reasons why gendermatters. First, women are major players in the privatesector, particularly in agriculture and in informal busi-nesses. It is estimated that women-owned businessesaccount for over one-third of all firms, and they are themajority of businesses in the informal sector in Africancountries. Second, the ability of women to formalizeand grow their businesses, to create jobs, and to enhanceproductivity is hampered where legal and institutionalbarriers exist that affect men’s and women’s enterprisesdifferently.Third, there is evidence—especially at themicro level—to indicate that gender disparities not onlydisadvantage women but also reduce the growth poten-tial of the region as a whole.The existence of gender-related barriers can thwart the economic potential ofwomen as entrepreneurs and workers, and such barriershave an adverse impact on enterprise development, pro-ductivity, and competitiveness in Africa. Consequently,addressing gender-specific barriers to entrepreneurshipand leveraging the full participation of both men andwomen in the development of Africa’s private sectortogether represent a significant opportunity to unleashAfrica’s productive potential and to strengthen econom-ic growth.

This chapter aims to shed light on the nature ofmen’s and women’s enterprises in Africa, to assess theextent to which the constraints and obstacles faced bywomen and men entrepreneurs may differ, and to addresswhether the constraints and obstacles entrepreneurs faceaffect the productivity and performance of men’s andwomen’s businesses differently.We begin with a briefoverview of gender in the economy, followed by a moredetailed analysis of available Enterprise Survey datawhere key characteristics of businesses can be disaggre-gated by the sex of the business owner.1 This allows usto look at various characteristics of men’s and women’sbusinesses, including perceptions of obstacles and con-straints, and to assess productivity differences.Afterbriefly placing this analysis in a wider context, the chapter concludes with some recommended actions toaddress the gender dimensions of entrepreneurship moresystematically in policy and programs aimed at supportingprivate-sector development, along with suggestions forfurther data collection and analysis.

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Gbemisola Oseni and Federica Saliola provided valuable assistance tothe authors in the preparation of this chapter. We thank TheodoreAhlers, Theresa Bradley, Mayra Buvinic, Constantine Chikosi, JozefinaCutura, Simeon Djankov, Amanda Ellis, Lucia Fort, Alan Gelb, OlaGranström, Mary Hallward-Driemeier, Giuseppe Iarossi, AndrewMorrison, Sudhir Shetty, Andrew Stone, Michaela Weber, and JulieWeeks, who provided useful comments on earlier drafts.


Gender in African economiesThe study Can Africa Claim the 21st Century? made the argument that Africa has enormous unexploitedpotential, especially the potential of women. Specifically,it pointed out that women comprise one of Africa’s hidden growth reserves, providing most of the region’slabor, but their productivity is hampered by widespreadinequality in education as well as unequal access to landand productive inputs.The report concluded that genderequality can be a potent force for accelerated povertyreduction.2 The economic importance of women inAfrica was reinforced by the Africa CommissionReport, which noted that “all the evidence agrees that[women] make a greater contribution to economic lifethan their menfolk.”3 The World Bank’s Africa ActionPlan (AAP), developed in response to the G8 Summit in2005, also reiterates the central contribution of womento African economies (see Box 1).The AAP progressreport presented to the Bank’s Board of Directors inMarch 2007 included women’s economic empowermentas one of eight flagship areas for increased focus duringimplementation.

Gender inequality plays a significant role inaccounting for Africa’s poor growth and poverty reduc-tion performance.A recent review of available evidenceindicates that gender inequality in education may limitgrowth; that inequalities in access to land and productiveinputs reduce agricultural productivity, investment, andmodernization; and that inequalities in time burdens,alongside high demographic growth rates, all contribute

to reducing women’s ability to participate effectively in,and to benefit from, economic growth.4

The legal and regulatory environment is a core element of the investment climate, and is also critical for competitiveness. In particular, property rights, laborlaws, personal security, the performance of the judiciary,and the time and cost required to register, license, andoperate a business all affect competitiveness and thedynamism of the private sector.This environment mayaffect men and women in quite different ways, as inmany African societies laws and customs impede womento a greater extent than men in obtaining credit, pro-ductive inputs, education, training, and informationneeded to start and operate a business.Although insome cases there may be gender-specific legal andadministrative barriers, for the most part the regulatoryenvironment will be “gender-neutral” in principle, butwith possibly gender-differentiated outcomes in practice—for example, women may be less able than men toafford long and expensive registration procedures. Forthese reasons, women may be more disadvantaged thanmen in starting-up and managing enterprises.

Characteristics of men’s and women’s enterprisesEnterprise Surveys allow us to identify certain charac-teristics of a business, such as the sector in which itoperates, the size of the enterprise, the number of yearsit has been in operation, whether it is an individual orfamily enterprise, and, in many cases, the sex of thebusiness owner.5 This chapter examines some of thesecharacteristics differentiated by the sex of the businessowner. Entrepreneurs, whether they are men or women,are a small, select sample of the population. Since theEnterprise Surveys necessarily focus on entrepreneursoperating businesses, it is important to bear in mind thatthese entrepreneurs have already overcome whateverbarriers exist to entry into business, including any gender-based barriers. It is likely that gender differencesin access to entrepreneurship may well exist, but suchbarriers cannot be analyzed in these datasets. Moreover,and related to the previous point about selection,women and men entrepreneurs are likely to differ notonly with respect to observable characteristics but alsowith respect to unobservable characteristics that make agood entrepreneur, such as motivation, innate ability,persistence, and intuition.

The Enterprise Survey data confirm that womenentrepreneurs are a minority compared with their malecounterparts.6 However, there is large variation acrosscountries. Including only manufacturing enterpriseswith at least 10 employees, women own fewer than 10percent of firms in Kenya, Morocco, Nigeria, Senegal,and Tanzania, but up to 40 percent or more in Botswana,Cameroon, Cape Verde, and Mozambique (Figure 1).7

These percentages are very similar if one looks at a sub-sample of enterprises run by a stakeholder with more

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Pro-active measures to build the assets of women and toconnect women to markets are essential if Africa is to suc-ceed in meeting the challenges of shared growth. A distin-guishing characteristic of African economies is that genderdifferences lead to men and women playing substantially dif-ferent economic roles. Much of Africa’s economic activity isin the hands of women. Data from Uganda suggest both thatwomen contribute about 50 percent of the country’s GDP, andthat women and men are not equally distributed across theproductive sectors. Time allocation studies throughout Africaconfirm women’s preponderant role in agriculture. Becausemen and women differ in their access to, and control over,productive and other assets, economic capacities and incen-tives are strongly gender-differentiated in ways that affectsupply response, resource allocation within the household,labor productivity, and welfare. These differences have impli-cations for the flexibility, responsiveness, and dynamism ofthe economy, and they directly limit economic growth.

Source: World Bank, 2005.

Box 1: Africa Action Plan: The key contribution of women


than 50 percent of the firm’s shares—the percentage offemale-owned enterprises decreases in Cameroon andEgypt, and particularly in Mozambique and Cape Verde,but remains very similar in all the other countries. If it isreasonable to assume that a majority stakeholder alsoruns the business, these percentages can be interpreted asapproximately reflecting the share of female ownerswho manage their own enterprise.

Research conducted in other regions indicates thatwomen are less likely than their male counterparts toown businesses.8 In the 40 countries included in thisstudy, the percentage of women entrepreneurs rangesfrom a low of 1.9 percent of adult women in Belgiumto 49.9 percent in the Philippines.While overall entre-preneurship rates for both men and women are higherin low/middle-income countries than in high-incomecountries, in all of the countries studied entrepreneurshiprates for men are higher than those for women.

The data for African countries also distinguishbetween individual and family enterprises.The percentageof entrepreneurs in family enterprises (as distinct fromindividual enterprises) is higher—sometimes muchhigher—for female-owned enterprises than for male-owned enterprises in almost all countries.As shown inFigure 2, only in Kenya and Lesotho are men entrepre-neurs more likely than women entrepreneurs to be in afamily enterprise. Overall, women are more likely thanmen to own (and possibly manage) their enterprisetogether with other family members, rather than ontheir own.The predominance of women in family

enterprises is also significant in two other respects. First,it may be that family enterprises are a way for womento combine their business activities with their domesticor household tasks, which are disproportionatelywomen’s responsibility. Second, other factors affectingfamily members—such as their legal status and theirmarital and property rights—are likely to affect the typeof constraints that the firm may face and the performanceof the business as well.

Unfortunately, the Enterprise Survey data do notinclude much information on the personal characteristicsof the entrepreneur.To build a profile of men andwomen entrepreneurs, we have therefore analyzedhousehold survey data9 that allow us to distinguishbetween several categories of workers, including“employers” (defined as self-employed people who hireemployees), whom we believe to be a reasonable proxyfor the category of “entrepreneurs” in the EnterpriseSurveys.The analysis of household survey data indicatesthat women entrepreneurs tend to be younger than men(by two to six years), an encouraging sign that accessinto entrepreneurship may be easier for younger cohortsof women. In almost all countries, a much lower shareof female than male entrepreneurs is married.This is aparticularly significant finding in that it suggests thatwomen may not find it easy to combine both familyand enterprise responsibilities. Case studies confirm thisfinding, as it is rare to find women entrepreneurs whosehusbands support their enterprises.10 Finally, these dataconfirm that women entrepreneurs are much more

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Figure 1: Percentage of enterprises owned by women in selected African countries


Note: The sample is restricted to individual and family firms. Enterprises with fewer than 10 employees and enterprises operating in the service sector are excluded.

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likely than men to live in a household with other entrepreneurs—suggesting that women are more likelyto own and manage the enterprise together with familymembers rather than independently (for example, theymay be likely to work in the enterprise of their familyof origin).This reinforces the findings of the EnterpriseSurvey data presented above.

Table 1 summarizes key characteristics of male- andfemale-owned enterprises in Africa.These include thesector, the size, and the number of years in business.Female-owned enterprises are more likely found insome sectors than in others, although the sector withmore women entrepreneurs varies depending on thecountry. For example, women are more likely found inthe textile sector in the Democratic Republic of Congo(DRC), Madagascar, Mauritius, and South Africa; inagro-food in Angola, Malawi, and Mali; and in servicesin The Gambia, Mauritania, Namibia, and Uganda.Asthe table shows, there is no unambiguous pattern, eitherin terms of sector or business size, that differentiatesmale-owned from female-owned enterprises.

Contrary to a priori expectations, female-ownedenterprises in the formal manufacturing sector are notdisproportionately small and medium-sized enterprises(SMEs).Women are as likely to own large firms as theyare to own small ones. In fact, in five of seven countriesfor which data are available, the percentage of female-owned enterprises is higher among large firms thanamong small firms.11 Although the Enterprise Surveydata do not tell us how long the woman herself has

owned the enterprise, there is information about the age of the enterprise.Table 1 shows that women are notsystematically more likely than men to own new firms.While in some countries (Benin, DRC, Eritrea, Lesotho,Mali, and South Africa) the average age of the enterprisesowned by women is lower than those owned by men, inother countries (Kenya, Mauritius, Mozambique, Nigeria,and Tanzania) the opposite is the case.With few excep-tions, countries where businesses are on average younger(older) for both men and women tend to have a higher(lower) share of female-owned enterprises.This mayindicate that a higher level of female entrepreneurshipexists where it is easier altogether to start a business(that is, where obstacles at entry are lower) and there is ahigher level of entrepreneurial activity.

The multivariate analysis confirms the patternshighlighted in Table 1. In several countries (DRC,Madagascar, Mauritius, Morocco, Namibia, Niger, SouthAfrica, and Uganda), enterprises in the textiles sector aredisproportionately more likely to be owned by womenthan enterprises in other sectors. In other countries(Angola, Cape Verde,The Gambia, Madagascar, Mali,Mauritania, Senegal,Tanzania, and Uganda), manufactur-ing enterprises are less likely to be owned by womenthan enterprises in other sectors.After controlling forsector, size is not correlated in any significant way withfemale ownership except in South Africa (where bigfirms are less likely to be owned by women) and inAngola (where medium-sized enterprises are more likely to be female-owned). Even after controlling for

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Figure 2: Percentage of entrepreneurs in family enterprises (as opposed to individual enterprises), by sex of the business owner


Beni

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■ Female entrepreneurs ■ Male entrepreneurs


other characteristics, family enterprises are still two toseven times more likely to be owned by women thanindividual enterprises.This is the case in Egypt, Ethiopia,Madagascar, Malawi, Mauritius, Zambia, and especiallyin South Africa.

Gender differences in constraints and opportunitiesDo women and men entrepreneurs face different con-straints in managing their businesses? Table 2 indicatesfor selected constraints, separately for men and women,the percentage of entrepreneurs who are more likely tocomplain that a specific constraint represents a “major”or “very severe” obstacle for the operation and growthof their enterprise. Some constraints tend to be moreclosely associated with women entrepreneurs. For exam-ple, corruption is identified as a “major” or “very severe”constraint by female-owned enterprises somewhat morefrequently than by male-owned enterprises, while thereverse is the case for labor regulations. However,although there are differences in their perceptions aboutthe severity of an obstacle, there is no clearly discernible

gender-distinct pattern in either the nature of the constraint (that is, there is no obstacle that women findsystematically more severe than men in all countries) orthe country (that is, there is no country where womenare systematically more likely than men to complainabout all obstacles) in which the entrepreneur operates.Unfortunately, small sample sizes—especially for thesample of women entrepreneurs—again limit in manycases the possibility of testing whether the differencebetween female and male entrepreneurs is significant,and to draw firm conclusions.

A related but important question is whether thedifferences between women and men entrepreneurs isdue to gender rather than to other factors, such as thesize of the enterprise or the sector within which theenterprise operates.The answer is “Yes”—to someextent.After accounting for the fact that enterprises ofdifferent size and age, and that are operating in differentsectors and geographical locations, can be affected dif-ferently by the severity of business constraints, we stillobserve some differences between men and womenentrepreneurs in their judgment about the severity of a

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Table 1: Percentage of female-owned enterprises, by sector and size (selected countries)

Mircro Small Medium LargeAgro- Other (1–9 (10–49 (50–99 (100+ Female- Male-

Country/Year of survey Textile food manuf. Services Other employees) employees) employees) employees) Total owned owned

Angola . 40 10 29 30 25 25 . . 25 7.8 7.6Benin . 13 8 n/a . 10 7 . . 9 6.9 14Botswana . . 58 56 . 56 54 . . 55 9.2 9.3Burkina Faso . . . n/a . . . . . 29 14 15Burundi . . 21 32 39 31 42 . . 33 8.2 7.9Cameroon . . 37 . . . 41 . . 42 15 16Cape Verde . . . n/a . . . . . 51 23 21Congo, Dem. Rep. 46 7 8 25 26 25 17 . . 22 7.8 10Egypt 21 25 20 . . 19 19 22 24 21 22 21Eritrea . . . n/a . . . . . 5 22 29Ethiopia 14 11 10 n/a . 11 12 . . 11 20 13Gambia, The 24 . 11 36 . 27 18 . . 25 12 9.2Guinea-Bissau . . 13 11 . 18 15 . . 14 10 9.9Kenya 8 . 6 n/a . . 6 6 6 6 28 24Lesotho . . . n/a . . . . . 20 7.8 12Madagascar 48 22 12 n/a . . 21 . 24 24 14 17Malawi . 23 15 n/a . . 15 . 18 18 17 14Mali . 30 3 n/a . 19 11 . . 13 8.4 13Mauritania . . 6 20 11 16 20 . . 17 7.8 9.7Mauritius 21 . 7 n/a . . 9 17 . 12 26 23Morocco 8 2 2 n/a . . 5 8 7 6 14.6 18.6Mozambique . 46 42 n/a . . 43 . . 44 27 20Namibia . . 17 45 19 41 32 . . 37 9.7 11Niger . . . . . 12 10 . . 11 14 16Nigeria . . 5 n/a . 3 . . 6 28 18Senegal . 9 4 n/a . 4 8 . . 7 17 16South Africa 15 3 10 . . . 12 7 8 9 15 21Swaziland . . . 48 . 38 27 . . 39 8.2 7.9Tanzania . 9 6 n/a . 3 10 . . 8 25 16Uganda . 38 16 41 . 31 30 . . 32 12 11Zambia . 15 13 . . . 8 20 18 14 18 19


Note: The figures represent the percentage of women entrepreneurs within each group. Figures are not shown when the sample size is fewer than 30 enterprises(= . ). n/a indicates that the data were not collected in the survey.

Sector of enterpriseSize of enterprise

Years in business


given constraint. Figure 3 shows predicted probabilitiesof complaining about an obstacle being “major” or“very severe” for a man and a woman entrepreneur withfixed characteristics—that is, similar in all respectsexcept for their sex.12 The results are shown for 6 of the 18 constraints identified in the Enterprise Surveyquestionnaire—these are the constraints that are usuallyindicated as more binding and critical for women thanfor men, such as corruption and access to finance.Women and men entrepreneurs do differ in their per-ceptions of business constraints, after controlling for themost important observable characteristics.Again, howev-er, there is no consistent pattern across countries andconstraints. In some countries, men are more likely thanwomen to report a constraint as “major” or “verysevere”; in other countries the opposite holds—evenwhen looking at the same type of constraint. In severalcases, men and women entrepreneurs agree on theseverity of a constraint. No constraint appears to be a“female-type” of constraint, that is, one overwhelminglysuffered by women. Corruption, for example, is, along

with access to finance, a constraint that one wouldexpect women to be more likely to complain aboutthan others.As shown in Figure 3b, in Mozambique,Senegal, and Zambia, women are more likely than mento judge corruption a “major” or “very severe” obstacle,but in Angola, Benin, Egypt, Malawi, and Mali, men aremuch more likely to complain about corruption.

Access to finance appears to be as much a maleproblem as it is a female one. If women are more likelyto indicate this constraint as “major” or “very severe” inBurundi, Eritrea, Kenya, Lesotho, and Madagascar, menidentify this more as a constraint in Angola, Mauritania,and Tanzania. Figure 3 reveals a very clear positive correlation—in countries where the probability of awoman considering an obstacle “major” or “very severe”is higher, the probability of men complaining about thesame obstacle to the same degree is also higher. So, forexample, corruption is clearly a problem for both menand women in Egypt and Kenya, access to finance inGuinea-Bissau and Cameroon, and tax administration inCameroon and Kenya. Some issues appear to be more

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Table 2: Percentage of entrepreneurs who identify selected obstacles as “major” or “very severe,” by sex of thebusiness owner

OBSTACLE

Skills and education Crime, Labor LicensesAccess to land of available workers Corruption theft, disorder regulations and permits

Country/Year of survey Female Male Female Male Female Male Female Male Female Male Female Male

Angola 15 26 10 22 22 37 27 35 3 12 31 31Benin . 32 . 21 . 85 . 50 . 34 . 52Botswana 31 23 18 14 23 22 14 22 5 9 16 16Burkina Faso . 8 . 19 . 50 . 8 . 19 . 22Burundi 29 30 12 10 24 14 21 17 0 2 16 10Cameroon 26 6 17 6 42 29 26 6 75 61 42 29Cape Verde . . . . . . . . . . . .Congo, Dem. Rep. 24 15 14 15 18 18 30 20 14 12 31 25Egypt 29 20 35 36 59 63 n/a n/a 24 31 14 11Eritrea . . . 36 . 3 . 0 . 3 . 6Ethiopia 61 63 14 15 46 43 8 11 0 4 3 10Gambia, The 30 27 18 8 15 9 15 11 7 2 13 14Guinea-Bissau 26 24 15 11 40 45 29 33 12 3 9 20Kenya . 24 . 29 . 77 . 72 . 25 . 16Lesotho . 29 . 33 . 38 . 51 . 19 . 27Madagascar 18 22 32 27 41 48 42 35 19 10 14 14Malawi . 19 . 45 . 48 . 49 . 15 . 5Mali . 40 . 21 . 52 . 25 . 4 . 10Mauritania 14 29 26 15 21 15 0 4 0 3 2 4Mauritius . 23 . 39 . 35 . 24 . 26 . 46Morocco 38 45 36 20 16 16 9 8 18 15 18 19Mozambique 35 24 32 32 63 56 49 51 18 43 31 25Namibia 19 14 13 24 26 18 26 26 9 10 9 7Niger . 14 . 2 . 58 . 6 . 17 . 17Nigeria n/a n/a . 5 n/a n/a . 26 . 17 . 12Senegal . 28 . 18 . 36 . 13 . 16 . 7South Africa 6 3 19 30 19 16 35 32 16 33 0 3Swaziland 10 13 12 11 19 24 31 32 4 6 21 26Tanzania . 29 . 29 . 54 . 29 . 13 . 30Uganda 13 22 9 9 25 20 15 14 1 2 8 16Zambia . 19 . 39 . 50 . 56 . 19 . 15


Note: The figures represent the percentage of entrepreneurs reporting the identified obstacle as “major” or “very severe.” Figures are not shown when the samplesize is fewer than 30 enterprises (= . ). n/a indicates that the data were not collected in the survey.


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100Kenya

Mozambique

The Gambia

Congo, Dem. Rep.Egypt

Angola

Mauritania

Figure 3: Probability of an entrepreneur declaring that a specific constraint constitutes a “major” or “very severe”obstacle for the operation and growth of the business, by sex of the business owner

3a: Anticompetitive and informal practices


Note: Predicted probabilities are evaluated for a stylized enterprise with the following characteristics: small firm, in manufacturing (outside textile and agro-food),located in the capital city, in operation for about seven years, and where top management has an education level below university.

The points above the diagonal line represent countries in which the estimated probability of the “stylized enterprise” complaining about the constraint as a “major”or “very severe” obstacle is greater for women enterprises. The points below the diagonal line show where the probability is greater for male enterprises.

Only in countries indicated in bold is the difference significant in a statistical sense (at the 5 percent level). However, because the sample sizes are often quitesmall, it is not possible to determine in countries with a substantial but not statistically significant difference whether this result is due to the small sample sizeor whether it reflects the fact that there is no economic difference between men and women. For this reason, where this is the case, these countries are alsoincluded in the figure.

Male-owned enterprises

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South Africa

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Zambia

3c: Access to finance


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Mozambique

The Gambia

South AfricaAngola

Figure 3: Probability of an entrepreneur declaring that a specific constraint constitutes a “major” or “very severe”obstacle for the operation and growth of the business, by sex of the business owner (cont’d.)

3d: Labor regulations


Note: Predicted probabilities are evaluated for a stylized enterprise with the following characteristics: small firm, in manufacturing (outside textile and agro-food),located in the capital city, in operation for about seven years, and where top management has an education level below university.

The points above the diagonal line represent countries in which the estimated probability of the “stylized enterprise” complaining about the constraint as a “major”or “very severe” obstacle is greater for women enterprises. The points below the diagonal line show where the probability is greater for male enterprises.

Only in countries indicated in bold is the difference significant in a statistical sense (at the 5 percent level). However, because the sample sizes are often quitesmall, it is not possible to determine in countries with a substantial but not statistically significant difference whether this result is due to the small sample sizeor whether it reflects the fact that there is no economic difference between men and women. For this reason, where this is the case, these countries are alsoincluded in the figure.


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severe than others—access to finance is in general clearly felt as a more problematic constraint than laborregulations.

International research in other regions indicates thata lower level of confidence, a greater fear of failure, andthe lack of role models may be preventing some womenfrom entering into business ownership in the first place.In interviews conducted as part of the 2006 GlobalEntrepreneurship Monitor surveys in 40 countries,fewer adult women than men interviewed feel that they “have the required skills and knowledge to start abusiness”: 41 percent of women in low- or middle-income countries compared with 50 percent of men,and 33 percent of women in high-income countriescompared with 46 percent of men.These gender differ-ences disappear among the women and men interviewedwho actually own enterprises, with over three-quartersof male and female respondents saying they have therequired knowledge and skills. Likewise, women whoare not business owners are more likely than men toagree that “fear of failure would prevent me from startinga business” (40 percent compared with 33 percent inlow- or middle-income countries and 44 percent com-pared with 39 percent in high-income countries) and,again, gender differences disappear among the activebusiness owners interviewed.13

The lack of role models is another constraint towomen’s entrepreneurship, but one that appears to bediminishing with time.Among the adult women inter-viewed for the 2006 Global Entrepreneurship Monitorstudy, just 35 percent in low- or middle-income countriesand 27 percent in high-income countries personallyknow someone who has started a business.That shareincreases to 53 percent and 47 percent, respectively,among established business owners (those who havebeen in business for more than 42 months), and it iseven higher for newly established businesses—61 percentof women in low- or middle-income countries and 56 percent of women in high-income countries.14

Consequently, familiarity with someone involved inentrepreneurship is positively correlated with becomingan entrepreneur, and it appears that there are now moresuch role models for women getting into business todaythan even in the recent past.These factors all affectselection into entrepreneurship at the outset, and help toexplain why, once already engaged in entrepreneurialactivity, differences based on gender seem to becomeless immediately relevant.

The results derived from the Enterprise Survey datapresented here need to be interpreted with caution.First, sample sizes are small. Second, there are missingobservations that are likely not to be random and there-fore are likely to affect the results. For example, entre-preneurs who have a strong feeling about a constraintbeing severe may be more likely to answer the question(or vice versa).This selection effect on the missing valuesmay be different for men and women.Third, these

results reflect perceptions, not objective measures of theconstraints identified. Finally, the severity of the con-straints is assessed by entrepreneurs already in business—therefore these constraints are perceived in relation tohow they affect the firm’s operations, not its startup. Itmay be that women are affected more than men by spe-cific constraints at the startup stage, so that they are notable to enter into business, but this is not amenable toanalysis through the Enterprise Survey data.

How is the performance of businesses affected?The analysis of constraints developed in the previoussection indicates that, although there are cases in whichwomen are more likely to identify certain obstacles as“major” or “very severe,” men’s and women’s perceptionstend to be in agreement more often than we might haveexpected. Even if perceptions of constraints are frequentlysimilar for men and women, it is important to askwhether some constraints affect the performance offemale-owned enterprises more than they affect the performance of male-owned enterprises.

In what follows, two indicators of performancehave been analyzed: value-added per worker and totalfactor productivity (TFP).15 A priori, differences betweenfemale- and male-owned enterprises may be expected,due, for example, to women facing greater difficultiesthan male entrepreneurs in managing their enterprises.Or, conversely, differences may be due to women entre-preneurs being a very selected sample, because they hadto face greater obstacles than men to start their businessesin the first place.

The value-added per worker is very similar for menand women, as Figure 4 illustrates.This analysis disag-gregates the results presented in Chapter 1.2 by sex ofthe owner of the enterprise. Only in three countries(Tanzania, in favor of women; Namibia and Botswana, infavor of men) is there a statistically significant differencebetween the median of the value-added per worker ofthe two groups of entrepreneurs.

Women entrepreneurs are also fairly equally distrib-uted across quintiles of TFP—see Figure 5.16 Women arenot overrepresented at the top of the distribution ofTFP, nor are they overrepresented at the bottom.

These results suggest that, once men and womenentrepreneurs are in business (and survive in business),they face on average the same conditions, and theirenterprises display very similar levels of value-added perworker and TFP. It may be that, if selection of womeninto entrepreneurship is tougher than for men, higherunobservable characteristics of women compensate forhigher obstacles that they may be facing as women, butthe net result is essentially one of no difference in pro-ductivity.The positive message, therefore, is that in Africawomen’s enterprises can be just as productive as men’s.

What about the impact of business constraints onfirm productivity? Even in this case there is no evidence

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Tanzania

Figure 4: Median value-added per worker, by sex of the business owner (2005 US$)


Note: Countries where the difference between male and female owners in the values given is statistically significant (at the 5 percent level) are indicated in bold.


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Figure 5: Total factor productivity, by quintile and sex of the business owner


Quintile of total factor productivity

Perc

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■ Female-owned enterprises ■ Male-owned enterprises


of the performance of female-owned enterprises beingdisproportionately negatively affected. Figure 6 showsthe relationship between median value-added per worker(by sex of the business owner) and the severity of twoconstraints that are generally identified as gender-adverse:corruption (measured by the percentage of entrepreneursforced to pay bribes to obtain a service or a license,Figure 6a) and access to finance (measured by the averagepercentage of working capital financed by “formal”sources—from local or foreign commercial banks, leasingarrangements, investment funds, trade credit, creditcards, Figure 6b—and by all types of external sources,including informal networks, Figure 6c). In this case, thechosen constraints are more “objective” than the percep-tions of entrepreneurs about the severity of an obstacle,analyzed in the previous section.

The negative relationship between corruption andproductivity highlighted in Chapter 1.2 exists for bothmen and women entrepreneurs. However, according tothe Enterprise Survey data, the productivity of female-owned businesses does not appear to be affected morethan the productivity of male-owned businesses.17 Thesame holds for access to finance, measured as the averagepercentage of working capital from formal sources.Similarly, across countries, a larger share of working cap-ital derived from external sources (that is, from formalsources as well as informal channels such as family,friends, money lenders, but excluding internal funds and

sale of stock) is associated with higher productivity, butthe same relationship exists for men and women alike.

These findings are confirmed even after controllingfor the firm’s characteristics (size, sector, location, andwhether the firm exports or not). Except in a few cases,the performance of female-owned enterprises is not disproportionately affected by the severity of the con-straints.18 In other words, once they are over the entrythreshold and are operating businesses, both men andwomen entrepreneurs in this sample are by and largeaffected by these constraints in the same way.

The broader contextAlthough the focus on formal sector entrepreneurssheds light on a particular, if small, facet of entrepre-neurial activity, it is important to bear in mind both thewider context in which such activity occurs in Africaand the limitations of available data in interpreting theseresults. First, much economic activity in Africa takesplace in the informal sector, which is poorly captured inavailable data and statistics. Second, data on the legal status of men and women, on gender differences inproperty rights—for example, with respect to land own-ership—or rights relating to marriage and inheritance,which are highly relevant for understanding how thebusiness climate affects men and women differently,are largely unavailable and require in-depth and

6a: Corruption (percentage of entrepreneurs paying bribes)

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South Africa

South Africa

TanzaniaNamibia

NamibiaMali

Cameroon Cameroon

Congo, Dem. Rep.Congo, Dem. Rep.

Kenya

Kenya

Figure 6: Median value-added per worker and intensity of selected constraints, by sex of the business owner


Percentage of entrepreneurs paying bribes

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● Value-added per worker (women) ● Value-added per worker (men)

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Figure 6: Median value-added per worker and intensity of selected constraints, by sex of the business owner (cont’d.)

Percentage of working capital from formal sources

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6c: Access to finance (percentage of working capital from external sources)

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country-specific analysis that is beyond the scope of thischapter.Third, Enterprise Surveys have important limi-tations for the analysis of female entrepreneurship interms of coverage, sample size, and information collect-ed.These issues will be addressed in turn.

The informal sectorEntrepreneurs—male or female—constitute a very smallpercentage of the population, according to householdsurvey data.Almost everywhere, less than 1 percent of allwomen of working age (15 to 65 years old) are“employers”—that is, women who own a business inwhich they employ hired labor. In Africa, most workingwomen are not “formal” entrepreneurs but are ratherself-employed and own-account workers in the informalsector.The informal sector is particularly important inAfrica, and is often an entry point for broadening participation in the private sector. International LabourOrganization (ILO) data indicate that the informal sector represents 48 percent of nonagricultural employ-ment in North Africa, and 72 percent of nonagriculturalemployment in sub-Saharan Africa.19 Informal employ-ment is generally a larger source of employment forwomen, though not in North Africa.

For example, the recently completed Gender andGrowth Assessment (GGA) for Tanzania confirmed theimportance of the informal sector in the economy, not-ing that the vast majority of businesses in the countryare outside the formal legal system. It is estimated thatthe number of women entrepreneurs ranges from730,000 to 1.2 million, and are particularly found in the micro, small, and medium-sized enterprise (MSME)sector where they make up 43 percent of the total.Barriers to the formalization of a business—particularlylengthy and complex business registration, incorpora-tion, and licensing practices—have a disproportionatelynegative effect on women, in some cases making itimpossible for them to formalize their businesses.20

Women’s participation in the informal economy mayhelp in understanding their participation in the formalsector. It has been argued, for example, that women running informal enterprises value the higher flexibilityoffered by the informal sector.This is confirmed bywomen entrepreneurs in both Kenya and Tanzania.21

One of the important reasons that women may prefer the flexibility of informal arrangements is thatthis flexibility makes it easier for women to managetheir “double workday.” Because women usually have toassume by far the greater burden of domestic tasks, asrevealed in time allocation data in Africa, their capacityto engage in economic, including entrepreneurial, activ-ity is much more constrained.22 Moreover, the boundarybetween economic and household activity is less welldrawn in Africa than in other regions,23 and conventionallabor force data capture a much more limited share ofwomen’s total workload than men’s.This additionalworkload means that women can essentially carry out

economic activities only in conjunction with or afterfulfilling their domestic responsibilities.This may help toexplain why, as indicated earlier, women are more likelyto be involved in family enterprises that are more com-patible with combining both domestic and economicactivity.

Legal and regulatory constraintsMany African countries are characterized by the coexis-tence of dual or multiple legal systems, which lead togreater insecurity of women’s legal status, comparedwith men.A 10-country study of women’s legal rightsin sub-Saharan Africa finds that under both statutoryand customary law, the overwhelming majority ofwomen in sub-Saharan Africa—often regardless of theirmarital status—cannot own or inherit land, housing, orother property in their own right.24 Eligibility to accessfinance is identified as a hurdle in the World Bank’srecent study of finance in Africa. In Swaziland, forexample, legislation mandates that a woman can beparty to a contract (such as opening an account or takingout a loan) only with the consent of her father, husband,or other male family member.This might explain thelarge gender gap in bank accounts—52 percent of menbut only 30 percent of women have accounts in thatcountry.25 Many country studies document the ways inwhich property rights differ for men and women, andhow protections and remedies afforded to women aredifferent from those afforded to men.These constraintsmay not have as much impact on women who arealready entrepreneurs, but may have a severe impact onwomen who want to become entrepreneurs and are notable to do so. Unfortunately, data are “sorely lacking”according to one study of women’s property rights insub-Saharan Africa.26 This makes it difficult to know thetrue extent of women’s ownership or control of keyassets and resources.

Some African countries have embarked on reformsaimed at reducing the discriminatory treatment ofwomen by their legal systems. Reforms have generallyfocused on gaining equal legal protection for womenunder constitutions, suffrage rights, fair labor laws, familylaw (for example, incorporating the various customsgoverning women’s role in the family into a uniformlegal code), and improving women’s right to propertyunder intestate laws. Not all constitutions guaranteewomen equal rights with men, and in countries wherethey do, lower-level laws or application of laws may violate the gender equality provision of the constitution,and common practice may ignore it altogether.Toaddress some of these issues,African heads of stateadopted a protocol to the African Charter on Human andPeoples’ Rights on the Rights of Women in Africa in Maputoin 2003, which entered into force in November 2005.In all, 43 countries have signed the protocol, and 20have ratified it.27

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A promising area of intervention in support ofwomen’s entrepreneurship has been opened up throughthe work pioneered by the Gender EntrepreneurshipMarkets (GEM) unit of the International FinanceCorporation (IFC), in collaboration with the ForeignInvestment Advisory Service (FIAS) and the WorldBank.A program of Gender and Growth Assessments(GGAs) is now being developed to address legal andregulatory obstacles that affect men and women differ-ently, to build the capacity of entrepreneurs, bankers,and other stakeholders, and to put in place financingmechanisms for women entrepreneurs in partnershipwith commercial banks (Box 2).

The Uganda GGA, for example, found that womencomprise 39 percent of businesses with registered prem-ises, yet most female workers in Uganda either areunpaid family farm workers or are self-employed in theinformal sector.28 Barriers to the formalization of a busi-ness appear to have a disproportionate effect on femaleentrepreneurs in Uganda due to increased time con-straints, fewer official contacts, and less access to funds.

In some cases, these constraints create an absolute barrier to women’s ability to formalize their businesses.The costs of registration and licensing regulations aremarkedly different for women compared with men (seeBox 3).

Limitations of Enterprise Survey data for gender analysisAlthough the Enterprise Survey data are without doubta rich source of information about enterprises, theiractivity, and their constraints, they have important limi-tations for investigating entrepreneurship disaggregatedby sex.The first problem is one of coverage. Becauseonly enterprises are sampled, it is impossible to analyzethe process of selection into entrepreneurship and theeffect of the constraints on the startup of enterprises,including those owned and managed by women.Second, sample sizes are often too small to allow an in-depth analysis of women entrepreneurs, who representin some cases only 10 percent or less of the sample.Third, the relationship between ownership and manage-ment is not thoroughly examined in these data.Yet this

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To strengthen the business-enabling environment for womenentrepreneurs, the Gender Entrepreneurship Markets (GEM)unit of the International Finance Corporation (IFC) in collabora-tion with the Foreign Investment Advisory Service (FIAS) andthe Africa Region of the World Bank has developed new adviso-ry and analytical products. At government request (usuallyfinance or trade ministries), Gender and Growth Assessments(GGAs) have been carried out in Kenya, Tanzania, and Ugandaand are underway or planned in Ethiopia, Ghana, and Rwanda.Building on the “Doing Business” indicators, Investment ClimateAssessments, and FIAS Assessments, these GGAs address—through a gender lens—the legal and regulatory obstacles thataffect businesses and propose concrete measures to tackle theobstacles identified. In Ghana, Kenya, and Tanzania, accompa-nying Voices of Women Entrepreneurs reports showcase suc-cessful women entrepreneurs as role models. Key results todate include:

• In Uganda and Kenya, GGA recommendations have beenfully integrated into these countries’ private-sector devel-opment strategies.

• In Uganda, a Gender Coalition has been created to supportthe implementation of GGA recommendations. Followinglobbying from the coalition, GGA recommendations havebeen incorporated into four labor reform bills coveringemployment, occupational safety and health, labor dis-putes, and labor unions, which were passed in 2006. TheMinistry of Finance, acting on GGA recommendations,commissioned new legal drafts of the Companies Act, theChattels Transfer Act, and other bills.

• As access to formal finance is now identified as amongthe most significant obstacles, IFC-GEM has worked withIFC Financial Markets to put in place lines of credit foronlending to women entrepreneurs through commercialbanks. In Nigeria, a US$15 million line of credit was provid-ed to Access Bank plc, to onlend to women entrepreneurs,and by January 2007 US$4.5 million had been disbursed to33 women-owned businesses. In Uganda, US$6 million hasbeen provided to Development Finance Company ofUganda (DFCU), with US$2 million set aside for womenentrepreneurs. In Tanzania, a US$5 million line of credit foronlending to women entrepreneurs has been provided toExIm Bank, of which US$1 million has been onlent to awoman-owned microleasing company.

• Lending to women is only part of the story. Under a finan-cial products and advisory services package, the IFC ishelping to train bank staff in areas such as market posi-tioning and gender sensitivity, and is advising banks onnew product development, such as insurance services forwomen. Women clients receive tailored training in how toprepare a bankable business, in product development, andin access to markets. To date, around 280 stakeholders inGhana, Kenya, Tanzania, and Uganda—including govern-ment staff, lawyers, entrepreneurs, and members of civilsociety—have been trained in public-private dialogue,advocacy and media issues, and business managementskills.

Source: Based on materials provided by the IFC GEM Unit.

Box 2: World Bank–IFC partnership focuses on women entrepreneurs


issue appears to be particularly relevant for women,given that one of the more pertinent findings presentedin this chapter concerns the very high percentage ofwomen entrepreneurs who are part of a family enter-prise. Finally, in addition to clarifying the relationshipbetween ownership and management, EnterpriseSurveys would be better suited to the analysis of femaleentrepreneurship if they included more questions aboutthe background of the entrepreneur, for example, moreinformation about personal characteristics and familybackground, and the reasons that motivated the individ-ual to become an entrepreneur in the first place.

ConclusionsThis chapter shows that both men and women areactive as entrepreneurs in Africa, and their enterprisesshare many common characteristics. For the select sam-ple of manufacturing and service sector entrepreneurscaptured in the Enterprise Surveys, the analysis revealssurprisingly little difference between men and womenentrepreneurs.There are some differences in the type ofbusinesses in which men and women are engaged, andsome differences in perceived constraints. However,these differences are often quite small and are not con-sistently associated with specific countries, sectors, ortypes of business.

Because this chapter finds such small differencesbetween men and women entrepreneurs along thedimensions analyzed here, it may be tempting to conclude that there is little to be gained from addressing

entrepreneurship in Africa through a gender lens.Thiswould be a mistake, as even the absence of differences—for example, with respect to firm performance—is animportant and positive finding.This analysis brings tolight several important findings that are relevant forstrengthening Africa’s competitiveness and entrepre-neurship:

• Women entrepreneurs are more likely than theirmale counterparts to be engaged in family enter-prises.They are also generally younger and less likely to be married. In recent years, it seems tohave become easier for women to enter into entre-preneurship.This suggests that family dynamics playan important role in entrepreneurship in Africa, andthat these dynamics are particularly relevant forwomen entrepreneurs.The confluence of familyand business activity, or, as mentioned earlier, theblurring of the boundary between household andeconomic activity, suggests that the legal status andrights of women within the family—especially inrelation to marriage, inheritance, and propertyrights—have a bearing on their capacity to engagein entrepreneurial activity.

• Contrary to what one might expect, in the sampleanalyzed here women are as likely to own largebusinesses as small ones, and there is no gender-distinct segmentation of women entrepreneurs interms of the sector of operation or the size and ageof the business.

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The Uganda Regulatory Cost Survey Report 2004, which cov-ered 241 enterprises in four regions, measured the compliancecost of registration and licensing requirements. Key findingswere:

• Over a quarter of all enterprises reported that govern-ment officials had “interfered” with their business, by,for example, threatening to close it or asking for bribes.For female-headed enterprises, the figure rose to 43percent.

• Forty percent of micro enterprises headed by a womanfelt that the total burden of regulation was “heavy” or“severe” (as compared with 35 percent for enterprisesheaded by a man).

• Trade licenses were identified as the most burdensomeregulation. Over 40 percent of women, compared withjust over 30 percent of men, reported trade license pro-cedures as an obstacle to the growth of their business.

The Regulatory Best Practice Program has started pilot proj-ects to reduce the time and monetary cost of obtaining tradelicenses, by streamlining licensing procedures and reducing thenumber of approvals. A pilot project in Entebbe Municipalityreduced the time spent by Ugandan businesses in obtaininglicenses by 90 percent, reduced compliance costs by 75 per-cent, and increased revenue collection by 40 percent. Theimpact assessment of the first pilot at Entebbe (which hasrecently won an International Investors award) suggests thatthe reforms were encouraging female-owned enterprises toobtain licenses for the first time—most of the license applica-tions from women were first-time registrations.

Source: Ellis et al., 2006.

Box 3: Regulatory reform and female-headed enterprises in Uganda


• Women’s businesses are at least as productive asthose of their male counterparts, as measured byvalue-added per worker and TFP. Once men andwomen entrepreneurs are operating their businesses,the constraints and obstacles they face affect themin largely the same way. Differences based on gendertend to disappear, as shown both in this chapter andin the Global Entrepreneurship Monitor surveys in40 countries.This is further confirmed in the find-ing that in countries where it is easier overall tostart, register, license, and operate a business, thereare more women entrepreneurs.

• The absence of significant gender-based barriers inoperating a business does not mean that there areno gender-based obstacles to entrepreneurship. It isvery likely that barriers to entry into entrepreneur-ship present greater obstacles for women than formen.

• Consequently, measures aimed at facilitating entryinto entrepreneurship through legal, regulatory, andother reforms are likely to have a more positiveimpact on women entrepreneurs.As shown in theGGA program, priority needs to be given to tack-ling gender-based legal and regulatory obstacles tostarting a business as a specific component of thewider effort to improve the business-enabling environment.

This analysis suggests that complex family dynamicsare at work in relation to business activity in ways thatare particularly important for women.This raises ques-tions that merit further analysis, such as what decision-making power women have, and whether the presenceof a male relative in the enterprise either dilutes orfacilitates (for example, by mediating access to credit)the discharge of their managerial responsibility.A furtherquestion concerns the ways in which women managetheir “double workday,” including through preferringinformal arrangements that are more compatible withtheir domestic responsibilities.The wider realms of fam-ily relations, and of property, marital, and inheritancerights, all have a bearing on the potential and prospectsfacing women entrepreneurs that are not the same as formen.Though data are very limited, available evidencesuggests that there is persistent discrimination againstwomen and greater precariousness of their legal statusand rights.

An important arena for further work is to addresswomen’s disadvantage by analyzing other types ofdata—for example, household surveys, or surveys ofinformal sector activities.Also, more could be doneusing Enterprise Surveys if they included more informa-tion about observable characteristics of the entrepreneurthat are not currently collected—for example, familybackground (what do parents and spouses do?), the way

the firm was acquired, and the role played by men andwomen in managing the firm. Since sex-disaggregateddata on property ownership, assets, and legal rights arelacking, one critical task is to develop statistical anddata-gathering capacity in this area.

The finding that there are no or few significant dif-ferences between female and male entrepreneurs oncethey are already operating businesses—in terms of thesectors of operation, the size or age of the business, andthe performance and productivity of the business—isencouraging. It suggests, for example, that Africa doesindeed have considerable hidden growth potential in itswomen, and that tapping that potential, includingthrough removal of barriers that exist at entry, andreducing disparities in access to and control of resourcesby empowering women economically, can make a sub-stantial difference for Africa’s growth and poverty reduc-tion. If Africa is to remain competitive, and is to tap thefull productive potential of all economic actors—maleand female—it is important to understand and tacklegender-based barriers to entrepreneurship. OnceEnterprise Surveys obtain more information on thebackground of male and female entrepreneurs, includingthrough larger samples of female entrepreneurs, it willbe possible to undertake more robust analysis of thegender dynamics of entrepreneurship in Africa.

Notes1 The World Bank’s Enterprise Surveys, some results of which are pre-

sented in the Investment Climate Profiles at the end of thisReport, were earlier termed the “Investment Climate Surveys.”

2 World Bank 2000.

3 Commission for Africa 2005.

4 Blackden et al., in Mavrotas and Shorrocks 2007. For recentoverviews of analysis relating to gender, economic growth, andmacroeconomic policy, see Stotsky 2006 and World Bank 2007a.For a wider discussion of the relevance of gender for growth anddevelopment, see World Bank 2001.

5 For more information on Enterprise Surveys, see http://www.enter-prisesurveys.org/.

6 Throughout this chapter, the data included in the analysis refer onlyto individual and family enterprises where it is both possible anduseful to determine the sex of the business owner. Governmententerprises and foreign enterprises are excluded. As a generalrule, no results are presented when there are fewer than 30enterprises in the sample or subsample being analyzed.

7 More recent surveys include a much larger percentage of very smallfirms than older surveys, and some include only manufacturingenterprises, while in others services are also covered. Because itmay be expected that women are more concentrated in smallfirms and in services, and to facilitate comparability across sur-veys and time periods, we have excluded these enterprises incomputing the percentages shown in Figure 1. In fact, womenare not overrepresented in small and service sector enterprises inthese datasets, and very similar figures are obtained using the fullsample.

8 Allen et al. 2007.

9 We used Living Standards Measurement Survey (LSMS) data for thecountries analyzed in this chapter.

10 Case studies of women entrepreneurs are presented in Voices ofWomen Entrepreneurs reports for Kenya and Tanzania (Cutura2006, 2007).

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11 Because of small sample sizes for large firms, we are able to reportresults only for a minority of countries.

12 These characteristics are chosen to represent a “common type” ofenterprise—a small firm, in manufacturing other than textile andagro-food, located in the capital city, which has been in operationfor about seven years, and with top management at an educationlevel below university. The predicted probabilities are based onthe estimates of a logit model—very similar results are obtainedwith an ordered logit model.



15 The value-added per worker has a more straightforward interpreta-tion and has been used for the univariate analysis (Figures 4 and6). Total factor productivity has been derived from estimating pro-duction functions including a dummy variable for female entrepre-neurship, and interactions between this variable and the invest-ment climate constraints. Several specifications have been used,in one- and two-step procedures, to assess the robustness of theresults.

16 The quintiles of TFP are created by dividing all the entrepreneurs infive groups of 20 percent each, after sorting all the entrepreneursin order from the least productive (the ones with the lowest TFP)to the most productive (with the highest TFP).

17 The slope of the line that captures the relationship between aver-age value-added per worker and percentage of entrepreneurs pay-ing bribes is the same for men and women (the same results holdwhen fitting functional forms other than the linear one).

18 We run one-step production function regressions for each country,including a dummy for female ownership and an interactionbetween female ownership and each constraint. We addressedthe potential endogeneity of the constraint by computing its aver-age over enterprises’ sector, size, and geographical location. Wetested whether the coefficient of the interaction term (femaleownership*average constraints) was significantly different fromzero.

19 ILO 2002; see also UNIFEM 2005.

20 World Bank 2007b.

21 Cutura 2006, 2007.

22 For more on the time poverty issue, see Blackden and Wodon2006.

23 Gelb 2001.

24 COHRE 2004.

25 Honohan and Beck 2007.

26 Strickland 2004.

27 Data on the protocol are maintained by the African Union:http://www.africa-union.org/root/au/Documents/Treaties/List/Protocol%20on%20the%20Rights%20of%20Women.pdf

28 Ellis et al. 2006.

ReferencesAllen, I. E., N. Langowitz, and M. Minitti. 2007. Global Entrepreneurship

Monitor, 2006 Report on Women and Entrepreneurship. Centerfor Women’s Leadership, Babson College, and London School ofEconomics.

Blackden, C. M. and Q. Wodon, Eds. 2006. “Gender, Time Use, andPoverty in Sub-Saharan Africa.” World Bank Working Paper No.73. Washington, DC: World Bank.

Blackden, C. M., S. Canagarajah, S. Klasen, and D. Lawson. 2007.“Gender and Growth in Sub-Saharan Africa: Issues andEvidence.” In G. Mavrotas and A. Shorrocks, eds. AdvancingDevelopment: Core Themes in Global Economics. Basingstoke,UK: Palgrave Macmillan in association with United NationsUniversity-World Institute for Development Economics Research(UNU-WIDER).

COHRE (Center on Housing Rights and Evictions). 2004. BringingEquality Home, Promoting and Protecting the Inheritance Rightsof Women: A Survey of Law and Practice in Sub-Saharan Africa.Geneva, Switzerland: COHRE.

Commission for Africa. 2005. Our Common Interest: Report of theCommission for Africa, March. Available at www.commission-forafrica.org.

Cutura, J. 2006. Voices of Women Entrepreneurs in Kenya, Report.Washington, DC: International Finance Corporation.

———. 2007. Voices of Women Entrepreneurs in Tanzania, Report.Washington, DC: International Finance Corporation.

Ellis, A., C. Manuel, and C. M. Blackden. 2006. Gender and EconomicGrowth in Uganda: Unleashing the Power of Women.Washington, DC: World Bank, Directions in Development.

Gelb, A. 2001. “Gender and Growth: Africa’s Missed Potential.” AfricaRegion Findings No. 197, December. Washington, DC: WorldBank.

Honohan, P. and T. Beck. 2007. Making Finance Work for Africa.Washington, DC: World Bank.

ILO (International Labour Organization). 2002. Women and Men in theInformal Economy: A Statistical Picture. Geneva: ILO,Employment Sector.

Mavrotas, G., and A. Shorrocks, eds. 2007. Advancing Development:Core Themes in Global Economics. Basingstoke, UK: PalgraveMacmillan in association with United Nations University-WorldInstitute for Development Economics Research (UNU-WIDER).

Stotsky, J. G. 2006. “Gender and Its Relevance to MacroeconomicPolicy: A Survey.” IMF Working Paper No. WP/06/233.Washington, DC: International Monetary Fund.

Strickland, R. 2004. “To Have and To Hold: Women’s Property andInheritance Rights in the Context of HIV/AIDS in Sub-SaharanAfrica.” International Center for Research on Women (ICRW)Working Paper. Washington, DC: ICRW in collaboration with theGlobal Coalition on Women and AIDS.

UNIFEM (United Nations Development Fund for Women). 2005.Progress of the World’s Women 2005: Women, Work, andPoverty. New York: United Nations.

World Bank. 2000. Can Africa Claim the 21st Century? Report preparedjointly by the African Development Bank, the African EconomicResearch Consortium, the Global Coalition for Africa, theEconomic Commission for Africa, and the World Bank.Washington, DC: World Bank.

———. 2001. Engendering Development: Through Gender Equality inRights, Resources, and Voice. A World Bank Policy ResearchReport. Washington, DC: World Bank.

———. 2005. Meeting the Challenges of Africa’s Development: AWorld Bank Group Action Plan. World Bank Board Document,SecM 2005-0445. Washington, DC: World Bank.

———. 2007a. Global Monitoring Report 2007: MillenniumDevelopment Goals: Confronting the Challenges of GenderEquality and Fragile States. Washington, DC: World Bank.

———. 2007b.(forthcoming). Gender and Economic Growth in Tanzania.Washington, DC: Directions in Development.

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CHAPTER 1.5

Competitiveness andInformation andCommunication Technologies(ICTs) in AfricaHAMADOUN I. TOURÉ, International Telecommunication Union

As African governments seek to liberalize theireconomies and integrate them more closely into theglobal economy, their industrial performance increasing-ly depends on the competitiveness of the firms servingtheir markets—both local and foreign-owned. Firm-level competitiveness will define the ability of Africaneconomies to grow, create new jobs, and increaseexports. Competitiveness is vital across all sectors of theeconomy:African firms face intensifying competitionboth in their domestic markets and as abroad.

Competitiveness and ICTsBecoming competitive does not mean cutting wages orenvironmental standards, avoiding taxation, or seekingsubsidies.All these strategies have been adopted by dif-ferent countries in the past, but the advantages theyconfer are at best transient. Rather, becoming competi-tive means adopting long-term strategies to raise effi-ciency, boost skill and technology levels, and move intohigher-value products. Information and communicationtechnologies (ICTs) are critical for Africa’s growth.Theyenable the fast and efficient communications across dif-ferent countries and different continents that are vitalfor success in today’s global economy. Not only that, butICT products are themselves part of the higher-value,high-tech products that are growing fastest in interna-tional trade and that can sustain faster growth of incomes.ICTs are essential for creating new skills and generatinggrowth and technological change across the wholeeconomy—from agriculture to finance, construction,and modern services. It is this dual role of ICTs—asenablers of competitiveness and as a key sector in theirown right—that makes them vital for the overall com-petitiveness of nations.

This chapter of the Africa Competitiveness Report2007 examines the policy and regulatory landscape thatis the foundation for the rapidly improving ICT infra-structure in Africa.Although African governments havealready done much to liberalize telecommunicationsmarkets (as discussed in the next section), encourageinvestment, and promote the technological readinessvital to firms’ survival, more remains to be done.Incentives are needed to build local capabilities and helpmake local firms become more competitive.As discussedin the following section,African firms and telecommu-nications operators are not waiting for government,however—they understand the importance of technologyand, in many cases, they are forging ahead and introduc-ing new communication technologies.The chapter goeson to examine the deployment of next-generation tech-nologies in the continent, including third-generation(3G) telephony, broadband Internet, and Voice overInternet Protocol (VoIP).

Indeed, far from being isolated in the global econo-my, some African firms are already participating in theforefront of technological developments and investment

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opportunities. One of the striking features of the recentboom in mobile communications is that it is largelyAfrican firms—such as MTN, Orascom, and Celtel—that are capitalizing on the new investment opportuni-ties.The boom is as much homegrown as it is based onforeign investment, and is therefore likely to prove moresustainable than previous rounds of investment in thecontinent.

The challenge for Africa is not whether to integrateinto the global economy—that is now a given—buthow to become competitive within an integrationprocess that is already taking place. Competitiveness canbest be achieved through public-private partnershipsbetween firms and government to promote the take-upof new technologies and development of new skills.Thischapter provides some insights into how this could beachieved.

Intuitively everyone can appreciate the speed, capa-bilities, and power of computers or instant messaging(even if this power is not always realized!). Historically,however, economists have struggled to prove causationbetween the adoption of ICTs and improved productiv-ity and economic growth.As Robert Solow famouslyremarked,“you can see computers everywhere but inthe productivity statistics.” Most studies originating inthe United States on the relationship between ICTs andproductivity have typically used static growth account-ing models to analyze pre- and post-1995 productivitydata relative to the number of computers or mainlines(1995 being an arbitrary cut-off point roughly corre-sponding to more rapid growth of the Internet inOrganisation for Economic Co-operation andDevelopment, or OECD, countries).1 Depending onwhether cross-country regressions or case studies areused, on the variables and time period studied, on thedefinition of the ICT sector, and on the way endogene-ity is treated, results can differ widely.

There are at least two reasons why the wealth ofresearch in this field has failed to yield a consistentanswer. Regressions have mainly focused on growth inthe number of computers or fixed telephone lines andhave generally failed to take into account the networkeffects from connecting ICT devices together (whichare likely to be sizeable). Furthermore, due to the mas-sive growth in power and speed of ICTs over the lastdecade, there are likely to be not just one, but several,structural discontinuities in the time series data—that is,data for growth and productivity data for the last decadeare being related to “computers” that are fundamentallydifferent from the computers of the early or even mid1990s. Despite these problems, Fuss and Waverman(2005) note that there is broad consensus that technicaladvances in the Information Computer (IC) andTelecommunications (T) sectors have led to large directand indirect benefits to economic growth and produc-

tivity.These advances allow for spillover effects and findsome support for modern, high-capacity telecommuni-cations networks and increased deployment of computershaving a positive impact on productivity.2

In Africa, mobile phones are the most widely usedform of communications technology (see the later sec-tion of this paper on the private sector), so the debatesurrounding the macroeconomic impact of computersin the United States and Europe may be less relevant.Waverman et al. (2005) examined the specific growthimpact of mobile phones for both developed and devel-oping countries and found a significant growth impactof mobiles that is twice as important for developingcountries as it is for developed ones.3 Moreover, theyfound an important “critical mass effect” whereby ICTshave a greater impact on productivity and growth thecloser the economy is to near-universal service.Waverman et al. (2005) suggest that their amplifiedimpact on productivity may be due to synergy and net-work effects. Despite some conflicting results (mainlybecause of the rapidity of technological change), ICTshave been found to improve productivity in severalstudies, and, more specifically, mobile phones have beenfound to have a positive growth impact in some Africancountries.

What role for governments?Traditionally the role for government in ICTs in Africahas been a very direct one: owner and operator of theincumbent public telecommunications operator.This isnow shifting as African governments seek, instead, topromote competitiveness by establishing a sound policyframework and stable institutions, some of the definingfactors of competitiveness set out in Chapter 1.1.4

Market liberalizationIn the increasingly integrated global economy, manyAfrican governments have committed to open up theirdomestic telecommunications market and introducecompetition. Half of all Africa’s fixed-line markets arenow subject to competition (Figure 1a) and nearly halfhave private-sector participation in their ownershipstructure (Figure 1b).The first privatizations of Africanincumbents took place in 1995–97, with a second roundin 2000–01.Today 25 African incumbents have beenwholly or partially privatized. Nevertheless, by compari-son with other regions,Africa remains the continentwith the highest number of monopoly service providersand the lowest proportion of privatized incumbentsworldwide.

African mobile markets are more competitive thanfixed markets (Figure 2a) with four-fifths subject tocompetition in 2006 (Figure 2b). Over the last 10 years,

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1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006


mobile operations that started out as extensions of state-owned incumbents have been transformed through:

• licensing additional operators—as happened, forinstance, in Nigeria, with the licensing of threemobile operators in 2001;

• sale—for example, the disposal of Telecom Egypt’smobile subsidiary; and

• foreign acquisition—such as Vivendi’s acquisition of35 percent of Maroc Telecom in December 1999.

Recent technological advances are transformingtelecommunications markets, however, and changing thenature of competition.5 On the one hand, the migrationfrom circuit-switched networks to Internet Protocol(IP)-based networks is opening opportunities for newentrants to offer new services and challenge establishedoperators. Niche VoIP service providers squeezing aprofit out of the margin between retail and wholesaleprices have sprung up in many countries, includingAlgeria, Kenya, Mauritius, South Africa,Tanzania, andUganda.VoIP traffic in the “gray market” is an alterna-tive form of competition and is driving significant pricereductions in international calls across Africa.

However, control of the international gateways is acritical factor in opening up markets.The majority ofAfrican incumbents still have only one gateway operatedby the incumbent—as, for example, in the Republic ofBenin—with little or no competition at this level.A fewcountries have led the way in establishing more gate-ways with licenses for mobile operators—Kenya nowhas over 10 international gateways in an open market,with cheaper international-call tariffs as a result. Somegovernments are now pioneering the structural reformsnecessary for a sound and vibrant telecommunicationsmarket. Far from seeing VoIP as a threat and resisting itsadvance, countries such as Kenya and Nigeria haveopened up their markets to multiple operators and serv-ice providers. However, other African countries havealso a shown a tendency to backtrack and four ofthem—Benin, Central African Republic, Sierra Leone,and Zimbabwe—have taken steps to repudiate competi-tive international gateways in recent months.6

Incentives to attract investment and build local capabilitiesBy themselves, however, market liberalization and regu-latory reform are not sufficient.They must be matchedby incentives to ensure the absorption of technologyand development of local capabilities at the firm level.Local capabilities are even more important in an opensetting.Although some countries have succeeded inattracting investment in labor-intensive activities, thisadvantage is at best transient—low-skilled labor cannoteasily cope with rapid technological change.As wagesrise, local capabilities must be upgraded and the skills ofthe workforce must be developed if firms are to remain

competitive.Technological readiness is one of the ninepillars of the Global Competitiveness Index (GCI), asdiscussed in Chapter 1.1.

Governments have adopted a range of measures topromote activities with potential for growth, employ-ment, and technology transfer.Asian governments wereamong the first to pioneer the use of a wide range offiscal and export incentives to attract investors, but taxincentives are now popular and widely used, includingin Africa.Table 1 lists the tax incentives offered by vari-ous developing countries to encourage investment andtechnological upgrading in specific sectors or regions—often to attract investment in manufacturing, export,and high-tech activities—including ICTs.

Tax incentives are often designed to attract largeinvestors and multinationals, for example, in the incen-tives offered to firms in Free Zones or ExportProcessing Zones (EPZs). Domestic tax incentives usual-ly apply mainly to large, listed companies. Small firmsare often more responsive to tax incentives, however,because taxes play a larger role in their cost base andthey do not have access to sophisticated tax planning.This is especially important in Africa, where small andmedium-sized enterprises (SMEs) account for mostdomestic production. Kheir-El-Din et al. (2000) notethat tax exemptions in Egypt applied mostly to freezone enterprises or publicly listed companies on thestock exchange and are enjoyed mainly by large enter-prises, hindering the development of capabilities by localfirms that is vital for competitiveness.7

Many African governments have offered generousincentives targeting high-tech activities. Historically,African countries have tended to rely on tax holidays orexemptions from corporate income tax8 in contrast toindustrialized countries, which have used investmentallowances more widely.9 There is evidence that tax hol-idays are costly to developing economies and ineffec-tive—Rwanda abolished its tax holiday scheme in linewith best practice. Mauritius has a favorable capitalallowance scheme with a 25 percent investmentallowance on new premises, plant and machinery, andcomputer software in the first year. Nigeria has alsointroduced an investment allowance scheme. Egypt hasestablished its Smart Village as a hub for ICT companiesto encourage investment in ICT and high-tech sectors.Rwanda’s National Information and CommunicationInfrastructure (NICI) Plan seeks to promote absorptionof ICTs by industry (Box 1). International experiencesuggests that incentives are best offered on the basis of asectoral approach.10 Governments can promote competi-tiveness by designing a framework of incentives support-ing higher-tech activities taking into account of theneeds of local firms, as well as large investors.

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Table 1: Investment tax incentives in selected developing countries

AcceleratedInvestment depreciation Sectoral Export Regional Loss carry Tax holidays Corporation tax

Country tax credit (percent per annum) incentives incentives incentives forward (in years) rate (percent)

Botswana None Mining + capital Yes Duty exemptions No 5 None 25allowances

Brazil None Yes Yes Yes Yes 4 15 34Ecuador In tourism 5–10 Yes Yes Yes n/a 20 25Ethiopia n/a Yes Yes Yes Yes 3–5 1–5 35Ghana None 5–20 Yes Yes; less CT in NTE Yes (–25/–50%) 5 5–10 30–32.5Kenya None Yes Limited Yes No Unlimited 10 30–37.5Korea 6–10% Yes Yes Yes No 3 5 15–25Lesotho None 5–25 Yes Yes No n/a None 15–35Mauritius 10% Yes Yes Extensive No Unlimited 0–10 15–25–35Mexico 19–25% Yes Yes Yes Yes 4 None 34Nepal None 5–25 Yes Yes Yes n/a 5–10 20–30Nigeria 5–20% No Yes Yes No 4 3–5 30Peru None 3–20 Yes Yes Yes 4 None 27Philippines 75–100% No Yes Yes No n/a 4–5 32Rwanda None 5–50 Yes Yes Yes 5 None 30Singapore 33.3–50% Yes Yes Yes No Unlimited 5–10 20Sri Lanka None Yes Yes Yes Yes 6 5 30Tanzania None 25–100 Yes Yes Yes 5 2–5 30Uganda None 5–20 Yes Yes Yes Unlimited 10 30

Source: Biggs 2007, adapted from El-Samalouty 2000 and UNCTAD Investment Policy Reviews.

Note: Corporation tax rates are sourced from investment promotion agency websites and from KPMG, available atwww.in.kpmg.com/pdf/2003CorporateTaxSurveyFINAL.pdf. @http://www.investzanzibar.org/IPA_Information.asp?hdnGroupID=3&hdnLevelID=9&hdnlocaleid=1;Ethiopia CT rate from http://www.eatic.org/media/powerpoint/eia_presentation.ppt#297,6,Slide 6. n/a, not available.

Box 1: Rwanda: An inclusive ICT policy

Rwanda’s Government has developed a National Informationand Communication Infrastructure (NICI) Plan as its ICT strate-gy for the next 15 years until the fulfillment of Vision 2020. ThePlan aims to transform Rwanda from an agricultural economy toa predominantly information-rich, knowledge-based economy.

The Plan has a dual focus:

• to build an export-oriented ICT industry; and

• to use ICTs to boost development in areas such as agriculture, government public service, the private sector,and social services such as education and health.

The Government has established a Rwanda InformationTechnology Authority (RITA) to oversee the implementation ofthe Plan. The agency aims to create pro-ICT development bypairing local ICT companies with international players and otherinitiatives, including:

• supporting the development of a low-cost computer fordomestic use and export;

• translating software to Kinyarwanda, the local language;

• working with international IT companies, such as Ciscoand Sun, to develop training facilities;

• examining the feasibility of building a national fiber opticbackbone to connect public agencies and support e-government applications; and

• developing public Internet access facilities.In terms of supporting structural reforms, Rwanda priva-

tized its incumbent telecommunications operator Rwandatel in2005, when it sold 99 percent of shares in Rwandatel toTerracom, a private investor, the highest proportion of privateownership of any incumbent operator in Africa. Terracom boost-ed Rwanda’s broadband subscribers from a mere 22 to some700 in its first eight months of operations and has nowembarked on a fiber expansion, laying a national backbone fromthe capital Kigali to the Ugandan and Burundi borders.


What role for the private sector?The growing “information intensity” of modern manu-facturing means that a range of modern technologiesand skills are needed by firms.11 The ability to use newICTs effectively is now common to all activities. Inindustrialized countries it is the private sector (mainlymanufacturing enterprises) that has been the mainsource of innovation and new technologies.13 In Africa,the private sector is also investing to offer modern com-munications to African firms and consumers. However,private-sector investment does not occur in a vacuum.As we have seen, governments can establish an enablingenvironment for investment in infrastructure and incen-tives to encourage local firms to upgrade their businessprocesses and make them more competitive. New anddisruptive technologies pose significant challenges forregulation and licensing that can be resolved only bygovernment working in partnership with the privatesector.

African firms and telecommunications operators areforging ahead with new services and advanced tech-nologies.Arguably Africa’s greatest success story to datein telecommunications is the remarkable spread ofmobile telephony throughout the continent.Africa’smobile market has been the fastest-growing of anyregion over the last five years, and has grown twice asfast as the global market (Figure 3a).Africa took over ahundred years to accumulate 28 million fixed lines: thisis an average penetration rate of just 3 lines per 100inhabitants, and is still below 1 line per 100 inhabitantsin many countries.The stunning growth of mobile tele-phones, led mainly by private operators, means thatmobile phones overtook fixed lines in 2001 and nowoutnumber fixed lines by nearly five to one, with 137.2million mobile subscribers in 2005.This ratio is evenhigher in sub-Saharan Africa, where 9 out of every 10subscribers with access to a telephone are using amobile one. Mobile penetration doubled from 6.5 per100 inhabitants in 2003 to 13.1 per 100 inhabitants in2005.This remarkable growth has been driven by theprivate sector and is greatest where the mobile market iscompetitive. Prepaid mobile subscriptions have also beena major factor in mobile growth, with some 92 percentof African subscribers using a prepaid package in 2005.

The top 10 African markets account for over four-fifths of all mobile subscribers on the continent (Figure3b). One quarter of all cellular mobile subscribers live inSouth Africa, nearly an eighth in the large Nigerianmarket, while the four Maghreb countries (Algeria,Egypt, Morocco, and Tunisia) account for a further thirdof all African mobile subscribers. It is therefore not sur-prising that operators from these leading countries alsofeature in the largest top 10 African mobile operators(Table 2).All the remaining African economies altogeth-er account for just over a quarter of subscribers.

During the boom in mobile communications in thelast decade, there has been strong competition for

investment. Large markets in other developing regions—such as Brazil, India, and Thailand—have proved moreattractive to multinational investors than the markets inAfrican countries.As a consequence,African investmentopportunities have often been left to African-basedinvestors.This has resulted in the development of strongand resilient operators that are increasingly pan-regionalin scope (Table 3). Large strategic investors such asVodacom, MTN, Orascom, and Millicom have beenable to transfer the skills and experience gained in theirhome markets to other operations across Africa. In 2005,the seven largest investors accounted for over half (53.3percent) of all African mobile subscribers (Table 3).These operators have witnessed astounding growth inboth subscribers and revenues.They remain mostlyfocused on Africa, but this has not stopped Orascom orMTC (Kuwait’s incumbent, which owns Celtel) fromexpanding by organic growth and acquisition through-out the Middle East. Now, these investors are starting tolook beyond their traditional markets.

Unlike some operators, these African strategicinvestors are not saddled with debts from 3G license feesand are free to follow a high-volume, lower-marginstrategy.They are now pioneering innovative new serv-ices (including mobile banking and instant messaging),payment methods, and pricing models. Celtel, for exam-ple, has established “One Network” and has abolishedroaming charges for customers traveling between Kenya,Tanzania, and Uganda. Subscribers can buy airtime indifferent currencies and transfer it across borders. Celtelhas, in effect, created a borderless market for mobiletelephony. In 2006, MobiNil introduced an off-peak tariff, per-second billing, and online payment usingcredit cards.

The mobile market in Africa has been a significantcontributor to expanding access opportunities to a vastmajority of its population. Unlike some mature markets,the African mobile industry enjoys enviable rates ofgrowth (as shown by Table 3).Worldwide, the totalnumber of mobile subscribers was 2.17 billion at theend of 2005; this is projected to surpass 3 billion by late2007 and to reach 4 billion by 2010 (Figure 4), with 80percent of new growth expected to come from lower-income emerging markets.13

The future growth potential for mobile communi-cations in Africa lies in making mobile telephony moreaffordable for the huge untapped market of lower-incomeconsumers. Operators that can follow high-volume/low-cost strategies combined with innovative pricingand payment methods stand to make big gains in Africa(as the indigenous strategic investors have proven).Making mobile communications affordable includesreducing both the total cost of ownership (for example,by introducing ultra low cost handsets at around 10 dol-lars each) and the cash-flow (“cash-barrier”) aspects ofpaying for mobile subscriptions. If operators can matchpayment to incomes through micro-financing, shared

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AmericasEurope World Asia Africa

Figure 3: African mobile markets

Source: ITU World Telecommunication Indicators Database.

Perc

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3a: Annual average growth in mobile network subscribers: Compound Annual Growth Rate, by world regions (2000–05)

Source: ITU World Telecommunication Indicators Database.

3b: Ten largest mobile markets, percent (2005)

Mobile subscribers as a percent oftotal telephone subscribers, 2005

South Africa: 25

Nigeria: 14

Algeria: 10Egypt: 10

Morroco: 9

Tunisia: 4

Kenya: 3

Tanzania: 2

Ghana: 2

Congo, Dem. Rep.: 2

Others: 19


Table 2: Top 10 mobile operators in Africa

Percent change Revenue Percent change Yearly average revenueOperator Subscribers 2006 2005–06 (US$ millions) 2005–06 per user (US$)*

1. Vodacom (South Africa) 19,200 +49 $4,870 +24 $2612. Maroc Telecom (Morocco) 10,710 +30 $1,640 +15 $1533. MTN Nigeria 10,376 +24 $1,460 (2005) +9 $76 (2005)5. MTN (South Africa)* 10,235 +30 $2,780 (2005) n/a $3204. MobiNil (Egypt) 9,267 +38 $920 (2005) +18 (2004–05) $1426. Vodafone Egypt 6,615 +60 $1,019 +35 $1707. Méditel (Morocco) 5,155 +28 $533 +7 $1038. Tunisie Telecom (Tunisia) 3,265 n/a $940 (2004) n/a n/a9. Cell C (South Africa) 2,900 +34 $862 +33 $29710. Safaricom (Kenya) 2,512 (2005) +64 (2004–05) $355 (2005) +43 (2004–05) $141

Source: ITU, from company reports.

* Based on ITU calculations, not operators’ official figures. n/a, not available.

Table 3: Africa’s mobile strategic investors

Percent Yearly averageStrategic Subscribers Subscribers change Revenue Percent revenue perinvestor (000s) 2006 (000s) 2005 2005–06 (US$ millions) change user (US$)* African countries where the investor has operations

MTN 24,300 15,600 +56 $4,545 +21 $291 Benin, Cameroon, Côte d’Ivoire, Congo, Ghana, (Mar 2006) (Mar 2005) (Mar 2005) Guinea, Guinea-Bissau, Liberia, Nigeria, Rwanda,

S. Africa, Swaziland, Sudan Uganda**

Vodacom 23,520 15,483 +52 $5,328 +25 $227 Congo, Dem. Rep., Lesotho, Mozambique, (Mar 2006) (Mar 2005) (Mar 2006) Mauritius, South Africa, Tanzania

Orascom 21,128 Africa 17,500 +53 $3,216 –0.3 $69 Algeria, Egypt, Tunisia, Zimbabwe***(total 46,522) (total 30,383) (total)

Celtel 15,270 5,375 +184 $953 +60 $62 Burkina Faso, Chad, Congo, Congo, Dem. Rep., (Sept 2006) (Sept 2005) Gabon,Kenya, Niger, Nigeria, Madagascar,

Malawi, Sierra Leone, Sudan, Tanzania, Uganda, Zambia

Orange n/a 5,188 n/a n/a n/a n/a Botswana, Cameroon, Cote d’Ivoire, Egypt, (Sept 2005) Equatorial Guinea, Madagascar, Mali, Mauritius,

Reunion, Senegal

Millicom 12,800 8,929 +43 $1,084 +6 $85 Chad, Congo, Dem. Rep., Ghana, Mauritius, (Sept 2006) (Sept 2005) Senegal, Sierra Leone, Tanzania

Etisalat n/a 4,534 n/a $3,512 +23 $775 Benin, Burkina Faso, Central African Rep., Cote (2004/5) d’Ivoire, Gabon, Niger, Sudan, Tanzania, Togo****

TOTAL 97,018 72,609 N/A $18,638 +18 $145

Source: ITU, abridged from company reports.

Note: n/a, not available.

* Based on ITU calculations, not operators’ official figures.**Also Syria and Yemen.*** Also Bangladesh, Iraq, and Pakistan.**** Also Pakistan, Qatar, Saudi Arabia and the United Arab Emirates.

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phones, and micro-prepaid schemes with low-denomi-nation top-up cards and balance transfers between sub-scribers, then rapid growth and large profits can made inthe African market. Furthermore, because of the poorlydeveloped state of the personal finance sector in Africaand the low level of credit card ownership, there aretremendous opportunities also for mobile operators inexploring new financial services, such as m-commerce,banking, and Internet access over mobile phones.

For ICTs to have a significant impact on competi-tiveness, it is not sufficient to simply make informationavailable to firms, factories, farmers, and new users—theinformation must be put to good use. In this respectAfrican operators are experimenting with new informa-tion services to improve productivity and eliminateintermediaries.TradeNet, a software company in Ghana,has unveiled a simplified form of eBay over mobilephones for agricultural products across more than 10countries in West Africa. Buyers and sellers post infor-mation about what they are after along with their contactdetails, which are then circulated to “matched” subscribersusing Short Message Service (SMS) text-messages in several languages. Interested parties can then contacteach other directly to do a deal. Similar projects areunderway to provide daily price information for fruitand vegetable exports in Burkina Faso, Mali, andSenegal.14 Such initiatives can improve the flow of busi-ness information and help reduce costs and boost profits.

Next generation mobile and Internet accessAlthough access to mobile communications and theInternet are vital to the competitiveness of Africa’sfirms, in the future the ability to upgrade to high-speedor broadband access will enable them to compete mosteffectively in the global market.

3G mobile networksGiven Africa’s head start in mobile telephony, broadbandInternet access is more likely to be delivered over amobile platform than over a fixed line.Third-generation(3G) mobile services with higher transmission speedsand enhanced data services promise a range of newapplications for users and new revenues for operators.ITU recognizes the following 3G services as compliantwith the IMT-2000 family of standards:

• Wideband Code Division Multiple Access (W-CDMA), which can reach maximum datadownload speeds of 2 Mbps when fully imple-mented.This is sometimes known as UMTS or3GSM in Europe.

• High Speed Downlink Packet Access (HSDPA), anupgrade to W-CDMA allowing a theoretical peakdownlink rate of 14.4 Mbps, although this rate is not currently widely available on commercialhandsets.

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2 billion mobile phone users 2005



Figure 4: Evolution of projected business models to reach low-income consumers (2005–10)

Source: Granath, 2007.

Business model

World population by income segment (US$ per capita per day)

0.8 billion> $40/day

1.5 billion $4–40/day

1.3 billion $4/day

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1.3 billion $1/day

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• CDMA 2000 1x, which delivers speeds of up to144 kbps.This does not qualify as “broadband” as itis below the threshold speed of 256 kbps.

• CDMA EV-DO (Evolution Data Only) enhances1x speeds up to 2.4 Mbps.

• Time Division Synchronous CDMA (TD-SCDMA),which has not yet been commercially launched, butmay be the preferred choice for 3G systems inChina.

3G services have been commercially available since2001 worldwide and in Africa since 2003, when the firstWireless Local Loop (WLL) CDMA 1x networks wererolled out in Nigeria. South Africa and Mauritiuslaunched W-CDMA networks in 2004, with SouthAfrica already implementing an HSDPA network in2006.A total of 17 African countries now boast IMT-2000 mobile networks (Figure 5). Eleven countries haveCDMA 1x networks, while operators in Angola, Côted’Ivoire, Nigeria, and Rwanda have launched EV-DOnetworks (Box 2 and Table 4). Further 3G launches areexpected in 2007, including Etisalat and Vodafone inEgypt (in Q1 and Q3 respectively)14 and Vodacom inTanzania.16

Fixed broadband Internet accessAlthough the major adoption of broadband has been inresidential markets, broadband also has a big impact in

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2003 2004 2005 2006

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1Total number of countries: 7 16 17

Figure 5: African countries with IMT-2000 (3G) networks (2003–06)

Source: ITU.

■ WCDMA+HSDPA■ WCDMA only■■ CDMA+EV-DO■ CDMA 1x

Table 4: African countries with 3G (IMT-2000) networks

Economy Technology Operator Launch date

Algeria CDMA 1x Lacom February 22, 2006Algerie Telecom July 15, 2004

Angola CDMA 1x Movicel January 21, 2004EV-DO Movicel July 31, 2005

Cameroon CDMA 1x Camtel September 15, 2005Côte d’Ivoire EV-DO Arobase March 15, 2006

CDMA 1x Arobase October 27, 2005Egypt CDMA 1x Telecom Egypt January 15, 2005Ethiopia CDMA 1x ETZ December 2, 2004Ghana CDMA 1x Kasapa September 19, 2005Kenya CDMA 1x Papote Wireless March 29, 2006

CDMA 1x Telkom Kenya December 15, 2004Madagascar CDMA 1x Telecom Malagasy August 15, 2005Mali CDMA 1x Sotelma October 1, 2005Mauritius W-CDMA Emtel November 15, 2004Mozambique CDMA 1x TDM July 15, 2005Nigeria EV-DO Starcomms February 27, 2006

CDMA 1x Nitel July 15, 2005CDMA 1x Bourdex August 14, 2005CDMA 1x ITN August 14, 2004CDMA 1x MTS First Wireless August 15, 2004CDMA 1x Rainbownet March 1, 2004CDMA 1x Intercellular February 15, 2004CDMA 1x Starcomms November 1, 2003CDMA 1x Reltel Nigeria October 15, 2003CDMA 1x Cellcom Nigeria September 15, 2003

Rwanda EV-DO Terracom January 23, 2006CDMA 1x Terracom December 15, 2005

South Africa HSDPA MTN March 29, 2006W-CDMA MTN June 15, 2005W-CDMA Vodacom December 19, 2004

Uganda CDMA 1x MTN Uganda November 24, 2004CDMA 1x Uganda Telecom May 15, 2004

Zambia CDMA 1x Zamtel September 15, 2006

Source: ITU, adapted from 3GToday and GSM Association, start 2007.


the business sector, where it competes favorably on pricewith leased-line solutions. Broadband Internet access 17

can give firms access to new markets, improved businessinformation, and e-commerce. In 2002 broadbandInternet access was commercially available in threeAfrican nations.Today ADSL is on offer in over 30economies (Figure 6a).ADSL was rolled out in Botswanain mid 2006,18 in Ghana in March 2006,19 and is currentlybeing introduced over Libya Telecom and Technology’sATM network.20 Existing operators are investing inextending coverage outside main urban areas to otherprovinces. In Rwanda, 700 subscribers now enjoybroadband ADSL service in Kiyovu and Terracom is lay-ing fiber in other main towns throughout the country,with ADSL services rolled out in Kigali, Gitarama, andButare in 2006.21 Efforts are underway to extend broad-band outside main urban areas in Uganda.22

Broadband speeds and quality are also increasing inAfrica.Advertized maximum speeds are rarely achievedbecause of a number of factors23 but average speeds areincreasing nevertheless (Figure 6b). In 2003, the maxi-mum speed commercially available was 512 kbps. By2006, Internet service providers (ISPs) in 18 Africancountries had launched commercial offers at 1 and 2Mbps, while the ISP Menara in Morocco offered a 4Mbps service (Box 3).

Although the high-speed broadband access, vital tomodern businesses, is now available in many capital

cities and major towns, it comes at a high price.Thecost of broadband must be evaluated relative to speed, ashigher-speed Internet access costs more. Broadbandpackages for sub-Saharan Africa show that high-speedInternet access is available in 22 African economies, butonly at very high prices. On average, broadband pricesin Africa are three times higher than they are in Asia(see Figure 8b). However, at least 10 African countriesnow offer broadband at below US$15 per 100 kbps permonth (Table 5). Broadband is available at semi-reasonableprices in most North African countries (Morocco,Egypt, and Tunisia), as well as in Mauritius and SouthAfrica. In Senegal the low price of broadband hasencouraged Internet subscribers to migrate to DigitalSubscriber Lines (DSL), with 40 percent of all Internetsubscribers accessing the Internet over DSL in 2004.24

In Morocco, the launch of comparatively high speedoffers has encouraged broadband subscribers to upgradeto higher speeds (Box 3). However, even these prices farexceed typical European and Asian prices and, in therest of Africa, broadband access (frequently leased-linesin disguise) can cost hundreds of dollars per month,beyond the reach of most small firms and individuals.The effect in terms of skills and training cannot beunderstated—teenagers in Europe spend many hoursonline exploring the virtual world and developing ITknow-how. Most African teenagers cannot afford the

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Box 2: Nigeria: Licensing to create a dynamic market

At the turn of the century Nigeria had one of the most backwardtelecommunications networks in Africa. It had just half a millionfixed lines and had still not surpassed the symbolic milestone ofone fixed line per 100 inhabitants; waiting times stretched toyears and connections were unreliable. The analogue mobilesystem was very limited and not available outside the mainurban areas. In response to the growing need for telecommuni-cations and a modern infrastructure, Nigeria launched theNational Telecommunications Policy (NTP) in September 2000.

The government issued a round of new licensing, including:

• three mobile cellular licenses in 2001, to MTN, Econet, and the incumbent NITEL;

• a second national operator (SNO) license to Globacom in 2002 for all telecommunications services; and

• more than a dozen local network operator licenses since 2000.

The results have been dramatic. Teledensity has soared—by June 2006 there were almost 26 million fixed and mobile sub-scribers with a teledensity of over 22 subscribers per 100 inhab-itants. Population coverage of mobile networks has increased

from a mere 5 percent in 2000 to over 75 percent in June 2006.Nigeria now has some of the most competitive fixed and mobilemarkets in Africa, with over 20 private operators accounting fornearly three-quarters of the 1.5 million fixed lines in operation atJune 2006. Ten operators have launched IMT-2000 compliantCDMA 1x networks (some using Wireless Local Loop, WLL),while the mobile operator Starcomms launched the secondCDMA EV-DO network in Africa in February 2006.

This startling growth has not been without problems.Mobile interconnection disputes have arisen and the privatiza-tion of the incumbent NITEL has been subject to repeated setbacks. ISPs have complained about access to backboneinfrastructure and the high prices charged by NITEL. However,the Nigerian Communications Commission (NCC) has beenproactive in dealing with these issues—it established rates tobe followed by the mobile industry. In February 2006, Nigeriaalso became one of the first countries in Africa to adopt a unified licensing approach. In the future the NCC will issue uni-fied licenses, allowing operators to provide multiple servicesunder the terms of a single license. These will streamline andaccelerate licensing procedures and enable operators to deploynew infrastructure and services more rapidly.


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Figure 6: Growth in availability of broadband and broadband speeds in Africa

Source: ITU.

6a: African countries with broadband (2002–06)

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Speed (kbps)

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Box 3: Morocco: An African success story

Morocco initiated market liberalization relatively early. In mobilecommunications, it licensed a second mobile operator, MédiTelecom, as early as July 1999. In December 1999, it sold 35 per-cent of its incumbent, Maroc Telecom, to Vivendi of France.Intense competition between the two operators led to mobilephones overtaking fixed lines in August 2000, just six monthsafter the second operator had launched its network. By June2001, Médi had 755,000 customers and a population coverage of70 percent. Not to be surpassed, Maroc Telecom responded byinvesting US$275 million in its network and innovating in itsprice strategy. It achieved a client base of 1 million customersin June 2000, 2 million in November 2000, and 3 million by May2001. The growth in Morocco has significantly surpassed that ofall its North African neighbors.

Some of the same dynamism is now reaching theMoroccan Internet market. Helped by Morocco’s proximity tofiber networks in the Mediterranean, Maroc Telecom and theISP Menara have launched a range of high-speed packages atcomparatively low prices, including the highest speed broad-band package in Africa at 4 Mbps. Surveys of the residentialmarket carried out by the regulator, the National Agency ofTelecommunication Regulation (Agence Nationale deRégulation des Télécommunications or ANRT), show that broad-band connections are moving to progressively higher speeds.With nearly 400,000 ADSL connections at the end of 2006,Morocco is the top country in Africa in terms of the total num-ber of broadband subscribers, well ahead of South Africa

(although Mauritius had the highest broadband penetration).Broadband now accounts for 98 percent of all MoroccanInternet connections (including dial-up and leased lines).Broadband connections increased by 58 percent between 2005and 2006, while dial-up connections actually lost ground, with a40 percent drop. The future of the Internet in Morocco seems tobe assured.

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45

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128 256 512 1,024 214 Mbps

Speed (kbps, unless stated)

Figure 1: Evolution in the speed of Internet access in

Morocco: Proportion of broadband connections

by speed (2005 and 2006)

Source: Agence Nationale de Régulation des Télécommunications (ANRT).

■ 2005 ■ 2006

Table 5: Ten African countries with lowest broadband prices

In order of cheapest

broadband Internet access

(US$ per 100 kbps Internet Speed in kbit/s Subscription price Price (US$) per per month) Economy service provider (high – low) per month (US$) 100 kbps per month

1 Morocco Menara 256 – 4,096 89.21 2.182 Egypt Soficom 1,024 2,048 124.36 6.073 Madagascar Wanadoo 256 21.40 8.364 Senegal Sentoo 512 – 1,024 43.59 8.515 Botswana BTC 256 – 768 75.22 9.805 Mauritius Telecom Plus 512 – 1,024 51.96 10.157 South Africa Telkom 384 – 1,024 125.24 12.248 Sierra Leone Limeline 1,024 – 2,048 295 14.409 Tunisia Hexabyte 256 – 512 37.52 14.66

10 Côte d’Ivoire Aviso 256 – 2048 301.85 14.74

Africa average various 806 n/a 205.63

World average various 1,958 n/a 76.57

Source: ITU.

Note: Prices sampled in July–August 2006. There was an offer in Réunion with a price of US$3.94 per 100 kbps in 2006, but is not included here as it is not a sover-eign state in its own right. n/a, not available.

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luxury of experimentation time online, however, andcannot develop these skills.

The limited fixed-line network is proving a barrierto more extensive broadband access in some countries,especially in areas outside the major cities.To overcomethe lack of underlying infrastructure (including coppertelephone lines and coaxial television cable), wirelesstechnologies hold real promise for spreading broadbandaccess. Broadband Internet access is most likely to beachieved through 3G, as mentioned previously.Wi-Fi(or, more correctly,Wireless Local Area Networks basedon the IEEE 802.11 series) is proving popular for con-necting computers to the Internet, but it has only limit-ed range—typically less than 100 meters.A related tech-nology,WiMAX, is being promoted as a solution forhigh-speed Internet access because it can cover largedistances (theoretically, at speeds of up to 70 Mbps over50 kilometers). If WiMAX proves to be a commercialsuccess it could provide broadband solutions for manydeveloping countries in and beyond Africa, resulting incompetition among DSL and cable providers to providemore affordable prices. However, both the technicalstandards and the likely spectrum allocations forWiMAX remain uncertain for the moment, althoughthere are a growing number of pilot projects.

Voice over Internet Protocol (VoIP)Until recently, the carriage of voice services overInternet Protocol–based networks or VoIP (and associat-ed technologies, such as Voice over Broadband) were

banned in many African countries, although VoIP tech-nology has been in use in Africa for international callssince at least 1996. Initially incumbents invested in IP-based networks as a way of reducing their costs whilemaintaining prices. Incumbents sought to exploit profitmargins between the falling cost of international min-utes at wholesale prices while continuing to sell servicesat higher Public Switched Telephone Network (PSTN)prices.Today over a quarter of African incumbent oper-ators have international VoIP gateways,25 but the savingsthey realize on the cost of calls have not necessarilybeen passed on in full to customers.

Today retail and wholesale prices have increasinglydiverged because of the introduction of competitionthat has helped push prices down, the use of IP-basednetworks that has further reduced rates, and the growingdemand for international calls—mainly from multina-tional corporations and overseas workers (see Figure 7).The international calling market has been transformedfrom a low-volume, high-margin market to a higher-volume, lower-margin market.

New entrants are now undercutting incumbents,offering VoIP services over incumbents’ networks orbypassing incumbents’ networks altogether throughalternative infrastructure.This has led to a large “graymarket” in VoIP-based calling, with VoIP serviceproviders exploiting “arbitrage” opportunities andsqueezing a profit out of the margin between retail andwholesale prices. Bypass traffic in the gray market isestimated at between one-fifth to one-third of overall

0

20

40

60

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Above US$1/minute US25 cents–US$1/minute Below US25 cents/minute

Figure 7: African international retail telephone rates (2005 and 2006)

Source: Southwood, 2007.

■ 2005 ■ 2006

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international call revenue in some African markets.26

African incumbents have even witnessed declines intheir annual international traffic volumes and revenuesas traffic goes over to the gray market.They are facedwith the challenge of watching their traffic disappearinto the gray market or adopting fresh strategies toattract traffic back to their networks.

Mauritius was one of the first countries to adopt alicensing regime for VoIP services.Today 36 Africangovernments prohibit VoIP adoption except by monopolyincumbents. Seven African countries have now legalizedVoIP services (Algeria, Kenya, Mauritius, Somalia, SouthAfrica,Tanzania, and Uganda), with VoIP in the processof being legalized in a few other countries, such as Ghanaand Nigeria. Despite this,Africa and the Arab states arestill the regions most resistant to the introduction of IPtelephony.VoIP is often legal only for operators holdingan international gateway license, and while there aremoves to extend these to mobile operators, in manycountries currently only incumbents hold internationalgateway licenses. New second national operators(SNOs), such as Arobase in Côte d’Ivoire, KDN inKenya, and MTN in Uganda, have established IP-basedfiber rings in anticipation of wider VoIP liberalization,but these plans have yet to become fully realized.

International IP infrastructureIt has been argued that IP connectivity will prove asimportant in the 21st century as roads were in the 20thcentury or railways in the 19th century.27 The networkof high-speed links for Internet traffic is a critical infra-structure for development and wealth creation. IP net-works can carry vast volumes of information in realtime and can substitute demand for other types of trans-port in teleconferencing or long-distance inspection. IPnetworks will form the basis not only of Internet accessand browsing, but also of voice communications(including long-distance mobile voice traffic) and futurevideo communications and entertainment.

For Africa, a continent that missed out on some ofthe earlier rounds of infrastructure investment, it is cru-cial not to miss out on the next round. In particular,Africa’s future prosperity will depend critically on itsintegration with the global economy, and this in turndepends partly on its connectivity.At the regional leveltoo, as the post-war experience of Western Europe hasshown, greater regional integration, promoted throughtrade, communication, and migration, can encourageeconomic and social development.

How well connected is Africa? The data for 2005show that Africa’s 900 million inhabitants (nearly 14percent of the world’s population) had access to 19,512international circuits (that is, 64 kbps circuit equiva-lents) at the end of 200528—just 0.16 percent of theglobal total of 12.2 million international circuits.29

Indeed,Africa has fewer international circuits thanIreland despite the fact that Africa has more than 200

times as many inhabitants. Furthermore,Africa’s lack ofconnectivity is even more evident when compared withthe rapid progress it has made in other ICTs: forinstance, in expanding its Internet user base, whereAfrica accounts for 3.4 percent of the global total, ormobile phone ownership, where Africa is home to 6.2percent (see Figure 8a).

Such lack of connectivity means that Africa’s usersare starved of bandwidth.This relative scarcity feedsthrough into higher prices and slower speeds of connec-tion than in other parts of the world, even among otherdeveloping regions.As shown in Figure 8b,Africa’s aver-age monthly price for broadband service (US$762 permonth) is more than three times higher than the averagefor Asia and almost six times higher if expressed as apercentage of percentage of GNI per capita.

Analysis of Africa’s international bandwidth showsthat the situation is even worse than it appears. Over athird of Africa’s circuits are dedicated to voice telephonetraffic, compared with less than 5 percent for WesternEurope.This means that a far smaller share of active cir-cuits is available for IP traffic in Africa. Furthermore,whereas in Europe more than 45 percent of the avail-able circuits were “idle” in 2005 (usually reducing pricesas a result of overcapacity), in Africa less than 2 percentwere idle, meaning that African carriers are poorly pre-pared to respond to sudden surges in demand.Asrecently as 2002 around 9 percent of Africa’s interna-tional circuits were idle at any one time, but the lack ofcapacity is now becoming critical.

In summary,Africa’s communications infrastructureis grossly under-resourced and underinvested by inter-national standards.A recent study by the UKDepartment for International Development (DFID), forexample, identifies 28 countries that are unconnected toan international fiber connection, with a severe negativeimpact on the competitiveness of African firms andeconomies.30 Conversely, this lack of connectivity couldrepresent an exciting investment opportunity that ispotentially very profitable.A summary of the major fiberprojects that are currently planned is provided in Table6. Some of these are in the planning stages while othersare seeking funding.

If all the projects shown in Table 6 are developedand put into operation,Africa will most likely have thenecessary infrastructure to absorb future bandwidthdemand. Nevertheless, this is not sufficient to ensurethat Africa’s carriers and the users of their services willget cheaper prices.Action is needed to stimulate com-petition and introduce the affordable and high-qualityservices that are often lacking in markets where trans-mission capacity is abundant, but this capacity is con-trolled by monopoly state-owned telecommunicationsproviders.

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Figure 8: Bandwidth scarcity and its consequences in Africa

Source: ITU Internet Report, 2006; Digital Life; and the ITU World Telecommunication Indicators Database.

Note: The price sample is based on the 22 African economies that had fixed-line broadband service at the end of 2005. The average value is inflated by the factthat a high proportion of the economies in this sample offer broadband through leased lines and/or price broadband as a service for businesses, rather thanresidential users.

8a: Africa’s share of global total as percent (2005)

762.56

251.19

874

148

Price per month (US$) As percent of GNI per capita

Source: ITU Internet Report, 2006; Digital Life; and the ITU World Telecommunication Indicators Database.

8b: Average monthly fixed broadband prices (August 2006)

■ Africa ■ Asia

13.9

0.16

3.4

6.2

0.4

2.2

Population

Mobile phone users

Internet users

Fixed-line phones

Broadband subscribers

64 kbps Int’l circuits


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Table 6: Planned network initiatives in Africa

Planned initiative Comments Projected costs

Afritel subregional SRII will link the unconnected countries in the southern and central African region US$172.60 millionprojects (4) to a network that will allow them to connect to either or both SAT3 and EASSy.

It is divided in three stages:

1. All transmission links be digitalized (US$60.6 million)2. Digital capacity expansion (US$77.1 million)3. All fiber technology (US$34.9 million)

Intelcom I was established to create links between all the capitals of the ECOWAS n/aregion member states. On the other hand, Intelcom II is a plan to expand and upgrade the analogue routes of the existing network. It was initiated in 1997, aiming to establish 32 inter-country links in the ECOWAS region. It will connect 10 out of 13 countries that are currently unconnected to the SAT3 cable.

COMTEL aims to connect all of the unconnected countries in East Africa with the US$250–270 millionexceptions of Somalia, Mauritius, and the Seychelles. It will provide a fiber link to Lubumbashi in the Democratic Republic of Congo (DRC). It will function as a regional network delivering traffic into SAT3 in South Africa.

The Central African Ring is a piece of network infrastructure proposed by Celtel. n/aIt would be able to link a range of countries including Kenya, Malawi, Uganda, Tanzania, and Bukoba in eastern Congo.

EASSy This system is intended to establish a fiber optic undersea cable system to connect US$150–200 millioneastern African countries with the rest of the world. The cable system will connect Mtunzini, located just north of Durban in South Africa, to Port Sudan, in Sudan, a distance of about 9,900 kilometers.

East African Digital The EADTP system was conceived in 1997. It aimed to see the deployment of fiber n/aTransmission Project optic cable and microwave radio to interconnect the three countries of the East (EADTP) African Community (EAC): Kenya, Tanzania, and Uganda.

COM-7 COM-7 is intended to connect nine countries: Angola, Botswana, DRC, Malawi, n/aNamibia, South Africa, Tanzania, Zambia, and Zimbabwe via power/railway lines.

Boucle de Nord This system is intended to traverse the North African coast from Cairo to Dakar and US$300 millionthen cut inland through Mali and Burkina Faso to Kano in Nigeria. From there it would go via N’Djamena and Khartoum to Cairo.

Boucle de Sud This system is intended to go south from N’Djamena to Cameroon, Congo-Brazzaville, and Equatorial Guinea. It would then take an inland route around the continent and back up to Khartoum via Addis Ababa.

NIGAL The NIGAL pipeline project planned by the national oil companies to link Nigeria to US$78 millionAlgeria via Niger will also establish fiber links among the three countries using 24 fiber pairs along the 4,200 kilometers.

Infinity West African cable This cable is intended to link the remaining West African countries to Europe via US$750 millionmarine fiber that would also provide competing infrastructure to SAT-3. The seven initial cities being focused on are four in Nigeria (Lagos, Abuja, Wari, Port Harcourt) plus Dakar, Accra, and Douala.

GLO-1 Owned by GLOBACOM (Nigeria) and being developed by Alcatel, this is planned to US$170 millionconnect Lagos with the United Kingdom via an 8,600-kilometer submarine cable.

West African Festoon This system is intended to link countries currently unserved by SAT-3—Congo US$90 millionSystem Brazzaville, Equatorial Guinea, Chad, and Sao Tome and Principe—and to provide

diversity to SAT-3/WASC/SAFE for countries with landings—that is, Luanda (Angola), Libreville (Gabon), Douala (Cameroon), and Lagos (Nigeria).

East African Backhaul East African Backhaul System is a joint venture project among operators from n/aSystem (EABS) Tanzania, Burundi, Rwanda, Uganda, and Kenya to link the five countries to cables to

be laid along the Eastern African seaboard. MTN and 30 other operators in Eastern and Southern Africa are involved with this project.

(cont’d.)


Toward a measure of digital opportunityAs demonstrated in this chapter, measuring competitive-ness at the regional and international level is a multidi-mensional problem that must take account not only of infrastructure availability, but also of the pricing ofservices, extent of geographical coverage (especially out-side the large urban areas), the availability of the newerhigher-speed services mentioned, and the level of uti-lization of ICT services.31

In response to a call from the World Summit on theInformation Society (WSIS),32 ITU has worked with itspartners (including UNCTAD, MIC Korea, KADO,LIRNEAsia, the London Business School, and others)through a multi-stakeholder partnership (the DigitalOpportunity Platform) to develop a composite index tomeasure each country’s progress in bridging the digitaldivide.The Digital Opportunity Index, or DOI, uses 11separate indicators of ICT performance to monitorthree clusters of opportunity, infrastructure, and utiliza-tion.The index was endorsed by the World Summit onthe Information Society at the Tunis Phase.33

The DOI can be used in conjunction with othermeasures of competitiveness, such as the GlobalCompetitiveness Index (GCI) in this Report; it comple-ments the GCI by allowing analysis to zoom in on theICT sector.The GCI uses four ICT indicators to meas-ure technological readiness: telephone lines, mobilephones (which, as we have seen, are especially relevantfor Africa), Internet users, and personal computers (all ofwhich feature in the DOI).The DOI extends this analy-sis by including measures of geographical coverage ofmobile service, tariffs, and the availability of high-speedInternet access (both fixed and mobile) that are criticalto ICT competitiveness.

The results for Africa are shown in Figure 9 andTable 7.The highest-performing African economies interms of digital opportunity are Mauritius andSeychelles, ranked 58th and 62nd respectively in theworld (out of a total of 181 economies).The cluster ofNorth African economies comes next, led by Moroccoranked at 68th, followed by Algeria and Tunisia. SouthAfrica is ranked 5th in Africa and 86th in the world,while Nigeria is ranked 29th in Africa and 155th in theworld.

In addition to providing a snapshot of relative rank-ings for any given year, the DOI can also track progressover time.Among the African economies, Moroccoshows the most dramatic improvement. It has increasedits DOI score from 0.33 in 2004 to 0.47 in 2006, astrong improvement of 14 percentage points. Indeed,between 2005 and 2006, Morocco’s global rankingimproved from 78th to 68th in the world (see Box 3 forreasons why). Other high risers in the African regioninclude Kenya (Kenya’s ranking improved by 11 placesbetween 2005 and 2006), Rwanda (+10 places) andMauritania (+6 places), while the Central AfricanRepublic (–5 places) and Zimbabwe (–5 places) areamong the economies experiencing declines in theiroverall ranking.

The Digital Opportunity Index suggests that thedigital divide is evolving in new and complex ways:rather than being defined in terms of narrow connectiv-ity or subscriber numbers, the digital divide is taking onnew dimensions in speed, mobility, and capacity ofaccess, with countries catching up or falling behindaccording to their achievements in these areas.There aregrounds for optimism, including the commitments madeby governments at the WSIS in Geneva in 2003 andTunis in 2005, as well as examples of excellence by

Table 6: Planned network initiatives in Africa (cont’d.)

Planned initiative Comments Projected costs

TEAMS The Telkom Kenya and Etisalat initiative is to lay undersea fiber from Mombasa to KSh5.7 billionFujairah, United Arab Emirates.

FLAG Reliance is investing US$1.5 billion to upgrade its global network Flag Telecom. This n/awill include an East African backbone to link South Africa and Kenya, and will also serve Tanzania, Mauritius, Mozambique, and Madagascar as well as some landlocked countries.

Infraco A joint initiative of the South African government and the strategic investor in its 2.3 billion South Second Network Operator, VSNL, the project will operate an alternative national African rands backbone in South Africa and a competitor to SAT-3, fiber cable running from Cape Town to London.

NEPAD SPV Twelve governments in eastern and southern Africa have signed an accord to n/aestablish an SPV that will own and manage new regional fiber optic backbones financed by their governments and other investors.

Source: Winrock/Pyramid Research (forthcoming, 2007).

Note: n/a, not available.

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African companies leading the way in all these aspects,but much more remains to be done.

Conclusions: Toward a more competitive AfricaAs we have seen,Africa’s future growth and successdepends on the competitiveness of its firms. Becomingcompetitive needs a long-term strategy to raise efficien-

cy, boost skill and technology levels, and move intohigher-value products and processes. ICTs are a vitalpart of this strategy. ICTs enable rapid communicationsand can create the new skills essential in modern busi-ness.They can generate new growth and technologicalchange across the whole economy—from agriculture tofinance, construction, and modern services.

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Table 7: Digital Opportunity Index scores for Africa (2006)

Rank in Africa Country Opportunity Infrastructure Utilization Digital Opportunity World Rank Change in ranks2005/2006 2005/2006 2005/2006 2005/2006 2005/2006 2005/2006 2005/2006

1 Mauritius 0.98 0.43 0.09 0.50 58 —2 Seychelles 0.96 0.35 0.14 0.48 62 —3 Morocco 0.89 0.16 0.37 0.47 68 —4 Algeria 0.93 0.19 0.15 0.42 83 —5 South Africa 0.94 0.24 0.08 0.42 86 26 Tunisia 0.97 0.20 0.07 0.41 87 –17 Egypt 0.96 0.22 0.04 0.41 91 –18 Botswana 0.93 0.15 0.08 0.38 100 19 Gabon 0.92 0.13 0.07 0.37 103 2

10 Senegal 0.73 0.07 0.31 0.37 106 311 Libya 0.93 0.13 0.02 0.36 109 –312 Namibia 0.88 0.14 0.02 0.35 113 —13 Cape Verde 0.79 0.16 0.07 0.34 115 –314 Swaziland 0.85 0.10 0.02 0.32 120 —15 Equatorial Guinea 0.73 0.07 0.01 0.27 131 —16 Djibouti 0.74 0.05 0.01 0.26 132 —17 Lesotho 0.71 0.05 0.01 0.26 133 —18 Sudan 0.66 0.04 0.02 0.24 136 319 Cameroon 0.66 0.04 0.01 0.24 137 —20 Angola 0.64 0.03 0.01 0.23 138 –221 Ghana 0.56 0.04 0.03 0.21 142 422 Gambia 0.53 0.08 0.01 0.21 144 –223 Côte d’Ivoire 0.43 0.06 0.09 0.20 145 –124 Benin 0.52 0.03 0.03 0.19 146 —25 Togo 0.46 0.03 0.03 0.17 151 –226 Congo 0.48 0.04 0.00 0.17 152 427 Kenya 0.46 0.05 0.01 0.17 153 1128 Mauritania 0.46 0.06 0.00 0.17 154 629 Nigeria 0.45 0.05 0.01 0.17 155 230 Comoros 0.47 0.03 0.00 0.17 156 231 Zimbabwe 0.37 0.06 0.06 0.16 157 –532 Uganda 0.46 0.02 0.01 0.16 158 –333 S. Tomé & Principe 0.38 0.06 0.03 0.15 159 —34 Guinea 0.43 0.01 0.00 0.15 161 –635 Tanzania 0.41 0.03 0.00 0.15 162 436 Zambia 0.40 0.03 0.00 0.14 163 –137 Rwanda 0.40 0.01 0.01 0.14 164 1038 Burkina Faso 0.38 0.03 0.01 0.14 165 –139 Madagascar 0.35 0.02 0.00 0.12 167 –340 Mozambique 0.33 0.02 0.01 0.12 168 241 Mali 0.33 0.02 0.00 0.12 169 —42 Sierra Leone 0.32 0.02 0.00 0.11 171 243 Ethiopia 0.30 0.01 0.00 0.10 172 244 Burundi 0.27 0.01 0.00 0.09 173 –145 Central African Rep. 0.25 0.01 0.00 0.09 174 –546 Malawi 0.23 0.01 0.01 0.09 175 —47 Congo, Dem. Rep. 0.22 0.02 0.00 0.08 176 –2048 Eritrea 0.19 0.01 0.00 0.07 177 149 Guinea—Bissau 0.10 0.03 0.01 0.04 178 –150 Chad 0.11 0.01 0.00 0.04 180 151 Niger 0.06 0.01 0.02 0.03 181 –1

Africa 0.55 0.08 0.04 0.22 140

Source: ITU/UNCTAD/KADO Digital Opportunity Platform.


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0.50

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EthiopiaNigeria

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The designations employed and the presentation of material in this map do not imply any opinion whatsoever on the part of the ITU concerning the legal or other status of any country, territory or area or any endorsement or acceptance of any boundary.

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thNo dataan 0.1

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Digital Opportunity Index 2006

Overall Digital Opportunity Index scores, 2006

Figure 9: Digital opportunity in Africa (2006)

Source: ITU/UNCTAD, 2007.


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This chapter has reviewed the changing policy andregulatory landscape in African telecommunications.African governments have made considerable headwayin opening up the telecommunications markets togreater competition and introducing measures toencourage investment and to build local capabilities.Theresults are promising.African markets have witnessedstrong growth, especially in mobile markets and the riseof resource-rich strategic investors.Telecom operatorsare innovating with a range of different strategies andpricing models to suit consumers.African firms andtelecom operators understand the importance of tech-nology and, in many cases, they are forging ahead andintroducing new communications technologies. Farfrom being isolated in the global economy, some Africancountries are participating in the forefront of technolog-ical developments.

African governments and telecom operators nolonger face the strategic choice of whether or not toresist new technologies—they must instead decide howbest to adapt to them.The challenge for Africa is notwhether to integrate into the global economy, but howto become competitive within an integration processthat is already taking place.The next 10 years will showwhether Africa has succeeded in this challenge.

Notes1 See, for example, the series of research studies by Robert McGuckin

and Kevin Stiroh, which started with Robert H. McGuckin andKevin J. Stiroh, “Computers, Productivity and Growth,” EconomicResearch Report, 1213-98-RR, The Conference Board 1998.

2 Fuss and Waverman 2005.

3 Waverman et al. 2005.

4 In Chapter 1.1 the World Economic Forum defines competitivenessas the set of institutions, policies, and factors that drives produc-tivity and sets the sustainable current and medium-term levels ofeconomic prosperity.

5 See, for example, the discussions at the ITU Workshops, “WhatRules for Next Generation IP-Enabled Networks?” March 23–24,2006, Geneva, Switzerland, and “The Future of Voice,” January15–16, 2007, Geneva, Switzerland. Available atwww.itu.int/osg/spu/ngn/ and www.itu.int/osg/spu/voice/.

6 See “Balancing Act: Africa,” Issue 340, January 29, 2007, availableat: http://www.balancingact-africa.com/.

7 Kheir-El-Din et al., Economic Research Forum Working Paper 200035.

8 For example, economists and researchers in Egypt are widely agreedthat Egypt has tended to (over-)rely on tax holidays as its main taxincentive (Kheir-El-Din, Fawzy, and Refaat 2000 and El Samalouty2000). The authors conclude that tax incentives have been costlyand not very effective in achieving Egypt’s investment goals.

9 Morrisset and Pirnia 2000.

10 All successful industrializing countries have supported promisingnew activities by domestic and foreign firms. What distinguishesthe strategies of the most successful countries is that their pro-motion did not mean protection of sectors from international mar-kets: targeted sectors were encouraged to compete international-ly to become efficient and develop capabilities. Promotion wasflexible, broad and conditional on export performance.

11 ILO World Employment Report 2001: Life at Work in theInformation Economy.

12 In advanced OECD countries, the private sector funds between ahalf to two-thirds of total research and development (R&D) spend-ing in new technology.

13 Global Insights, as quoted by Rauno Granath, Director, New GrowthMarkets, Nokia, in his presentation, “Voice Services in NewGrowth Markets” to the ITU Workshop on the Future of Voice(http://www.itu.int/osg/spu/ni/voice/meeting.phtml). Available athttp://www.itu.int/osg/spu/ni/voice/presentations/S4-5-Nokia-Granath.ppt.

14 As reported by The Economist, “Buy, cell and hold,” January 25,2007.

15 See http://www.balancingact-africa.com/news/back/balancing-act_340.html.

16 See http://www.vodacom.co.za/mccrdetail.do?id=1016&action=detail.

17 Defined as speed of 256 kbps or more in the upstream and down-stream direction.

18 www.btc.bw/adsl/index.htm, accessed in April 2006.

19 www.ghanatelecom.com.gh/gt_aboutus/newsdetails.asp?pnum=3&id=228&catid=0.

20 www.lttnet.com/english/coming.php andwww.lttnet.com/english/sr_libyadsl.php.

21 As reported by Balancing Act Africa, Issue No. 296, 2006, availablefrom www.balancingact-africa.com/news/back/balancing-act_294.htm.

22 Map of broadband coverage available from Uganda Telecom Ltd athttp://www.utl.co.ug/utl.php?i=9.

23 Maximum download speeds are often not available in practice, dueto network conditions and congestion.

24 Agence de Régulation de Télécommunications (ART, Sénégal), “Lemarche de l’Internet” Web page. Available at http://www.artp-senegal.org/telecharger/Fiche_Internet_2005.pdf.

25 Southwood 2007.

26 Gray market revenues as a proportion of overall international callrevenues are estimated at 17 percent in Lesotho, 20 percent inEquatorial Guinea, 30 percent in Cameroon, and 47 percent inSierra Leone. See Southwood 2007.

27 Parts of this section draw upon work carried out by ITU, Winrock,Pyramid Research and Mike Jensen for a World Bank–fundedproject on Africa’s future infrastructure requirements. SeeWinrock/Pyramid Research Forthcoming (2007).

28 The 2005 International Circuits Report was issued by the FCC inJanuary 2007. It is available from http://hraunfoss.fcc.gov/edocs_public/attachmatch/DOC-269605A2.pdf. For more information seethe FCC International Bureau website at http://www.fcc.gov/ib.Although the report covers only U.S. facilities–based internationalcarriers, in practice, because of reporting requirements, this cov-ers most of the world’s carriers.

29 The International Circuits Reports issued annually by the U.S. regu-lator, the Federal Communications Commission (FCC), availablefrom www.fcc.gov.

30 DFID/ Balancing Act 2004.

31 The World Economic Forum publishes, in conjunction with INSEAD,an annual “Networked Readiness Index” (NRI) in the GlobalInformation Technology Report. This Report examines the net-worked readiness of 122 countries around the world in terms oftheir environment, readiness, and usage, taking into account gov-ernment, businesses, and users.

32 For information on the World Summit on the Information Society(WSIS), see www.itu.int/wsis. The reference to the compositeindex comes from the Geneva Declaration of Principles, para 28,and the Tunis Agenda for the Information Society, para 115.

33 For more information on the Digital Opportunity Index (DOI) and itsmethodology, see www.itu.int/doi.


ReferencesAgence de Régulation de Télécommunications (ART, Sénégal). “Le

marche de l’Internet” Web page. Available at http://www.artp-senegal.org/telecharger/Fiche_Internet_2005.pdf.

Biggs, P. 2007 (forthcoming). “Tax Incentives to Promote theDevelopment of Telecommunications.” Geneva: ITU.

DFID (UK Department for International Development)/Balancing Act.2004. African ICT Infrastructure Investment Options. Available atwww.afridigital.net/downloads/DFIDinfrastructurerep.pdf

Fuss, M. and L. Waverman. 2005. “The Networked Computer: TheContribution of Telecommunications and Computing to EconomicGrowth and Productivity.” Available at http://www.london.edu/assets/documents/NetworkedComputer_WavFuss.pdf.

Granath, R. 2007. “Voice Services in New Growth Markets.”Presentation to the ITU Workshop The Future of Voice, January15–16, Geneva. Available athttp://www.itu.int/osg/spu/ni/voice/presentations/S4-5-Nokia-Granath.ppt.

ILO (International Labour Organization). 2001. World EmploymentReport 2001: Life at Work in the Information Economy. Geneva:ILO.

ITU (International Telecommunication Union). ITU WorldTelecommunication Indicators Database. Available athttp://www.itu.int/ITU-D/ict/publications/world/world.html.

———. 2006. ITU Internet Report 2006: Digital Life. Geneva: ITU.Available at http://www.itu.int/publications/sector.aspx?lang=en&sector=0.

———. 2007. ITU Workshop, The Future of Voice. January 15–16,Geneva. Available at http://www.itu.int/osg/spu/ni/voice/meeting.phtml.

ITU/UNCTAD (International Telecommunication Union/United NationsConference on Trade and Development), 2007, World InformationSociety Report 2007. Available at www.itu.int/wisr.

Kheir-El-Din, H., S. Fawzy, and A. Refaat, 2000. “Investment Incentives,Marginal Effective Tax Rates and the Cost of Capital in Egypt.”Economic Research Forum Working Paper 200035.

McGuckin, R. H. and K. J. Stiroh. 1998. “Computers, Productivity andGrowth.” The Conference Board 1998. Economic ResearchReport, 1213-98-RR.

Morrisset, P. and Pirnia, J. 2000. “How Tax Policy and Incentives AffectFDI.” World Bank Working Paper 2509. Washington, DC: WorldBank.

Southwood, R. 2007. “The Future of Voice in Africa.” Background paperfor the ITU New Initiatives Workshop, The Future of Voice,Geneva, January 15–16, 2007. Available athttp://www.itu.int/osg/spu/ni/voice/papers/FoV-Africa-Southwood-draft.pdf.

Waverman, L., M. Meschi, and M. Fuss. 2005. “The Impact ofTelecoms on Economic Growth in Developing Countries.” In“Africa: The Impact of Mobile Phones,” The Vodafone PolicyPaper series, No. 3, March.

Winrock/Pyramid Research. Forthcoming (2007). Costing ICTInfrastructure Investment Needs for Africa. Report prepared forthe World Bank.

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Part 2 Country Profiles


2.1 Competitiveness Profiles


The Competitiveness Profiles section of the AfricaCompetitiveness Report 2007 details the performance inthe Global Competitiveness Index 2007 (GCI 2007) ofeach of the 29 countries covered by the study.

Page 1

Key indicatorsThe first section presents a selection of key indicators.Population figures come from the United NationsPopulation Fund (UNFPA)’s State of World Population2006, available at www.unfpa.org/swp/2006. GDP figures come from the April 2007 edition of theInternational Monetary Fund’s World Economic Outlook,available at www.imf.org/weo.The structure of GDPwas obtained from the Economist Intelligence Unit(EIU)’s CountryData Database.The Human DevelopmentIndex (HDI) ranking is computed by the UnitedNations Development Programme (UNDP) and is presented in the 2006 edition of the Human DevelopmentReport, available at hdr.undp.org.

In the right-hand side of the section, a chart shows the evolution of GDP per capita valued at pur-chasing power parity (PPP) over the period 1980–2006.Data come from IMF’s World Economic Outlook (April2007). Note that for Namibia data are available onlyfrom 1990 on.

Global Competitiveness IndexThis section details the country’s performance on theupdated Global Competitiveness Index 2007 (GCI 2007).In the table on the left-hand side, the first column showsits ranks among the 128 countries covered by the GCI2007 and the second column presents the scores.

On the right-hand side, the figure shows the coun-try’s performance on the nine pillars of the GCI (blueline) measured against the average scores across all thecountries in the same stage of development (black line).

The most problematic factors for doing businessThis figure summarizes those factors seen by businessexecutives as the most problematic for doing business intheir country.The information is drawn from the WorldEconomic Forum’s Executive Opinion Survey 2006.From a list of 14 factors, respondents were asked toselect the five most problematic ones, and to rank thosefrom 1 (most problematic) to 5.The results were thentabulated and weighted according to the rankingassigned by respondents.1

AlgeriaKey indicators

Population (millions), 2006.......................................33.4

GDP (billions, current US$), 2006 .........................114.3

GDP (PPP US$) per capita, 2006 ..........................7,827

Sectoral value-added (as percentage of GDP), 2004

Agriculture..............................................................10

Industry ...................................................................57

Services ..................................................................34

Human Development Indicator rank

(out of 177 economies), 2004 ................................102

Source: UNFPA, IMF, EIU, UNDP

Global Competitiveness Index 2007

Overallrank Score

(out of 128) (1–7)

Global Competitiveness Index 2007...............76.........4.0

GCR 2005–06 (out of 117 economies) ......................82 ..........3.8

Basic requirements ...................................................44 ..........4.9

1st pillar: Institutions..................................................65 ..........3.9

2nd pillar: Infrastructure ...........................................80 ..........2.9

3rd pillar: Macroeconomy...........................................2 ..........6.2

4th pillar: Health and primary education................46 ..........6.6

Efficiency enhancers.................................................92 ..........3.3

5th pillar: Higher education and training................86 ..........3.5

6th pillar: Market efficiency......................................97 ..........3.7

7th pillar: Technological readiness .........................93 ..........2.7

Innovation enhancers................................................92 ..........3.2

8th pillar: Business sophistication .......................106 ..........3.4

9th pillar: Innovation ..................................................77 ..........3.1

The most problematic factors for doing business

Access to financing......................................................13.6

Inefficient government bureaucracy...........................9.2

Corruption.........................................................................8.7

Tax rates ...........................................................................8.5

Tax regulations ................................................................7.9

Inadequate supply of infrastructure ............................7.7

Foreign currency regulations........................................6.7

Inadequately educated workforce...............................6.7

Policy instability...............................................................6.3

Poor work ethic in national labor force ......................6.1

Inflation .............................................................................5.7

Restrictive labor regulations.........................................5.4

Government instability/coups .......................................4.3

Crime and theft ................................................................3.1

0

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0 5 10 15 20 25 30

Percent of responses

Note: From a list of 14 factors, respondents were asked to select the five most problematic for doing business in their country and to rank them between

1 (most problematic) and 5. The bars in the figure show the responses weighted according to their rankings.

Algeria Africa

1Transition

1–2 2Transition

2–3

Factordriven

Efficiencydriven

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How to Read the Competitiveness ProfilesTHIERRY GEIGER, World Economic Forum

1 For more information regarding the Executive Opinion Survey, see WorldEconomic Forum, The Global Competitiveness Report 2006–2007.Hamsphire: Palgrave Macmillan.


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This page presents the score and rank achieved by acountry on each of the indicators entering the composi-tion of the updated Global Competitiveness Index 2007(GCI 2007).The following pages provide additionalinformation and definitions on the indicators that enterthe composition of the GCI 2007.

TECHNICAL NOTES AND SOURCES

Two types of data are used in the Global Competitive-ness Index 2007: survey data and hard data.

• Survey data: average responses in each country toquestions included in the World Economic Forum’sExecutive Opinion Survey, conducted in the earlymonths of 2006.

• Hard data: indicators obtained from a variety ofsources.While Survey data provide qualitative infor-mation, hard data are an objective measure of aquantity (for example, gross domestic product,malaria incidence, number of personal computers,number of procedures required to start a business,and so on).We use the latest data available frominternational organizations (such as the IMF, theWorld Bank, various United Nations agencies, theInternational Telecommunication Union), complet-ed, if necessary, by national sources. It is possiblethat some data will have been revised or updated bynational sources after the publication of the Report.

1st pillar: Institutions

Property rights | survey dataProperty rights, including over financial assets (1 = are poorlydefined and not protected by law, 7 = are clearly defined andwell protected by law)Source: World Economic Forum, Executive Opinion Survey 2006

Diversion of public funds | survey dataIn your country, diversion of public funds to companies, individuals or groups due to corruption (1 = is common, 7 = never occurs)Source: World Economic Forum, Executive Opinion Survey 2006

Public trust of politicians | survey dataPublic trust in the financial honesty of politicians is (1 = verylow, 7 = very high)Source: World Economic Forum, Executive Opinion Survey 2006

Judicial independence | survey dataIs the judiciary in your country independent from politicalinfluences of members of government, citizens or firms? (1 = no—heavily influenced, 7 = yes—entirely independent)Source: World Economic Forum, Executive Opinion Survey 2006

Favoritism in decisions of government officials | survey dataWhen deciding upon policies and contracts, government offi-cials (1 = usually favor well-connected firms and individuals, 7 = are neutral)Source: World Economic Forum, Executive Opinion Survey 2006

Government spending | survey dataPublic spending in your country (1 = is wasteful, 7 = providesnecessary goods and services not provided by the market)Source: World Economic Forum, Executive Opinion Survey 2006

Burden of government regulation | survey dataComplying with administrative requirements (permits, regulations, reporting) issued by the government in yourcountry is (1 = burdensome, 7 = not burdensome)Source: World Economic Forum, Executive Opinion Survey 2006

Business costs of terrorism | survey dataThe threat of terrorism in your country (1 = imposes significant costs on business, 7 = does not impose significantcosts on business)Source: World Economic Forum, Executive Opinion Survey 2006

Reliability of police services | survey dataPolice services (1 = cannot be relied upon to protect businesses from criminals, 7 = can be relied upon to protectbusinesses from criminals)Source: World Economic Forum, Executive Opinion Survey 2006

Business costs of crime and violence | survey dataThe incidence of common crime and violence (e.g., streetmuggings, firms being looted) (1 = imposes significant costs on businesses, 7 = does not impose significant costs on businesses)Source: World Economic Forum, Executive Opinion Survey 2006

Organized crime | survey dataOrganized crime (mafia-oriented racketeering, extortion) inyour country (1 = imposes significant costs on businesses, 7 = does not impose significant costs on businesses)Source: World Economic Forum, Executive Opinion Survey 2006

Ethical behavior of firms | survey dataThe corporate ethics (ethical behavior in interactions withpublic officials, politicians, and other enterprises) of firms in your country are (1 = among the world’s worst, 7 = amongthe best in the world)Source: World Economic Forum, Executive Opinion Survey 2006

* Hard data

Note: For descriptions of variables and detailed sources, please refer to “How to Read the Competitiveness Profiles.”

The Global Competitiveness Index in detail

INDICATOR SCORE RANK/128


Property rights..............................................................4.5...........67

Diversion of public funds .............................................3.2...........80

Public trust of politicians ..............................................2.8...........47

Judicial independence..................................................3.7...........65

Favoritism in decisions of government officials...........3.9...........25

Government spending .................................................3.7...........36

Burden of government regulation................................3.0...........63

Business costs of terrorism.........................................3.7.........118

Reliability of police services.........................................5.1...........34

Business costs of crime and violence .........................3.8...........83

Organized crime...........................................................4.7...........70

Ethical behavior of firms ..............................................4.1...........70

Efficacy of corporate boards ........................................3.9.........107

Protection of minority shareholders’ interests.............4.9...........38

Strength of auditing and accounting standards ...........3.7.........102

2nd pillar: Infrastructure

Quality of overall infrastructure....................................3.1...........72

Quality of railroad infrastructure...................................2.0...........73

Quality of port infrastructure........................................3.1...........79

Quality of air transport infrastructure...........................3.5...........93

Quality of electricity supply..........................................4.2...........70

Telephone lines* ..........................................................7.8...........90

3rd pillar: Macroeconomy

Government surplus/deficit*......................................14.2.............6

National savings rate*................................................51.2.............4

Inflation* ......................................................................1.6...........13

Interest rate spread*....................................................6.3...........73

Government debt*.....................................................28.5...........28

Real effective exchange rate*..................................–16.5...........13

4th pillar: Health and primary education

Business impact of malaria ..........................................6.1...........65

Business impact of tuberculosis ..................................5.8...........64

Business impact of HIV/AIDS ......................................5.3...........58

Infant mortality* .........................................................35.0...........90

Life expectancy*........................................................71.0...........69

Tuberculosis incidence* .............................................53.9...........59

Malaria incidence* .......................................................1.0...........66

HIV prevalence*...........................................................0.1...........28

Primary enrollment*...................................................96.7...........35

5th pillar: Higher education and training

Secondary enrollment* ..............................................80.7...........75

Tertiary enrollment* ...................................................20.0...........75

Quality of the educational system ...............................2.9...........93

Quality of math and science education........................3.7...........74

Quality of management schools ..................................3.5...........91

Local availability of research and training services ......3.0.........103

Extent of staff training .................................................3.0.........100


6th pillar: Market efficiency

Agricultural policy costs ...............................................4.4...........15

Efficiency of legal framework ......................................4.1...........54

Extent and effect of taxation .......................................3.9...........33

No. of procedures required to start a business* .......14.0.........110

Time required to start a business* ............................24.0...........38

Intensity of local competition.......................................4.2...........98

Effectiveness of antitrust policy...................................3.9...........59

Imports*.....................................................................30.4...........94

Prevalence of trade barriers .........................................4.1...........83

Prevalence of foreign ownership .................................4.7...........85

Exports* .....................................................................54.2...........34

Hiring and firing practices ............................................3.6...........81

Flexibility of wage determination.................................4.4.........104

Cooperation in labor-employer relations ......................4.6...........65

Reliance on professional management........................4.4...........66

Pay and productivity.....................................................3.8...........80

Brain drain ....................................................................2.4.........105

Private sector employment of women ........................4.6...........74

Financial market sophistication ....................................2.0.........125

Ease of access to loans ...............................................2.2.........114

Venture capital availability ............................................2.2.........117

Soundness of banks.....................................................4.1.........124

Local equity market access..........................................2.7.........112

7th pillar: Technological readiness

Technological readiness ...............................................2.5.........106

Firm-level technology absorption .................................4.6...........69

Laws relating to ICT.....................................................2.9...........95

FDI and technology transfer.........................................4.2.........112

Mobile telephone subscribers*..................................41.5...........69

Internet users*.............................................................5.8...........88

Personal computers* ...................................................1.1.........106

8th pillar: Business sophistication

Local supplier quantity .................................................4.2...........95

Local supplier quality....................................................3.5...........99

Production process sophistication ...............................3.1...........85

Extent of marketing .....................................................3.0.........118

Control of international distribution..............................3.4.........102

Willingness to delegate authority.................................2.6.........115

Nature of competitive advantage.................................2.8...........99

Value chain presence ...................................................2.4.........118

9th pillar: Innovation

Quality of scientific research institutions.....................3.4...........85

Company spending on R&D ........................................2.8...........92

University-industry research collaboration ...................2.5.........104

Gov’t procurement of advanced tech products ...........4.1...........36

Availability of scientists and engineers ........................5.4...........21

Utility patents*.............................................................0.0...........80

Intellectual property protection ....................................3.3...........73

Capacity for innovation.................................................2.3.........123

Algeria


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ilesEfficacy of corporate boards | survey data

Corporate governance by investors and boards of directors in your country is characterized by (1 = management has little accountability, 7 = investors and boards exert strongsupervision of management decisions)Source: World Economic Forum, Executive Opinion Survey 2006

Protection of minority shareholders’ interests | survey dataInterests of minority shareholders in your country are (1 = not protected by law and seldom recognized by majorityshareholders, 7 = protected by law and actively enforced)Source: World Economic Forum, Executive Opinion Survey 2006

Strength of auditing and accounting standards | survey dataFinancial auditing and reporting standards regarding compa-ny financial performance in your country are (1 = extremelyweak, 7 = extremely strong—the best in the world)Source: World Economic Forum, Executive Opinion Survey 2006


Quality of overall infrastructure | survey dataGeneral infrastructure in your country is (1 = underdeveloped,7 = as extensive and efficient as the world’s best)Source: World Economic Forum, Executive Opinion Survey 2006

Quality of railroad infrastructure | survey dataRailroads in your country are (1 = underdeveloped, 7 = asextensive and efficient as the world’s best)Source: World Economic Forum, Executive Opinion Survey 2006

Quality of port infrastructure | survey dataPort facilities and inland waterways in your country are (1 = underdeveloped, 7 = as developed as the world’s best)Source: World Economic Forum, Executive Opinion Survey 2006

Quality of air transport infrastructure | survey dataPassenger air transport in your country is (1 = infrequent, limited, and inefficient, 7 = as frequent, extensive, and efficient as the world’s best)Source: World Economic Forum, Executive Opinion Survey 2006

Quality of electricity supply | survey dataThe quality of electricity supply in your country (lack of interruptions and lack of voltage fluctuations) is (1 = worsethan in most other countries, 7 = meets the highest standardsin the world)Source: World Economic Forum, Executive Opinion Survey 2006

Telephone lines | hard dataMain telephone lines per 100 inhabitants, 2005A main telephone line is a telephone line connecting the sub-scriber’s terminal equipment to the public switched telephonenetwork and that has a dedicated port in the telephone exchangeequipment.

Source: International Telecommunication Union, WorldTelecommunication Indicators 2006


Government balance | hard dataGovernment fiscal surplus/deficit as a percentage of GDP,2005 or most recent year availableA positive (negative) number means that the government budgetexhibits a surplus (deficit).

Source: International Monetary Fund, World Economic OutlookDatabase, April 2006

National savings rate | hard dataNational savings rate as a percentage of GDP, 2005 or mostrecent year availableSource: International Monetary Fund, World Economic Outlook,April 2006 (Published Version); Economist Intelligence Unit,CountryData Database, June 2006; International Monetary FundCountry Reports

Inflation | hard dataAnnual percent change in consumer price index, average for 2005Source: International Monetary Fund, World Economic OutlookDatabase, April 2006

Interest rate spread | hard dataAverage interest rate spread, 2005This measures the difference between the typical short-termlending and deposit rates over the 2005 period.

Source: International Monetary Fund, International FinancialStatistics; national sources

Government debt | hard dataNet domestic and external debt contracted by the government, 2005Source: International Monetary Fund

Real effective exchange rate | hard dataReal effective exchange rate in 2005 relative to the 1997-2004averageSource: International Monetary Fund, INS Database, June 2006


Business impact of malaria | survey dataHow serious do you consider the future impact of malaria on your company in the next 5 years? (1 = extremely serious,7 = not a problem)Source: World Economic Forum, Executive Opinion Survey 2006

Business impact of tuberculosis | survey dataHow serious do you consider the future impact of tuberculo-sis on your company in the next 5 years? (1 = extremely serious, 7 = not a problem)Source: World Economic Forum, Executive Opinion Survey 2006

Business impact of HIV/AIDS | survey dataHow serious do you consider the future impact of HIV/AIDSon your company in the next 5 years? (1 = extremely serious,7 = not a problem)Source: World Economic Forum, Executive Opinion Survey 2006

Infant mortality | hard dataInfant (children aged 0 to 11 months) mortality per 1,000 livebirths, 2004Source: World Health Organization, World Health Statistics 2006and World Health Report 2006; United Nations Population Fund,State of World Population 2005; national sources

Life expectancy | hard dataLife expectancy at birth (years), 2004Source: World Health Organization, World Health Report 2006;The World Bank, World Development Indicators 2006; nationalsources

Tuberculosis incidence | hard dataEstimated number of tuberculosis cases per 100,000 inhabitants, 2004Source: World Health Organization, World Health Statistics 2006,World Health Report 2006 and Global Report 2006; nationalsources

Malaria incidence | hard dataEstimated number of malaria cases per 100,000 inhabitants,2004Source: UNICEF and World Health Organization, World MalariaReport 2005; World Health Organization Regional Offices; UnitedNations Population Fund, State of World Population 2005; TheWorld Bank, World Development Indicators 2006; United NationsDevelopment Programme, Human Development Report 2006;national sources


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HIV prevalence rate for population aged 15 to 49, 2003 ormost recent year availableSource: World Health Organization, World Health Statistics 2006and World Health Report 2006; national sources

Primary enrollment | hard dataNet primary education enrollment rate, 2004 or most recentyear availableAccording to the World Bank’s [1]World DevelopmentIndicators[1], this corresponds to the ratio of children of officialschool age (as defined by the national education system) who areenrolled in school to the population of the corresponding officialschool age. Primary education provides children with basic read-ing, writing and mathematics skills along with an elementaryunderstanding of such subjects as history, geography, natural sci-ence, social science, art and music.

Source: UNESCO Institute for Statistics; United Nations StatisticsDivision


Secondary enrollment | hard dataGross secondary education enrollment rate, 2004 or mostrecent year availableAccording to the World Bank’s World Development Indicators,this corresponds to the ratio of total enrollment, regardless ofage, to the population of the age group that officially correspondsto the secondary education level. Secondary education completesthe provision of basic education that began at the primary level,and aims at laying the foundations for lifelong learning and humandevelopment, by offering more subject- or skill-oriented instruc-tion using more specialized teachers.

Source: UNESCO Institute for Statistics; The World Bank, WorldDevelopment Indicators 2006; national sources

Tertiary enrollment | hard dataGross tertiary education enrollment rate, 2004 or most recent year availableAccording to the World Bank’s World Development Indicators,this corresponds to the ratio of total enrollment, regardless ofage, to the population of the age group that officially correspondsto the tertiary education level. Tertiary education, whether or notleading to an advanced research qualification, normally requires,as a minimum condition of admission, the successful completionof education at the secondary level.

Source: UNESCO Institute for Statistics; The World Bank, WorldDevelopment Indicators 2006; national sources

Quality of the educational system | survey dataThe educational system in your country (1 = does not meetthe needs of a competitive economy, 7 = meets the needs of a competitive economy)Source: World Economic Forum, Executive Opinion Survey 2006

Quality of math and science education | survey dataMath and science education in your country’s schools (1 = lagfar behind most other countries, 7 = are among the best in theworld)Source: World Economic Forum, Executive Opinion Survey 2006

Quality of management schools | survey dataManagement or business schools in your country are (1 = limited or of poor quality, 7 = among the best in the world)Source: World Economic Forum, Executive Opinion Survey 2006

Local availability of research and training services | survey dataIn your country, specialized research and training services are (1 = not available, 7 = available from world-class localinstitutions)Source: World Economic Forum, Executive Opinion Survey 2006

Extent of staff training | survey dataThe general approach of companies in your country to humanresources is (1 = to invest little in training and employeedevelopment, 7 = to invest heavily to attract, train, and retainemployees)Source: World Economic Forum, Executive Opinion Survey 2006


Agricultural policy costs | survey dataAgricultural policy in your country (1 = is excessively burdensome for the economy, 7 = balances the interests of taxpayers, consumers, and producers)Source: World Economic Forum, Executive Opinion Survey 2006

Efficiency of legal framework | survey dataThe legal framework in your country for private businesses to settle disputes and challenge the legality of governmentactions and/or regulations (1 = is inefficient and subject tomanipulation, 7 = is efficient and follows a clear, neutralprocess)Source: World Economic Forum, Executive Opinion Survey 2006

Extent and effect of taxation | survey dataThe level of taxes in your country (1 = significantly limits the incentives to work or invest, 7 = has little impact on theincentives to work or invest)Source: World Economic Forum, Executive Opinion Survey 2006

Number of procedures required to start a business | hard dataNumber of administrative procedures required to start a business, 2006Source: The World Bank, Doing Business 2007: How to Reform(2006)

Time required to start a business | hard dataNumber of days required to start a business, 2006Source: The World Bank, Doing Business 2007: How to Reform(2006)

Intensity of local competition | survey dataCompetition in the local market is (1 = limited in most industries and price-cutting is rare, 7 = intense in most industries as market leadership changes over time)Source: World Economic Forum, Executive Opinion Survey 2006

Effectiveness of antitrust policy | survey dataAnti-monopoly policy in your country is (1 = lax and not effective at promoting competition, 7 = effective and promotes competition)Source: World Economic Forum, Executive Opinion Survey 2006

Imports | hard dataImports of goods and services as a percentage of GDP, 2005Source: Economist Intelligence Unit, CountryData Database (June2006)

Prevalence of trade barriers | survey dataIn your country, tariff and nontariff barriers significantlyreduce the ability of imported goods to compete in thedomestic market (1 = strongly agree, 7 = strongly disagree)Source: World Economic Forum, Executive Opinion Survey 2006

Foreign ownership restrictions | survey dataForeign ownership of companies in your country is (1 = rare,limited to minority stakes and often prohibited in key sectors,7 = prevalent and encouraged)Source: World Economic Forum, Executive Opinion Survey 2006

Exports | hard dataExports of goods and services as a percentage of GDP, 2005Source: Economist Intelligence Unit, CountryData Database (June2006)

Hiring and firing practices | survey dataThe hiring and firing of workers is (1 = impeded by regulations, 7 = flexibly determined by employers)Source: World Economic Forum, Executive Opinion Survey 2006


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ilesFlexibility of wage determination | survey data

Wages in your country are (1 = set by a centralized bargainingprocess, 7 = up to each individual company)Source: World Economic Forum, Executive Opinion Survey 2006

Cooperation in labor-employer relations | survey dataLabor-employer relations in your country are (1 = generallyconfrontational, 7 = generally cooperative)Source: World Economic Forum, Executive Opinion Survey 2006

Reliance on professional management | survey dataSenior management positions in your country are (1 = usuallyheld by relatives, 7 = held by professional managers chosenbased on superior qualification)Source: World Economic Forum, Executive Opinion Survey 2006

Pay and productivity | survey dataPay in your country is (1 = not related to worker productivity,7 = strongly related to worker productivity)Source: World Economic Forum, Executive Opinion Survey 2006

Brain drain | survey dataYour country’s talented people (1 = normally leave to pursueopportunities in other countries, 7 = almost always remain inthe country)Source: World Economic Forum, Executive Opinion Survey 2006

Private sector employment of women | survey dataIn your country, do businesses provide women the sameopportunities as men to rise to positions of leadership? (1 = no, women are unable to rise to positions of leadership, 7 = yes, women are often in management positions)Source: World Economic Forum, Executive Opinion Survey 2006

Financial market sophistication | survey dataThe level of sophistication of financial markets in your country is (1 = lower than international norms, 7 = higher than international norms)Source: World Economic Forum, Executive Opinion Survey 2006

Ease of access to loans | survey dataHow easy is it to obtain a bank loan in your country with only a good business plan and no collateral? (1 = impossible,7 = easy)Source: World Economic Forum, Executive Opinion Survey 2006

Venture capital availability | survey dataEntrepreneurs with innovative but risky projects can generallyfind venture capital in your country (1 = not true, 7 = true)Source: World Economic Forum, Executive Opinion Survey 2006

Soundness of banks | survey dataBanks in your country are (1 = insolvent and may require agovernment bailout, 7 = generally healthy with sound balancesheets)Source: World Economic Forum, Executive Opinion Survey 2006

Local equity market access | survey dataRaising money by issuing shares on the local stock market is(1 = nearly impossible, 7 = quite possible for a good company)Source: World Economic Forum, Executive Opinion Survey 2006


Technological readiness | survey dataYour country’s level of technological readiness (1 = generallylags behind most other countries, 7 = is among the worldleaders)Source: World Economic Forum, Executive Opinion Survey 2006

Firm-level technology absorption | survey dataCompanies in your country are (1 = not able to absorb newtechnology, 7 = aggressive in absorbing new technology)Source: World Economic Forum, Executive Opinion Survey 2006

Laws relating to ICT | survey dataLaws relating to the use of information technology (electroniccommerce, digital signatures, consumer protection) are (1 = nonexistent, 7 = well developed and enforced)Source: World Economic Forum, Executive Opinion Survey 2006

FDI and technology transfer | survey dataForeign direct investment in your country (1 = brings littlenew technology, 7 = is an important source of new technology)Source: World Economic Forum, Executive Opinion Survey 2006

Mobile telephone subscribers | hard dataMobile telephone subscribers per 100 inhabitants, 2005The term subscribers refers to users of mobile telephones subscribing to an automatic public mobile telephone service thatprovides access to the public switched telephone network usingcellular technology. This can include analogue and digital cellularsystems but should not include non-cellular systems. Subscribersto fixed wireless, public mobile data services, or radio pagingservices are not included.

Source: International Telecommunication Union, WorldTelecommunication Indicators 2006

Internet users | hard dataInternet users per 10,000 inhabitants, 2005 or most recentyear availableInternet users are people with access to the worldwide network.

Source: International Telecommunication Union, WorldTelecommunications Indicators 2006; national sources

Personal computers | hard dataPersonal computers per 100 inhabitants, 2005 or most recentyear availableAccording to the World Bank, personal computers are self-contained computers designed to be used by a single individual.

Source: International Telecommunication Union, WorldTelecommunications Indicators 2006; national sources


Local supplier quantity | survey dataLocal suppliers in your country are (1 = largely nonexistent, 7 = numerous and include the most important materials, components, equipment, and services)Source: World Economic Forum, Executive Opinion Survey 2006

Local supplier quality | survey dataThe quality of local suppliers in your country is (1 = poor, as they are inefficient and have little technological capability,7 = very good, as they are internationally competitive andassist in new product and process development)Source: World Economic Forum, Executive Opinion Survey 2006

Production process sophistication | survey dataProduction processes use (1 = labor-intensive methods or previous generations of process technology, 7 = the world’sbest and most efficient process technology)Source: World Economic Forum, Executive Opinion Survey 2006

Extent of marketing | survey dataThe extent of marketing in your country is (1 = limited andprimitive, 7 = extensive and employs the world’s most sophisticated tools and techniques)Source: World Economic Forum, Executive Opinion Survey 2006

Control of international distribution | survey dataInternational distribution and marketing from your country (1 = takes place through foreign companies, 7 = is owned and controlled by local companies)Source: World Economic Forum, Executive Opinion Survey 2006


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iles Willingness to delegate authority | survey data

Willingness to delegate authority to subordinates is (1 = low—top management controls all important decisions, 7 = high—authority is mostly delegated to business unitheads and other lower-level managers)Source: World Economic Forum, Executive Opinion Survey 2006

Nature of competitive advantage | survey dataCompetitiveness of your country’s companies in internationalmarkets is primarily due to (1 = low cost or local naturalresources, 7 = unique products and processes)Source: World Economic Forum, Executive Opinion Survey 2006

Value chain presence | survey dataExporting companies in your country (1 = are primarilyinvolved in resource extraction or production, 7 = not onlyproduce but also perform product design, marketing sales,logistics, and after-sales services)Source: World Economic Forum, Executive Opinion Survey 2006


Quality of scientific research institutions | survey dataScientific research institutions in your country (e.g., universitylaboratories, government laboratories) are (1 = nonexistent, 7 = the best in their fields internationally)Source: World Economic Forum, Executive Opinion Survey 2006

Company spending on R&D | survey dataCompanies in your country (1 = do not spend money onresearch and development, 7 = spend heavily on research and development relative to international peers)Source: World Economic Forum, Executive Opinion Survey 2006

University/industry research collaboration | survey dataIn its R&D activity, business collaboration with local universi-ties is (1 = minimal or nonexistent, 7 = intensive and ongoing)Source: World Economic Forum, Executive Opinion Survey 2006

Government procurement of advanced technology products |

survey dataGovernment purchase decisions for the procurement ofadvanced technology products are (1 = based solely on price,7 = based on technical performance and innovativeness)Source: World Economic Forum, Executive Opinion Survey 2006

Availability of scientists and engineers | survey dataScientists and engineers in your country are (1 = nonexistentor rare, 7 = widely available)Source: World Economic Forum, Executive Opinion Survey 2006

Utility patents | hard dataNumber of utility patents (i.e., patents for invention) grantedbetween January 1 and December 31, 2005, per million populationUtility patents are recorded such that the origin of the patent isdetermined by the first-named inventor at the time of the grant.Patents per million population are calculated by dividing the number of patents granted to a country in 2005 by that country’spopulation in the same year.

Source: The United States Patent and Trademark Office (March2006); United Nations Population Fund, State of World Population2005

Intellectual property protection | survey dataIntellectual property protection in your country (1 = is weak ornonexistent, 7 = is equal to the world’s most stringent)Source: World Economic Forum, Executive Opinion Survey 2006

Capacity for innovation | survey dataCompanies obtain technology (1 = exclusively from licensingor imitating foreign companies, 7 = by conducting formalresearch and pioneering their own new products and processes)Source: World Economic Forum, Executive Opinion Survey 2006


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Country Page

Algeria 122

Angola 124

Benin 126

Botswana 128

Burkina Faso 130

Burundi 132

Cameroon 134

Chad 136

Egypt 138

Ethiopia 140

Gambia 142

Kenya 144

Lesotho 146

Libya 148

Madagascar 150

Malawi 152

Mali 154

Mauritania 156

Mauritius 158

Morocco 160

Mozambique 162

Namibia 164

Nigeria 166

South Africa 168

Tanzania 170

Tunisia 172

Uganda 174

Zambia 176

Zimbabwe 178


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AlgeriaKey indicators

Population (millions), 2006.......................................33.4GDP (billions, current US$), 2006 .........................114.3GDP (PPP US$) per capita, 2006 ..........................7,827Sectoral value-added (as percentage of GDP), 2004

Agriculture..............................................................10Industry ...................................................................57Services ..................................................................34

Human Development Indicator rank (out of 177 economies), 2004 ................................102


Global Competitiveness Index 2007Overall

rank Score(out of 128) (1–7)

Global Competitiveness Index 2007...............76.........4.0GCR 2005–06 (out of 117 economies) ......................82 ..........3.8

Basic requirements ...................................................44 ..........4.91st pillar: Institutions..................................................65 ..........3.92nd pillar: Infrastructure ...........................................80 ..........2.93rd pillar: Macroeconomy...........................................2 ..........6.24th pillar: Health and primary education................46 ..........6.6

Efficiency enhancers.................................................92 ..........3.35th pillar: Higher education and training................86 ..........3.56th pillar: Market efficiency......................................97 ..........3.77th pillar: Technological readiness .........................93 ..........2.7

Innovation enhancers................................................92 ..........3.28th pillar: Business sophistication .......................106 ..........3.49th pillar: Innovation ..................................................77 ..........3.1




Corruption.........................................................................8.7

Tax rates ...........................................................................8.5

Tax regulations ................................................................7.9






Inflation .............................................................................5.7



Crime and theft ................................................................3.1

0

2,000

4,000

6,000

8,000

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006


Institutions

Infrastructure

Macro-economy

Health andprimary

education

Higher educationand training

Market efficiency

Technologicalreadiness

Businesssophistication

Innovation

2

1

3

4

5

6

7

Algeria Economies in transition from 1 to 2

0 5 10 15 20 25 30


Note: From a list of 14 factors, respondents were asked to select the five most problematic for doing business in their country and to rank them between 1 (most problematic) and 5. The bars in the figure show the responses weighted according to their rankings.

Algeria Africa

1 Transition1–2 2 Transition

2–3

Factordriven

Efficiencydriven

Innovationdriven

3



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Property rights..............................................................4.5...........67Diversion of public funds .............................................3.2...........80Public trust of politicians ..............................................2.8...........47Judicial independence..................................................3.7...........65Favoritism in decisions of government officials...........3.9...........25Government spending .................................................3.7...........36Burden of government regulation................................3.0...........63Business costs of terrorism.........................................3.7.........118Reliability of police services.........................................5.1...........34Business costs of crime and violence .........................3.8...........83Organized crime...........................................................4.7...........70Ethical behavior of firms ..............................................4.1...........70Efficacy of corporate boards ........................................3.9.........107Protection of minority shareholders’ interests.............4.9...........38Strength of auditing and accounting standards ...........3.7.........102


Quality of overall infrastructure....................................3.1...........72Quality of railroad infrastructure...................................2.0...........73Quality of port infrastructure........................................3.1...........79Quality of air transport infrastructure...........................3.5...........93Quality of electricity supply..........................................4.2...........70Telephone lines* ..........................................................7.8...........90


Government surplus/deficit*......................................14.2.............6National savings rate*................................................51.2.............4Inflation* ......................................................................1.6...........13Interest rate spread*....................................................6.3...........73Government debt*.....................................................28.5...........28Real effective exchange rate*..................................–16.5...........13


Business impact of malaria ..........................................6.1...........65Business impact of tuberculosis ..................................5.8...........64Business impact of HIV/AIDS ......................................5.3...........58Infant mortality* .........................................................35.0...........90Life expectancy*........................................................71.0...........69Tuberculosis incidence* .............................................53.9...........59Malaria incidence* .......................................................1.0...........66HIV prevalence*...........................................................0.1...........28Primary enrollment*...................................................96.7...........35


Secondary enrollment* ..............................................80.7...........75Tertiary enrollment* ...................................................20.0...........75Quality of the educational system ...............................2.9...........93Quality of math and science education........................3.7...........74Quality of management schools ..................................3.5...........91Local availability of research and training services ......3.0.........103Extent of staff training .................................................3.0.........100



Agricultural policy costs ...............................................4.4...........15Efficiency of legal framework ......................................4.1...........54Extent and effect of taxation .......................................3.9...........33No. of procedures required to start a business* .......14.0.........110Time required to start a business* ............................24.0...........38Intensity of local competition.......................................4.2...........98Effectiveness of antitrust policy...................................3.9...........59Imports*.....................................................................30.4...........94Prevalence of trade barriers .........................................4.1...........83Prevalence of foreign ownership .................................4.7...........85Exports* .....................................................................54.2...........34Hiring and firing practices ............................................3.6...........81Flexibility of wage determination.................................4.4.........104Cooperation in labor-employer relations ......................4.6...........65Reliance on professional management........................4.4...........66Pay and productivity.....................................................3.8...........80Brain drain ....................................................................2.4.........105Private sector employment of women ........................4.6...........74Financial market sophistication ....................................2.0.........125Ease of access to loans ...............................................2.2.........114Venture capital availability ............................................2.2.........117Soundness of banks.....................................................4.1.........124Local equity market access..........................................2.7.........112


Technological readiness ...............................................2.5.........106Firm-level technology absorption .................................4.6...........69Laws relating to ICT.....................................................2.9...........95FDI and technology transfer.........................................4.2.........112Mobile telephone subscribers*..................................41.5...........69Internet users*.............................................................5.8...........88Personal computers* ...................................................1.1.........106


Local supplier quantity .................................................4.2...........95Local supplier quality....................................................3.5...........99Production process sophistication ...............................3.1...........85Extent of marketing .....................................................3.0.........118Control of international distribution..............................3.4.........102Willingness to delegate authority.................................2.6.........115Nature of competitive advantage.................................2.8...........99Value chain presence ...................................................2.4.........118


Quality of scientific research institutions.....................3.4...........85Company spending on R&D ........................................2.8...........92University-industry research collaboration ...................2.5.........104Gov’t procurement of advanced tech products ...........4.1...........36Availability of scientists and engineers ........................5.4...........21Utility patents*.............................................................0.0...........80Intellectual property protection ....................................3.3...........73Capacity for innovation.................................................2.3.........123

Algeria


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AngolaKey indicators

Population (millions), 2006.......................................16.4GDP (billions, current US$), 2006 ...........................43.8GDP (PPP US$) per capita, 2006 ..........................3,390Sectoral value-added (as percentage of GDP) ....n/aHuman Development Indicator rank

(out of 177 economies), 2004 ................................161




Global Competitiveness Index 2007.............128.........2.5GCR 2005–06 (out of 117 economies) ....................n/a..........n/a

Basic requirements .................................................128 ..........2.51st pillar: Institutions................................................123 ..........3.02nd pillar: Infrastructure .........................................116 ..........2.13rd pillar: Macroeconomy.......................................126 ..........2.44th pillar: Health and primary education..............128 ..........2.4

Efficiency enhancers...............................................126 ..........2.55th pillar: Higher education and training..............128 ..........1.96th pillar: Market efficiency....................................123 ..........3.47th pillar: Technological readiness .......................124 ..........2.3

Innovation enhancers..............................................126 ..........2.58th pillar: Business sophistication .......................126 ..........2.79th pillar: Innovation ................................................124 ..........2.3


Inefficient government bureaucracy.........................13.5

Inadequately educated workforce.............................12.5


Corruption.......................................................................10.7




Tax regulations ................................................................5.1


Crime and theft ................................................................4.2


Inflation .............................................................................3.2


Tax rates ...........................................................................2.9

1,000

1,500

2,000

2,500

3,000

3,500

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006


2–3

Factordriven

Efficiencydriven

Innovationdriven

3



Institutions

Infrastructure

Macro-economy

Health andprimary

education


Market efficiency



Innovation

2

1

3

4

5

6

7

Angola Factor-driven economies

0 5 10 15 20 25 30



Angola Africa


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Property rights..............................................................3.5.........111Diversion of public funds .............................................2.8...........97Public trust of politicians ..............................................2.3...........70Judicial independence..................................................2.8...........93Favoritism in decisions of government officials...........2.4.........104Government spending .................................................2.5.........105Burden of government regulation................................2.3.........117Business costs of terrorism.........................................5.8...........19Reliability of police services.........................................3.3...........95Business costs of crime and violence .........................2.4.........119Organized crime...........................................................4.5...........76Ethical behavior of firms ..............................................2.7.........128Efficacy of corporate boards ........................................3.2.........126Protection of minority shareholders’ interests.............3.5.........107Strength of auditing and accounting standards ...........3.3.........121


Quality of overall infrastructure....................................1.9.........121Quality of railroad infrastructure...................................1.5...........99Quality of port infrastructure........................................2.5...........98Quality of air transport infrastructure...........................3.3.........101Quality of electricity supply..........................................2.2.........115Telephone lines* ..........................................................0.6.........120


Government surplus/deficit*........................................4.3...........15National savings rate*................................................20.8...........62Inflation* ....................................................................23.0.........127Interest rate spread*..................................................55.0.........122Government debt*...................................................484.3.........114Real effective exchange rate* ...................................44.4.........125


Business impact of malaria ..........................................3.0.........125Business impact of tuberculosis ..................................3.6.........119Business impact of HIV/AIDS ......................................3.4.........105Infant mortality* .......................................................154.0.........128Life expectancy*........................................................40.0.........125Tuberculosis incidence* ...........................................309.9.........102Malaria incidence* ..............................................10,139.1.........117HIV prevalence*...........................................................3.9.........111Primary enrollment*...................................................29.9.........123


Secondary enrollment* ................................................n/a..........n/aTertiary enrollment* .....................................................1.0.........118Quality of the educational system ...............................2.2.........122Quality of math and science education........................2.4.........122Quality of management schools ..................................2.1.........127Local availability of research and training services ......2.2.........125Extent of staff training .................................................2.7.........111



Agricultural policy costs ...............................................3.3.........101Efficiency of legal framework ......................................2.8.........107Extent and effect of taxation .......................................3.8...........36No. of procedures required to start a business* .......13.0...........99Time required to start a business* ..........................124.0.........118Intensity of local competition.......................................2.8.........127Effectiveness of antitrust policy...................................2.3.........127Imports*.....................................................................61.1...........35Prevalence of trade barriers .........................................5.0...........38Prevalence of foreign ownership .................................3.8.........120Exports* .....................................................................80.0...........10Hiring and firing practices ............................................3.6...........80Flexibility of wage determination.................................5.6...........39Cooperation in labor-employer relations ......................4.4...........83Reliance on professional management........................3.5.........111Pay and productivity.....................................................2.8.........123Brain drain ....................................................................2.8...........78Private sector employment of women ........................4.1.........108Financial market sophistication ....................................2.2.........119Ease of access to loans ...............................................2.5...........98Venture capital availability ............................................2.4.........109Soundness of banks.....................................................4.9...........88Local equity market access..........................................1.8.........126


Technological readiness ...............................................2.2.........122Firm-level technology absorption .................................3.3.........125Laws relating to ICT.....................................................2.2.........120FDI and technology transfer.........................................4.7...........80Mobile telephone subscribers*....................................6.9.........113Internet users*.............................................................1.1.........114Personal computers* ...................................................0.2.........123


Local supplier quantity .................................................3.1.........124Local supplier quality....................................................2.7.........127Production process sophistication ...............................2.6.........112Extent of marketing .....................................................2.7.........122Control of international distribution..............................3.0.........122Willingness to delegate authority.................................2.3.........128Nature of competitive advantage.................................2.7.........107Value chain presence ...................................................2.2.........125


Quality of scientific research institutions.....................2.5.........122Company spending on R&D ........................................2.5.........112University-industry research collaboration ...................2.3.........108Gov’t procurement of advanced tech products ...........2.9.........117Availability of scientists and engineers ........................2.4.........127Utility patents*.............................................................0.0...........80Intellectual property protection ....................................2.6.........106Capacity for innovation.................................................2.3.........125

Angola


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BeninKey indicators

Population (millions), 2006.........................................8.7GDP (billions, current US$), 2006 .............................4.8GDP (PPP US$) per capita, 2006 ..........................1,408Sectoral value-added (as percentage of GDP), 2004






Global Competitiveness Index 2007.............107.........3.4GCR 2005–06 (out of 117 economies) ....................106 ..........3.3

Basic requirements .................................................106 ..........3.71st pillar: Institutions..................................................87 ..........3.62nd pillar: Infrastructure .........................................117 ..........2.13rd pillar: Macroeconomy.........................................95 ..........4.04th pillar: Health and primary education..............104 ..........5.3

Efficiency enhancers...............................................107 ..........3.05th pillar: Higher education and training..............104 ..........3.06th pillar: Market efficiency......................................96 ..........3.77th pillar: Technological readiness .......................114 ..........2.5

Innovation enhancers................................................90 ..........3.28th pillar: Business sophistication .........................87 ..........3.69th pillar: Innovation ..................................................91 ..........2.9



Corruption.......................................................................15.7

Tax regulations ..............................................................12.9

Tax rates .........................................................................11.1





Inflation .............................................................................3.8

Crime and theft ................................................................3.5





500

1,000

1,500

2,000

2,500

3,000

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006


2–3

Factordriven

Efficiencydriven

Innovationdriven

3



Institutions

Infrastructure

Macro-economy

Health andprimary

education


Market efficiency



Innovation

2

1

3

4

5

6

7

Benin Factor-driven economies

0 5 10 15 20 25 30



Benin Africa


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Property rights..............................................................3.6.........100Diversion of public funds .............................................2.1.........122Public trust of politicians ..............................................1.8...........99Judicial independence..................................................3.8...........64Favoritism in decisions of government officials...........2.7...........89Government spending .................................................2.6...........95Burden of government regulation................................2.4.........110Business costs of terrorism.........................................5.5...........39Reliability of police services.........................................3.3...........93Business costs of crime and violence .........................3.4...........91Organized crime...........................................................3.8.........101Ethical behavior of firms ..............................................3.9...........79Efficacy of corporate boards ........................................4.4...........77Protection of minority shareholders’ interests.............4.6...........52Strength of auditing and accounting standards ...........3.6.........107


Quality of overall infrastructure....................................2.2.........111Quality of railroad infrastructure...................................1.3.........114Quality of port infrastructure........................................2.5...........97Quality of air transport infrastructure...........................2.6.........119Quality of electricity supply..........................................2.8.........108Telephone lines* ..........................................................1.0.........110


Government surplus/deficit* ......................................–2.2...........68National savings rate*................................................12.8.........106Inflation* ......................................................................5.5...........75Interest rate spread*....................................................n/a..........n/aGovernment debt*.....................................................34.1...........33Real effective exchange rate* ...................................12.5.........106


Business impact of malaria ..........................................4.0.........112Business impact of tuberculosis ..................................4.2.........108Business impact of HIV/AIDS ......................................3.5.........103Infant mortality* .........................................................90.0.........116Life expectancy*........................................................53.0.........110Tuberculosis incidence* ...........................................142.3...........84Malaria incidence* ..............................................12,172.5.........120HIV prevalence*...........................................................1.9.........106Primary enrollment*...................................................82.6.........102


Secondary enrollment* ..............................................25.9.........116Tertiary enrollment* .....................................................n/a..........n/aQuality of the educational system ...............................2.9...........94Quality of math and science education........................4.3...........55Quality of management schools ..................................4.1...........64Local availability of research and training services ......3.1.........101Extent of staff training .................................................2.7.........112



Agricultural policy costs ...............................................3.4...........91Efficiency of legal framework ......................................3.4...........76Extent and effect of taxation .......................................2.2.........123No. of procedures required to start a business* .........7.0...........27Time required to start a business* ............................31.0...........57Intensity of local competition.......................................4.1.........102Effectiveness of antitrust policy...................................3.5...........80Imports*.....................................................................33.0...........86Prevalence of trade barriers .........................................4.4...........64Prevalence of foreign ownership .................................5.0...........72Exports* .....................................................................20.9.........113Hiring and firing practices ............................................4.4...........39Flexibility of wage determination.................................5.1...........71Cooperation in labor-employer relations ......................4.7...........61Reliance on professional management........................4.4...........67Pay and productivity.....................................................3.2.........109Brain drain ....................................................................2.5...........96Private sector employment of women ........................5.2...........26Financial market sophistication ....................................2.5.........103Ease of access to loans ...............................................1.9.........123Venture capital availability ............................................2.4.........111Soundness of banks.....................................................5.8...........47Local equity market access..........................................3.6...........99


Technological readiness ...............................................2.3.........113Firm-level technology absorption .................................4.4...........89Laws relating to ICT.....................................................2.8...........98FDI and technology transfer.........................................4.1.........118Mobile telephone subscribers*..................................10.0.........107Internet users*.............................................................5.7...........90Personal computers* ...................................................0.4.........116


Local supplier quantity .................................................4.0.........101Local supplier quality....................................................3.7...........87Production process sophistication ...............................2.8...........99Extent of marketing .....................................................3.5...........93Control of international distribution..............................3.8...........81Willingness to delegate authority.................................2.8.........103Nature of competitive advantage.................................3.4...........63Value chain presence ...................................................3.6...........61


Quality of scientific research institutions.....................2.9.........113Company spending on R&D ........................................2.5.........114University-industry research collaboration ...................2.2.........113Gov’t procurement of advanced tech products ...........4.0...........43Availability of scientists and engineers ........................4.4...........65Utility patents*.............................................................0.0...........80Intellectual property protection ....................................3.1...........83Capacity for innovation.................................................3.0...........71

Benin


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BotswanaKey indicators

Population (millions), 2006.........................................1.8GDP (billions, current US$), 2006 ...........................10.8GDP (PPP US$) per capita, 2006 ........................16,190Sectoral value-added (as percentage of GDP), 2004

Agriculture................................................................2Industry ...................................................................53Services ..................................................................40






Basic requirements ...................................................82 ..........4.31st pillar: Institutions..................................................38 ..........4.52nd pillar: Infrastructure ...........................................67 ..........3.43rd pillar: Macroeconomy.........................................41 ..........4.94th pillar: Health and primary education..............115 ..........4.4







Poor work ethic in national labor force ....................13.1


Inflation .............................................................................9.2


Corruption.........................................................................5.2

Crime and theft ................................................................5.1

Tax rates ...........................................................................2.8



Tax regulations ................................................................0.9


0

5,000

10,000

15,000

20,000

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006


Institutions

Infrastructure

Macro-economy

Health andprimary

education


Market efficiency



Innovation

2

1

3

4

5

6

7

Botswana Economies in transition from 1 to 2

0 5 10 15 20 25 30



Botswana Africa


2–3

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Efficiencydriven

Innovationdriven

3



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* Hard data





Property rights..............................................................4.9...........53Diversion of public funds .............................................4.7...........40Public trust of politicians ..............................................3.5...........27Judicial independence..................................................5.3...........25Favoritism in decisions of government officials...........3.6...........37Government spending .................................................4.3...........19Burden of government regulation................................3.1...........49Business costs of terrorism.........................................5.7...........24Reliability of police services.........................................4.1...........64Business costs of crime and violence .........................4.1...........69Organized crime...........................................................5.2...........50Ethical behavior of firms ..............................................4.6...........41Efficacy of corporate boards ........................................4.4...........71Protection of minority shareholders’ interests.............4.7...........50Strength of auditing and accounting standards ...........5.2...........45




Government surplus/deficit*........................................0.1...........42National savings rate*................................................40.6.............9Inflation* ......................................................................8.6...........99Interest rate spread*....................................................6.5...........75Government debt* .......................................................n/a..........n/aReal effective exchange rate* .....................................4.4...........80


Business impact of malaria ..........................................5.0.........100Business impact of tuberculosis ..................................3.9.........115Business impact of HIV/AIDS ......................................2.3.........122Infant mortality* .........................................................75.0.........105Life expectancy*........................................................40.0.........125Tuberculosis incidence* ...........................................552.8.........116Malaria incidence* ................................................1,245.4.........107HIV prevalence*.........................................................37.3.........128Primary enrollment*...................................................82.1.........103


Secondary enrollment* ..............................................75.1...........80Tertiary enrollment* .....................................................6.0.........102Quality of the educational system ...............................3.7...........58Quality of math and science education........................3.7...........73Quality of management schools ..................................3.4...........94Local availability of research and training services ......3.0.........104Extent of staff training .................................................3.5...........69



Agricultural policy costs ...............................................3.8...........47Efficiency of legal framework ......................................4.9...........32Extent and effect of taxation .......................................4.7...........17No. of procedures required to start a business* .......11.0...........82Time required to start a business* ..........................108.0.........116Intensity of local competition.......................................4.5...........75Effectiveness of antitrust policy...................................3.2...........91Imports*.....................................................................28.0.........105Prevalence of trade barriers .........................................4.8...........43Prevalence of foreign ownership .................................5.2...........58Exports* .....................................................................41.5...........62Hiring and firing practices ............................................3.5...........87Flexibility of wage determination.................................5.0...........73Cooperation in labor-employer relations ......................4.9...........42Reliance on professional management........................4.8...........43Pay and productivity.....................................................3.5...........92Brain drain ....................................................................3.5...........52Private sector employment of women ........................5.2...........24Financial market sophistication ....................................3.6...........75Ease of access to loans ...............................................3.4...........60Venture capital availability ............................................3.5...........45Soundness of banks.....................................................6.0...........40Local equity market access..........................................5.1...........59


Technological readiness ...............................................3.7...........68Firm-level technology absorption .................................4.2...........95Laws relating to ICT.....................................................3.0...........86FDI and technology transfer.........................................4.7...........85Mobile telephone subscribers*..................................46.6...........64Internet users*.............................................................3.4.........103Personal computers* ...................................................4.5...........77


Local supplier quantity .................................................3.7.........117Local supplier quality....................................................3.6...........94Production process sophistication ...............................3.1...........86Extent of marketing .....................................................3.6...........91Control of international distribution..............................3.4.........106Willingness to delegate authority.................................3.3...........75Nature of competitive advantage.................................3.5...........50Value chain presence ...................................................2.6.........109


Quality of scientific research institutions.....................3.6...........75Company spending on R&D ........................................2.8...........89University-industry research collaboration ...................2.7...........88Gov’t procurement of advanced tech products ...........3.8...........64Availability of scientists and engineers ........................3.4.........111Utility patents*.............................................................0.0...........80Intellectual property protection ....................................3.3...........77Capacity for innovation.................................................2.5.........114

Botswana


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Burkina FasoKey indicators

Population (millions), 2006.......................................13.6GDP (billions, current US$), 2006 .............................6.1GDP (PPP US$) per capita, 2006 ..........................1,396Sectoral value-added (as percentage of GDP), 2004







Basic requirements .................................................124 ..........3.21st pillar: Institutions..................................................67 ..........3.92nd pillar: Infrastructure .........................................113 ..........2.13rd pillar: Macroeconomy.......................................119 ..........3.44th pillar: Health and primary education..............127 ..........3.2





Corruption.......................................................................11.5

Tax regulations ..............................................................10.6

Tax rates ...........................................................................9.7




Inflation .............................................................................6.2



Crime and theft ................................................................3.8




0

500

1,000

1,500

2,000

2,500

3,000

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006


2–3

Factordriven

Efficiencydriven

Innovationdriven

3



Institutions

Infrastructure

Macro-economy

Health andprimary

education


Market efficiency



Innovation

2

1

3

4

5

6

7

Burkina Faso Factor-driven economies

0 5 10 15 20 25 30



Burkina Faso Africa


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* Hard data







Quality of overall infrastructure....................................2.1.........117Quality of railroad infrastructure...................................2.0...........78Quality of port infrastructure........................................1.8.........115Quality of air transport infrastructure...........................2.9.........114Quality of electricity supply..........................................3.1.........103Telephone lines* ..........................................................0.7.........117


Government surplus/deficit* ......................................–3.9.........101National savings rate*................................................10.5.........116Inflation* ......................................................................6.3...........81Interest rate spread*..................................................11.6.........105Government debt* .......................................................n/a..........n/aReal effective exchange rate* .....................................7.0...........94


Business impact of malaria ..........................................4.2.........108Business impact of tuberculosis ..................................4.6.........100Business impact of HIV/AIDS ......................................3.3.........107Infant mortality* .........................................................97.0.........118Life expectancy*........................................................48.0.........115Tuberculosis incidence* ...........................................365.1.........107Malaria incidence* ..............................................11,894.5.........118HIV prevalence*...........................................................4.2.........113Primary enrollment*...................................................40.5.........122


Secondary enrollment* ..............................................12.1.........123Tertiary enrollment* .....................................................1.0.........118Quality of the educational system ...............................2.5.........117Quality of math and science education........................3.7...........77Quality of management schools ..................................3.8...........75Local availability of research and training services ......3.3...........92Extent of staff training .................................................2.7.........110



Agricultural policy costs ...............................................3.8...........53Efficiency of legal framework ......................................3.2...........87Extent and effect of taxation .......................................3.4...........58No. of procedures required to start a business* .........8.0...........36Time required to start a business* ............................34.0...........64Intensity of local competition.......................................4.3...........87Effectiveness of antitrust policy...................................3.9...........57Imports*.....................................................................23.5.........115Prevalence of trade barriers .........................................5.2...........31Prevalence of foreign ownership .................................5.3...........46Exports* .....................................................................10.6.........125Hiring and firing practices ............................................3.9...........63Flexibility of wage determination.................................4.6...........95Cooperation in labor-employer relations ......................4.7...........60Reliance on professional management........................4.2...........74Pay and productivity.....................................................3.5...........95Brain drain ....................................................................3.2...........67Private sector employment of women ........................4.7...........61Financial market sophistication ....................................2.6...........97Ease of access to loans ...............................................2.4.........103Venture capital availability ............................................2.3.........114Soundness of banks.....................................................6.1...........35Local equity market access..........................................4.1...........85


Technological readiness ...............................................2.5.........107Firm-level technology absorption .................................4.6...........73Laws relating to ICT.....................................................2.6.........103FDI and technology transfer.........................................5.1...........50Mobile telephone subscribers*....................................4.3.........119Internet users*.............................................................0.5.........121Personal computers* ...................................................0.2.........121


Local supplier quantity .................................................4.3...........88Local supplier quality....................................................3.5...........97Production process sophistication ...............................2.7.........107Extent of marketing .....................................................2.9.........119Control of international distribution..............................3.7...........85Willingness to delegate authority.................................2.5.........124Nature of competitive advantage.................................3.0...........85Value chain presence ...................................................2.7.........104


Quality of scientific research institutions.....................3.5...........77Company spending on R&D ........................................3.3...........55University-industry research collaboration ...................2.9...........75Gov’t procurement of advanced tech products ...........4.0...........39Availability of scientists and engineers ........................3.6.........106Utility patents*.............................................................0.0...........80Intellectual property protection ....................................3.9...........51Capacity for innovation.................................................2.8...........88

Burkina Faso


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BurundiKey indicators

Population (millions), 2006.........................................7.8GDP (billions, current US$), 2006 .............................0.9GDP (PPP US$) per capita, 2006 .............................680Sectoral value-added (as percentage of GDP), 2004












Corruption.........................................................................9.4

Tax regulations ................................................................9.1


Tax rates ...........................................................................8.1




Inflation .............................................................................6.2





Crime and theft ................................................................4.0

0

500

1,000

1,500

2,000

2,500

3,000

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006


2–3

Factordriven

Efficiencydriven

Innovationdriven

3



Institutions

Infrastructure

Macro-economy

Health andprimary

education


Market efficiency



Innovation

2

1

3

4

5

6

7

Burundi Factor-driven economies

0 5 10 15 20 25 30



Burundi Africa


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* Hard data





Property rights..............................................................3.0.........122Diversion of public funds .............................................2.4.........117Public trust of politicians ..............................................1.8...........98Judicial independence..................................................1.8.........123Favoritism in decisions of government officials...........2.9...........75Government spending .................................................2.8...........86Burden of government regulation................................2.7...........92Business costs of terrorism.........................................3.8.........115Reliability of police services.........................................3.2.........100Business costs of crime and violence .........................3.4...........93Organized crime...........................................................3.8.........103Ethical behavior of firms ..............................................3.7...........95Efficacy of corporate boards ........................................3.8.........114Protection of minority shareholders’ interests.............3.7...........98Strength of auditing and accounting standards ...........3.2.........123


Quality of overall infrastructure....................................2.0.........120Quality of railroad infrastructure...................................1.2.........121Quality of port infrastructure........................................1.9.........110Quality of air transport infrastructure...........................2.4.........124Quality of electricity supply..........................................1.8.........123Telephone lines* ..........................................................0.4.........122


Government surplus/deficit* ......................................–7.0.........123National savings rate*..................................................8.6.........121Inflation* ....................................................................13.6.........119Interest rate spread*....................................................n/a..........n/aGovernment debt*...................................................199.3.........113Real effective exchange rate*..................................–23.9.............7


Business impact of malaria ..........................................3.5.........118Business impact of tuberculosis ..................................4.7...........99Business impact of HIV/AIDS ......................................3.1.........111Infant mortality* .......................................................114.0.........125Life expectancy*........................................................45.0.........121Tuberculosis incidence* ...........................................563.7.........117Malaria incidence* ..............................................26,993.9.........126HIV prevalence*...........................................................6.0.........117Primary enrollment*...................................................57.0.........118


Secondary enrollment* ..............................................12.1.........122Tertiary enrollment* .....................................................2.0.........115Quality of the educational system ...............................2.7.........107Quality of math and science education........................3.7...........75Quality of management schools ..................................2.8.........119Local availability of research and training services ......2.2.........126Extent of staff training .................................................2.2.........126



Agricultural policy costs ...............................................3.5...........75Efficiency of legal framework ......................................2.5.........117Extent and effect of taxation .......................................2.6.........100No. of procedures required to start a business* .......11.0...........82Time required to start a business* ............................43.0...........81Intensity of local competition.......................................3.5.........122Effectiveness of antitrust policy...................................2.6.........121Imports*.....................................................................25.8.........112Prevalence of trade barriers .........................................3.5.........117Prevalence of foreign ownership .................................4.2.........108Exports* .......................................................................4.4.........127Hiring and firing practices ............................................4.5...........34Flexibility of wage determination.................................5.8...........21Cooperation in labor-employer relations ......................4.7...........58Reliance on professional management........................3.6.........106Pay and productivity.....................................................3.0.........116Brain drain ....................................................................2.3.........111Private sector employment of women ........................5.1...........33Financial market sophistication ....................................2.2.........117Ease of access to loans ...............................................1.8.........125Venture capital availability ............................................1.9.........125Soundness of banks.....................................................4.8...........96Local equity market access..........................................2.2.........122


Technological readiness ...............................................1.6.........127Firm-level technology absorption .................................3.7.........110Laws relating to ICT.....................................................2.0.........125FDI and technology transfer.........................................3.3.........128Mobile telephone subscribers*....................................2.0.........126Internet users*.............................................................0.5.........119Personal computers* ...................................................0.5.........114


Local supplier quantity .................................................3.9.........104Local supplier quality....................................................2.9.........119Production process sophistication ...............................2.1.........125Extent of marketing .....................................................2.0.........126Control of international distribution..............................3.0.........121Willingness to delegate authority.................................2.7.........112Nature of competitive advantage.................................2.8...........98Value chain presence ...................................................2.9...........96



Burundi


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CameroonKey indicators

Population (millions), 2006.......................................16.6GDP (billions, current US$), 2006 ...........................18.4GDP (PPP US$) per capita, 2006 ..........................2,199Sectoral value-added (as percentage of GDP), 2004






Global Competitiveness Index 2007.............111.........3.3GCR 2005–06 (out of 117 economies) ......................99 ..........3.4

Basic requirements .................................................108 ..........3.71st pillar: Institutions................................................120 ..........3.12nd pillar: Infrastructure .........................................124 ..........1.93rd pillar: Macroeconomy.........................................42 ..........4.84th pillar: Health and primary education..............107 ..........5.0





Corruption.......................................................................15.2

Tax rates .........................................................................10.5

Tax regulations ..............................................................10.0






Crime and theft ................................................................3.7

Inflation .............................................................................3.6




1,000

1,500

2,000

2,500

3,000

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006


2–3

Factordriven

Efficiencydriven

Innovationdriven

3



Institutions

Infrastructure

Macro-economy

Health andprimary

education


Market efficiency



Innovation

2

1

3

4

5

6

7

Cameroon Factor-driven economies

0 5 10 15 20 25 30



Cameroon Africa


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* Hard data





Property rights..............................................................3.5.........108Diversion of public funds .............................................1.7.........126Public trust of politicians ..............................................1.4.........120Judicial independence..................................................2.2.........115Favoritism in decisions of government officials...........2.4.........107Government spending .................................................2.3.........117Burden of government regulation................................2.0.........124Business costs of terrorism.........................................5.6...........32Reliability of police services.........................................3.3...........96Business costs of crime and violence .........................3.1.........103Organized crime...........................................................4.1...........90Ethical behavior of firms ..............................................3.5.........106Efficacy of corporate boards ........................................3.6.........124Protection of minority shareholders’ interests.............3.8...........94Strength of auditing and accounting standards ...........3.3.........122




Government surplus/deficit*........................................3.5...........16National savings rate*................................................18.1...........76Inflation* ......................................................................2.0...........22Interest rate spread*..................................................12.8.........109Government debt* .......................................................n/a..........n/aReal effective exchange rate* .....................................2.1...........72


Business impact of malaria ..........................................4.2.........109Business impact of tuberculosis ..................................4.1.........112Business impact of HIV/AIDS ......................................3.5.........104Infant mortality* .........................................................87.0.........114Life expectancy*........................................................50.0.........112Tuberculosis incidence* ...........................................227.4...........96Malaria incidence* ................................................2,900.0.........110HIV prevalence*...........................................................6.9.........119Primary enrollment*.....................................................n/a..........n/a


Secondary enrollment* ..............................................43.8.........107Tertiary enrollment* .....................................................5.0.........105Quality of the educational system ...............................3.0...........89Quality of math and science education........................3.6...........82Quality of management schools ..................................3.4...........92Local availability of research and training services ......3.1...........99Extent of staff training .................................................2.7.........116



Agricultural policy costs ...............................................3.8...........51Efficiency of legal framework ......................................2.7.........108Extent and effect of taxation .......................................2.3.........117No. of procedures required to start a business* .......12.0...........92Time required to start a business* ............................37.0...........73Intensity of local competition.......................................4.1.........105Effectiveness of antitrust policy...................................3.0.........100Imports*.....................................................................25.5.........113Prevalence of trade barriers .........................................4.1...........80Prevalence of foreign ownership .................................5.2...........59Exports* .....................................................................25.4.........103Hiring and firing practices ............................................4.4...........37Flexibility of wage determination.................................4.6...........97Cooperation in labor-employer relations ......................4.5...........74Reliance on professional management........................4.0...........86Pay and productivity.....................................................3.1.........112Brain drain ....................................................................2.4.........106Private sector employment of women ........................4.6...........77Financial market sophistication ....................................1.8.........127Ease of access to loans ...............................................1.6.........127Venture capital availability ............................................2.0.........121Soundness of banks.....................................................5.3...........73Local equity market access..........................................2.7.........113


Technological readiness ...............................................2.3.........112Firm-level technology absorption .................................4.2...........99Laws relating to ICT.....................................................2.5.........108FDI and technology transfer.........................................4.4.........104Mobile telephone subscribers*..................................13.8.........100Internet users*.............................................................1.5.........112Personal computers* ...................................................1.0.........108


Local supplier quantity .................................................4.3...........87Local supplier quality....................................................3.4.........101Production process sophistication ...............................2.9...........98Extent of marketing .....................................................3.2.........103Control of international distribution..............................3.3.........112Willingness to delegate authority.................................2.4.........127Nature of competitive advantage.................................2.6.........115Value chain presence ...................................................2.9...........94


Quality of scientific research institutions.....................2.9.........112Company spending on R&D ........................................2.6.........106University-industry research collaboration ...................2.1.........121Gov’t procurement of advanced tech products ...........3.3.........100Availability of scientists and engineers ........................4.3...........74Utility patents*.............................................................0.0...........80Intellectual property protection ....................................3.4...........68Capacity for innovation.................................................2.4.........115

Cameroon


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ChadKey indicators


Agriculture..............................................................61Industry .....................................................................8Services ..................................................................29










Corruption.......................................................................16.7


Policy instability.............................................................10.8





Tax regulations ................................................................6.1

Tax rates ...........................................................................5.4

Crime and theft ................................................................4.0



Inflation .............................................................................1.5


0

500

1,000

1,500

2,000

2,500

3,000

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006


2–3

Factordriven

Efficiencydriven

Innovationdriven

3



Institutions

Infrastructure

Macro-economy

Health andprimary

education


Market efficiency



Innovation

2

1

3

4

5

6

7

Chad Factor-driven economies

0 5 10 15 20 25 30



Chad Africa


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* Hard data





Property rights..............................................................2.6.........126Diversion of public funds .............................................1.6.........127Public trust of politicians ..............................................1.8.........101Judicial independence..................................................1.8.........124Favoritism in decisions of government officials...........2.1.........121Government spending .................................................1.6.........127Burden of government regulation................................2.4.........112Business costs of terrorism.........................................4.3.........103Reliability of police services.........................................2.3.........123Business costs of crime and violence .........................2.3.........122Organized crime...........................................................2.6.........127Ethical behavior of firms ..............................................3.1.........123Efficacy of corporate boards ........................................2.9.........128Protection of minority shareholders’ interests.............3.9...........90Strength of auditing and accounting standards ...........2.7.........127




Government surplus/deficit* ......................................–1.5...........60National savings rate*................................................19.9...........67Inflation* ......................................................................7.9...........94Interest rate spread*..................................................12.8.........109Government debt* .......................................................n/a..........n/aReal effective exchange rate* .....................................8.3...........97


Business impact of malaria ..........................................3.1.........124Business impact of tuberculosis ..................................3.5.........120Business impact of HIV/AIDS ......................................2.2.........125Infant mortality* .......................................................117.0.........126Life expectancy*........................................................46.0.........118Tuberculosis incidence* ...........................................565.7.........118Malaria incidence* ................................................4,767.9.........113HIV prevalence*...........................................................4.8.........115Primary enrollment*...................................................58.3.........117


Secondary enrollment* ..............................................15.1.........121Tertiary enrollment* .....................................................n/a..........n/aQuality of the educational system ...............................2.1.........124Quality of math and science education........................2.4.........125Quality of management schools ..................................2.4.........125Local availability of research and training services ......2.5.........119Extent of staff training .................................................1.8.........127



Agricultural policy costs ...............................................3.4...........85Efficiency of legal framework ......................................2.2.........125Extent and effect of taxation .......................................2.4.........115No. of procedures required to start a business* .......19.0.........121Time required to start a business* ............................75.0.........108Intensity of local competition.......................................3.1.........125Effectiveness of antitrust policy...................................2.5.........126Imports*.....................................................................11.5.........128Prevalence of trade barriers .........................................3.2.........126Prevalence of foreign ownership .................................4.4.........101Exports* .....................................................................58.3...........31Hiring and firing practices ............................................3.6...........83Flexibility of wage determination.................................5.6...........35Cooperation in labor-employer relations ......................3.8.........118Reliance on professional management........................2.2.........128Pay and productivity.....................................................2.7.........126Brain drain ....................................................................2.4.........108Private sector employment of women ........................4.9...........43Financial market sophistication ....................................1.7.........128Ease of access to loans ...............................................1.9.........120Venture capital availability ............................................2.5.........104Soundness of banks.....................................................4.3.........119Local equity market access..........................................2.4.........119


Technological readiness ...............................................1.6.........126Firm-level technology absorption .................................3.4.........122Laws relating to ICT.....................................................2.0.........126FDI and technology transfer.........................................3.8.........127Mobile telephone subscribers*....................................2.2.........125Internet users*.............................................................0.4.........123Personal computers* ...................................................0.2.........124


Local supplier quantity .................................................3.6.........120Local supplier quality....................................................2.8.........123Production process sophistication ...............................1.9.........127Extent of marketing .....................................................2.0.........127Control of international distribution..............................2.5.........127Willingness to delegate authority.................................2.5.........122Nature of competitive advantage.................................2.8...........97Value chain presence ...................................................2.7.........102



Chad


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EgyptKey indicators

Population (millions), 2006.......................................75.4GDP (billions, current US$), 2006 .........................107.4GDP (PPP US$) per capita, 2006 ..........................4,836Sectoral value-added (as percentage of GDP), 2004







Basic requirements ...................................................64 ..........4.61st pillar: Institutions..................................................50 ..........4.22nd pillar: Infrastructure ...........................................56 ..........3.73rd pillar: Macroeconomy.......................................111 ..........3.74th pillar: Health and primary education................51 ..........6.5







Corruption.........................................................................9.6


Tax regulations ................................................................7.3


Inflation .............................................................................6.2


Tax rates ...........................................................................3.4




Crime and theft ................................................................0.0

1,000

2,000

3,000

4,000

5,000

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006


2–3

Factordriven

Efficiencydriven

Innovationdriven

3



Institutions

Infrastructure

Macro-economy

Health andprimary

education


Market efficiency



Innovation

2

1

3

4

5

6

7

Egypt Factor-driven economies

0 5 10 15 20 25 30



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* Hard data





Property rights..............................................................4.7...........58Diversion of public funds .............................................4.3...........44Public trust of politicians ..............................................2.7...........51Judicial independence..................................................4.8...........40Favoritism in decisions of government officials...........3.2...........48Government spending .................................................3.2...........64Burden of government regulation................................2.9...........74Business costs of terrorism.........................................4.3.........105Reliability of police services.........................................4.5...........47Business costs of crime and violence .........................4.8...........51Organized crime...........................................................5.8...........30Ethical behavior of firms ..............................................4.4...........50Efficacy of corporate boards ........................................4.3...........80Protection of minority shareholders’ interests.............4.4...........61Strength of auditing and accounting standards ...........4.5...........72


Quality of overall infrastructure....................................3.8...........57Quality of railroad infrastructure...................................3.3...........47Quality of port infrastructure........................................3.5...........62Quality of air transport infrastructure...........................4.7...........57Quality of electricity supply..........................................5.0...........54Telephone lines* ........................................................14.0...........73


Government surplus/deficit* ....................................–10.5.........127National savings rate*................................................19.5...........69Inflation* ....................................................................11.4.........112Interest rate spread*....................................................5.9...........67Government debt*...................................................108.2.........104Real effective exchange rate*..................................–29.0.............5


Business impact of malaria ..........................................6.2...........59Business impact of tuberculosis ..................................5.9...........58Business impact of HIV/AIDS ......................................5.6...........53Infant mortality* .........................................................26.0...........78Life expectancy*........................................................68.0...........82Tuberculosis incidence* .............................................34.9...........45Malaria incidence* .......................................................0.0.............1HIV prevalence*...........................................................0.0.............1Primary enrollment*...................................................95.4...........41


Secondary enrollment* ..............................................87.1...........61Tertiary enrollment* ...................................................33.0...........57Quality of the educational system ...............................2.7.........106Quality of math and science education........................3.2...........96Quality of management schools ..................................3.5...........89Local availability of research and training services ......3.5...........80Extent of staff training .................................................3.3...........84



Agricultural policy costs ...............................................3.4...........92Efficiency of legal framework ......................................4.1...........55Extent and effect of taxation .......................................3.8...........37No. of procedures required to start a business* .......10.0...........63Time required to start a business* ............................19.0...........27Intensity of local competition.......................................4.7...........68Effectiveness of antitrust policy...................................3.5...........74Imports*.....................................................................32.6...........87Prevalence of trade barriers .........................................3.7.........107Prevalence of foreign ownership .................................4.7...........86Exports* .....................................................................31.0...........84Hiring and firing practices ............................................3.1.........100Flexibility of wage determination.................................6.1.............7Cooperation in labor-employer relations ......................4.5...........78Reliance on professional management........................3.9...........89Pay and productivity.....................................................4.6...........31Brain drain ....................................................................2.3.........113Private sector employment of women ........................5.0...........38Financial market sophistication ....................................3.6...........77Ease of access to loans ...............................................2.8...........82Venture capital availability ............................................2.8...........89Soundness of banks.....................................................4.8...........95Local equity market access..........................................5.2...........55


Technological readiness ...............................................3.7...........67Firm-level technology absorption .................................4.7...........60Laws relating to ICT.....................................................3.1...........81FDI and technology transfer.........................................5.1...........51Mobile telephone subscribers*..................................18.4...........94Internet users*.............................................................6.8...........85Personal computers* ...................................................3.8...........87


Local supplier quantity .................................................5.1...........35Local supplier quality....................................................4.4...........56Production process sophistication ...............................3.3...........74Extent of marketing .....................................................3.6...........90Control of international distribution..............................4.5...........31Willingness to delegate authority.................................3.1...........89Nature of competitive advantage.................................3.4...........62Value chain presence ...................................................4.0...........44


Quality of scientific research institutions.....................3.2...........96Company spending on R&D ........................................2.7...........99University-industry research collaboration ...................2.6...........95Gov’t procurement of advanced tech products ...........3.5...........84Availability of scientists and engineers ........................4.9...........40Utility patents*.............................................................0.1...........72Intellectual property protection ....................................3.6...........63Capacity for innovation.................................................2.9...........84

Egypt


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EthiopiaKey indicators













Inadequate supply of infrastructure ..........................15.0




Corruption.........................................................................7.0

Tax rates ...........................................................................6.9

Tax regulations ................................................................6.0





Inflation .............................................................................2.3

Crime and theft ................................................................1.2

0

500

1,000

1,500

2,000

2,500

3,000

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006


2–3

Factordriven

Efficiencydriven

Innovationdriven

3



Institutions

Infrastructure

Macro-economy

Health andprimary

education


Market efficiency



Innovation

2

1

3

4

5

6

7

Ethiopia Factor-driven economies

0 5 10 15 20 25 30



Ethiopia Africa


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* Hard data





Property rights..............................................................3.6.........102Diversion of public funds .............................................3.5...........69Public trust of politicians ..............................................2.2...........73Judicial independence..................................................2.2.........117Favoritism in decisions of government officials...........3.0...........69Government spending .................................................3.1...........68Burden of government regulation................................3.0...........61Business costs of terrorism.........................................5.2...........60Reliability of police services.........................................4.2...........62Business costs of crime and violence .........................4.4...........64Organized crime...........................................................5.0...........59Ethical behavior of firms ..............................................3.4.........110Efficacy of corporate boards ........................................4.5...........69Protection of minority shareholders’ interests.............4.1...........79Strength of auditing and accounting standards ...........3.7.........106


Quality of overall infrastructure....................................2.2.........114Quality of railroad infrastructure...................................1.3.........113Quality of port infrastructure........................................1.4.........124Quality of air transport infrastructure...........................4.5...........65Quality of electricity supply..........................................3.6...........87Telephone lines* ..........................................................0.8.........115


Government surplus/deficit* ......................................–4.9.........109National savings rate*................................................17.2...........83Inflation* ......................................................................6.8...........83Interest rate spread*....................................................3.5...........32Government debt*.....................................................88.7...........97Real effective exchange rate*....................................–3.5...........51


Business impact of malaria ..........................................3.5.........118Business impact of tuberculosis ..................................3.4.........121Business impact of HIV/AIDS ......................................2.5.........118Infant mortality* .......................................................110.0.........124Life expectancy*........................................................50.0.........112Tuberculosis incidence* ...........................................533.2.........114Malaria incidence* ...................................................799.5.........106HIV prevalence*...........................................................4.4.........114Primary enrollment*...................................................46.4.........121


Secondary enrollment* ..............................................27.8.........114Tertiary enrollment* .....................................................2.0.........115Quality of the educational system ...............................2.9...........96Quality of math and science education........................2.8.........110Quality of management schools ..................................3.0.........112Local availability of research and training services ......2.6.........113Extent of staff training .................................................2.4.........123



Agricultural policy costs ...............................................3.1.........111Efficiency of legal framework ......................................2.6.........111Extent and effect of taxation .......................................3.3...........60No. of procedures required to start a business* .........7.0...........27Time required to start a business* ............................16.0...........20Intensity of local competition.......................................3.9.........113Effectiveness of antitrust policy...................................3.0...........99Imports*.....................................................................40.2...........68Prevalence of trade barriers .........................................4.2...........72Prevalence of foreign ownership .................................3.9.........116Exports* .....................................................................18.6.........116Hiring and firing practices ............................................3.7...........74Flexibility of wage determination.................................5.5...........55Cooperation in labor-employer relations ......................3.8.........113Reliance on professional management........................3.6.........105Pay and productivity.....................................................2.8.........121Brain drain ....................................................................2.1.........120Private sector employment of women ........................4.4...........90Financial market sophistication ....................................2.1.........123Ease of access to loans ...............................................1.9.........121Venture capital availability ............................................2.0.........124Soundness of banks.....................................................4.8.........103Local equity market access..........................................2.6.........116




Local supplier quantity .................................................3.6.........118Local supplier quality....................................................2.8.........125Production process sophistication ...............................2.0.........126Extent of marketing .....................................................2.6.........123Control of international distribution..............................3.9...........70Willingness to delegate authority.................................2.6.........118Nature of competitive advantage.................................2.5.........120Value chain presence ...................................................2.4.........116


Quality of scientific research institutions.....................3.7...........69Company spending on R&D ........................................2.2.........121University-industry research collaboration ...................2.2.........114Gov’t procurement of advanced tech products ...........3.1.........111Availability of scientists and engineers ........................3.0.........120Utility patents*.............................................................0.0...........80Intellectual property protection ....................................2.5.........112Capacity for innovation.................................................2.4.........119

Ethiopia


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GambiaKey indicators








Basic requirements .................................................105 ..........3.81st pillar: Institutions..................................................57 ..........4.12nd pillar: Infrastructure ...........................................97 ..........2.63rd pillar: Macroeconomy.......................................108 ..........3.84th pillar: Health and primary education..............110 ..........4.8

Efficiency enhancers...............................................103 ..........3.15th pillar: Higher education and training..............109 ..........2.86th pillar: Market efficiency......................................88 ..........3.87th pillar: Technological readiness .........................94 ..........2.7






Tax rates ...........................................................................9.9


Inflation .............................................................................7.1



Tax regulations ................................................................4.8

Corruption.........................................................................3.6

Crime and theft ................................................................3.2




500

1,000

1,500

2,000

2,500

3,000

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006


2–3

Factordriven

Efficiencydriven

Innovationdriven

3



Institutions

Infrastructure

Macro-economy

Health andprimary

education


Market efficiency



Innovation

2

1

3

4

5

6

7

Gambia Factor-driven economies

0 5 10 15 20 25 30



Gambia Africa


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* Hard data







Quality of overall infrastructure....................................3.0...........75Quality of railroad infrastructure...................................1.3.........116Quality of port infrastructure........................................3.9...........52Quality of air transport infrastructure...........................3.9...........79Quality of electricity supply..........................................2.4.........114Telephone lines* ..........................................................2.9.........105


Government surplus/deficit* ......................................–6.1.........121National savings rate*................................................10.9.........114Inflation* ......................................................................4.3...........67Interest rate spread*....................................................2.8...........20Government debt*...................................................168.5.........110Real effective exchange rate*..................................–37.2.............4


Business impact of malaria ..........................................3.6.........117Business impact of tuberculosis ..................................4.3.........106Business impact of HIV/AIDS ......................................3.9...........99Infant mortality* .........................................................89.0.........115Life expectancy*........................................................57.0.........106Tuberculosis incidence* ...........................................328.7.........105Malaria incidence* ..............................................17,340.0.........121HIV prevalence*...........................................................1.2...........97Primary enrollment*...................................................75.2.........109


Secondary enrollment* ..............................................46.9.........104Tertiary enrollment* .....................................................1.0.........118Quality of the educational system ...............................3.7...........56Quality of math and science education........................2.9.........107Quality of management schools ..................................3.3.........101Local availability of research and training services ......2.6.........115Extent of staff training .................................................3.1...........90



Agricultural policy costs ...............................................4.1...........31Efficiency of legal framework ......................................3.5...........71Extent and effect of taxation .......................................3.6...........45No. of procedures required to start a business* .........8.0...........36Time required to start a business* ............................27.0...........46Intensity of local competition.......................................4.3...........91Effectiveness of antitrust policy...................................3.0.........102Imports*.....................................................................48.6...........52Prevalence of trade barriers .........................................4.8...........48Prevalence of foreign ownership .................................5.6...........30Exports* .....................................................................39.4...........67Hiring and firing practices ............................................4.5...........29Flexibility of wage determination.................................5.4...........57Cooperation in labor-employer relations ......................5.0...........33Reliance on professional management........................4.7...........50Pay and productivity.....................................................3.2.........108Brain drain ....................................................................2.5.........100Private sector employment of women ........................5.5...........12Financial market sophistication ....................................2.4.........110Ease of access to loans ...............................................3.0...........69Venture capital availability ............................................2.5.........105Soundness of banks.....................................................5.6...........55Local equity market access..........................................3.4.........106


Technological readiness ...............................................3.2...........84Firm-level technology absorption .................................4.3...........93Laws relating to ICT.....................................................2.7.........101FDI and technology transfer.........................................4.9...........71Mobile telephone subscribers*..................................16.3...........96Internet users*.............................................................3.4.........104Personal computers* ...................................................1.6...........97


Local supplier quantity .................................................3.9.........106Local supplier quality....................................................3.3.........106Production process sophistication ...............................2.5.........118Extent of marketing .....................................................3.2.........105Control of international distribution..............................3.8...........79Willingness to delegate authority.................................3.2...........84Nature of competitive advantage.................................2.9...........92Value chain presence ...................................................2.3.........119


Quality of scientific research institutions.....................3.1.........102Company spending on R&D ........................................2.2.........123University-industry research collaboration ...................1.8.........125Gov’t procurement of advanced tech products ...........3.6...........79Availability of scientists and engineers ........................2.9.........124Utility patents*.............................................................0.0...........80Intellectual property protection ....................................2.8...........98Capacity for innovation.................................................2.5.........109

Gambia


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KenyaKey indicators












Corruption.......................................................................17.3



Tax rates .........................................................................11.7


Crime and theft ................................................................8.3

Inflation .............................................................................5.3

Tax regulations ................................................................5.1







500

1,000

1,500

2,000

2,500

3,000

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006


2–3

Factordriven

Efficiencydriven

Innovationdriven

3



Institutions

Infrastructure

Macro-economy

Health andprimary

education


Market efficiency



Innovation

2

1

3

4

5

6

7

Kenya Factor-driven economies

0 5 10 15 20 25 30



Kenya Africa


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* Hard data





Property rights..............................................................3.9...........84Diversion of public funds .............................................2.3.........119Public trust of politicians ..............................................1.8.........102Judicial independence..................................................3.0...........89Favoritism in decisions of government officials...........2.5.........103Government spending .................................................2.4.........116Burden of government regulation................................2.7...........85Business costs of terrorism.........................................3.6.........121Reliability of police services.........................................3.3...........94Business costs of crime and violence .........................2.5.........118Organized crime...........................................................3.5.........111Ethical behavior of firms ..............................................3.8...........91Efficacy of corporate boards ........................................4.8...........41Protection of minority shareholders’ interests.............4.3...........67Strength of auditing and accounting standards ...........4.7...........66


Quality of overall infrastructure....................................2.3.........108Quality of railroad infrastructure...................................1.9...........79Quality of port infrastructure........................................3.2...........75Quality of air transport infrastructure...........................5.0...........51Quality of electricity supply..........................................3.1.........101Telephone lines* ..........................................................0.8.........112


Government surplus/deficit* ......................................–1.8...........66National savings rate*................................................10.8.........115Inflation* ....................................................................10.3.........109Interest rate spread*....................................................7.8...........85Government debt*.....................................................46.9...........54Real effective exchange rate* ...................................13.7.........108


Business impact of malaria ..........................................3.9.........115Business impact of tuberculosis ..................................3.9.........114Business impact of HIV/AIDS ......................................2.9.........114Infant mortality* .........................................................78.0.........108Life expectancy*........................................................51.0.........111Tuberculosis incidence* ...........................................888.4.........128Malaria incidence* ...................................................389.3.........104HIV prevalence*...........................................................6.7.........118Primary enrollment*...................................................76.4.........108


Secondary enrollment* ..............................................48.0.........102Tertiary enrollment* .....................................................3.0.........107Quality of the educational system ...............................4.2...........37Quality of math and science education........................3.5...........83Quality of management schools ..................................3.9...........73Local availability of research and training services ......4.2...........50Extent of staff training .................................................3.7...........57



Agricultural policy costs ...............................................3.5...........77Efficiency of legal framework ......................................3.0...........96Extent and effect of taxation .......................................2.5.........110No. of procedures required to start a business* .......13.0...........99Time required to start a business* ............................54.0...........98Intensity of local competition.......................................5.1...........47Effectiveness of antitrust policy...................................4.0...........54Imports*.....................................................................40.6...........67Prevalence of trade barriers .........................................3.5.........116Prevalence of foreign ownership .................................5.2...........61Exports* .....................................................................31.1...........83Hiring and firing practices ............................................4.5...........30Flexibility of wage determination.................................5.3...........63Cooperation in labor-employer relations ......................4.1.........101Reliance on professional management........................4.6...........58Pay and productivity.....................................................3.2.........107Brain drain ....................................................................2.2.........116Private sector employment of women ........................4.9...........45Financial market sophistication ....................................3.8...........69Ease of access to loans ...............................................3.4...........58Venture capital availability ............................................3.1...........68Soundness of banks.....................................................5.3...........74Local equity market access..........................................5.5...........43


Technological readiness ...............................................3.2...........83Firm-level technology absorption .................................4.8...........54Laws relating to ICT.....................................................3.2...........76FDI and technology transfer.........................................5.4...........29Mobile telephone subscribers*..................................13.5.........102Internet users*.............................................................3.2.........106Personal computers* ...................................................1.4.........101


Local supplier quantity .................................................5.0...........46Local supplier quality....................................................4.2...........67Production process sophistication ...............................2.7.........111Extent of marketing .....................................................4.3...........64Control of international distribution..............................3.7...........87Willingness to delegate authority.................................3.3...........77Nature of competitive advantage.................................3.4...........58Value chain presence ...................................................3.5...........65



Kenya


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LesothoKey indicators















Corruption.........................................................................9.0

Crime and theft ................................................................7.2

Tax rates ...........................................................................6.8



Tax regulations ................................................................4.4



Inflation .............................................................................1.3



500

1,000

1,500

2,000

2,500

3,000

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006


2–3

Factordriven

Efficiencydriven

Innovationdriven

3



Institutions

Infrastructure

Macro-economy

Health andprimary

education


Market efficiency



Innovation

2

1

3

4

5

6

7

Lesotho Factor-driven economies

0 5 10 15 20 25 30



Lesotho Africa


147

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* Hard data





Property rights..............................................................3.4.........114Diversion of public funds .............................................3.1...........88Public trust of politicians ..............................................2.2...........79Judicial independence..................................................4.0...........56Favoritism in decisions of government officials...........2.9...........77Government spending .................................................3.0...........74Burden of government regulation................................2.5.........106Business costs of terrorism.........................................5.2...........62Reliability of police services.........................................3.2...........98Business costs of crime and violence .........................3.0.........105Organized crime...........................................................4.5...........75Ethical behavior of firms ..............................................3.7.........100Efficacy of corporate boards ........................................4.2...........90Protection of minority shareholders’ interests.............4.1...........72Strength of auditing and accounting standards ...........4.0...........90


Quality of overall infrastructure....................................2.2.........115Quality of railroad infrastructure...................................1.4.........105Quality of port infrastructure........................................1.9.........112Quality of air transport infrastructure...........................2.2.........126Quality of electricity supply..........................................3.2...........98Telephone lines* ..........................................................2.7.........107


Government surplus/deficit*........................................2.0...........23National savings rate*................................................20.9...........60Inflation* ......................................................................3.7...........59Interest rate spread*....................................................7.8...........84Government debt*.....................................................62.8...........75Real effective exchange rate* ...................................23.6.........122


Business impact of malaria ..........................................6.4...........44Business impact of tuberculosis ..................................2.5.........128Business impact of HIV/AIDS ......................................1.8.........128Infant mortality* .........................................................55.0...........98Life expectancy*........................................................41.0.........123Tuberculosis incidence* ...........................................544.0.........115Malaria incidence* .......................................................0.0.............1HIV prevalence*.........................................................28.9.........127Primary enrollment*...................................................85.9...........97





Agricultural policy costs ...............................................3.1.........112Efficiency of legal framework ......................................3.8...........59Extent and effect of taxation .......................................3.1...........72No. of procedures required to start a business* .........8.0...........36Time required to start a business* ............................73.0.........105Intensity of local competition.......................................4.3...........94Effectiveness of antitrust policy...................................2.6.........124Imports*.....................................................................79.3...........14Prevalence of trade barriers .........................................4.1...........84Prevalence of foreign ownership .................................5.2...........53Exports* .....................................................................42.4...........58Hiring and firing practices ............................................3.7...........78Flexibility of wage determination.................................3.6.........114Cooperation in labor-employer relations ......................4.6...........68Reliance on professional management........................4.5...........59Pay and productivity.....................................................3.0.........118Brain drain ....................................................................1.6.........127Private sector employment of women ........................5.4...........18Financial market sophistication ....................................2.2.........120Ease of access to loans ...............................................2.5...........96Venture capital availability ............................................2.2.........119Soundness of banks.....................................................5.5...........68Local equity market access..........................................2.5.........117


Technological readiness ...............................................2.3.........114Firm-level technology absorption .................................3.5.........117Laws relating to ICT.....................................................2.5.........109FDI and technology transfer.........................................4.1.........116Mobile telephone subscribers*..................................13.7.........101Internet users*.............................................................2.4.........108Personal computers* ...................................................n/a..........n/a


Local supplier quantity .................................................2.9.........127Local supplier quality....................................................2.8.........124Production process sophistication ...............................2.4.........122Extent of marketing .....................................................2.9.........120Control of international distribution..............................2.6.........126Willingness to delegate authority.................................2.9.........102Nature of competitive advantage.................................2.7.........106Value chain presence ...................................................2.9...........93



Lesotho


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LibyaKey indicators

Population (millions), 2006.........................................6.0GDP (billions, current US$), 2006 ...........................50.3GDP (PPP US$) per capita, 2006 ........................12,204Sectoral value-added (as percentage of GDP), 2004


Human Development Indicator rank (out of 177 economies), 2004 ..................................64




Global Competitiveness Index 2007...............73.........4.0GCR 2005–06 (out of 117 economies) ....................n/a..........n/a

Basic requirements ...................................................45 ..........4.91st pillar: Institutions..................................................75 ..........3.82nd pillar: Infrastructure .........................................100 ..........2.53rd pillar: Macroeconomy...........................................1 ..........6.94th pillar: Health and primary education................81 ..........6.3

Efficiency enhancers.................................................95 ..........3.25th pillar: Higher education and training................73 ..........3.96th pillar: Market efficiency....................................121 ..........3.47th pillar: Technological readiness .......................115 ..........2.5






Corruption.......................................................................11.2






Tax rates ...........................................................................4.2

Tax regulations ................................................................2.7


Inflation .............................................................................0.6

Crime and theft ................................................................0.3

0

3,000

6,000

9,000

12,000

15,000

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006


Institutions

Infrastructure

Macro-economy

Health andprimary

education


Market efficiency



Innovation

2

1

3

4

5

6

7

Libya Economies in transition from 1 to 2

0 5 10 15 20 25 30



Libya Africa


2–3

Factordriven

Efficiencydriven

Innovationdriven

3



149

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* Hard data





Property rights..............................................................3.7...........96Diversion of public funds .............................................4.7...........37Public trust of politicians ..............................................2.1...........80Judicial independence..................................................4.2...........50Favoritism in decisions of government officials...........3.2...........51Government spending .................................................3.0...........72Burden of government regulation................................2.6...........99Business costs of terrorism.........................................5.8...........19Reliability of police services.........................................4.1...........66Business costs of crime and violence .........................5.6...........25Organized crime...........................................................6.5...........10Ethical behavior of firms ..............................................4.1...........69Efficacy of corporate boards ........................................3.0.........127Protection of minority shareholders’ interests.............4.1...........76Strength of auditing and accounting standards ...........3.4.........116


Quality of overall infrastructure....................................2.2.........109Quality of railroad infrastructure...................................1.2.........120Quality of port infrastructure........................................2.3.........105Quality of air transport infrastructure...........................2.9.........113Quality of electricity supply..........................................4.0...........78Telephone lines* ........................................................13.6...........75


Government surplus/deficit*......................................32.2.............2National savings rate*................................................57.3.............3Inflation* ......................................................................2.5...........34Interest rate spread*....................................................2.5...........13Government debt*.......................................................1.2.............2Real effective exchange rate*..................................–68.2.............1


Business impact of malaria ..........................................5.9...........74Business impact of tuberculosis ..................................5.5...........83Business impact of HIV/AIDS ......................................4.6...........82Infant mortality* .........................................................15.0...........58Life expectancy*........................................................72.0...........54Tuberculosis incidence* .............................................20.0...........34Malaria incidence* .......................................................0.2...........62HIV prevalence*...........................................................0.0...........27Primary enrollment*...................................................87.0...........89


Secondary enrollment* ............................................104.0...........17Tertiary enrollment* ...................................................56.0...........29Quality of the educational system ...............................2.2.........123Quality of math and science education........................3.5...........87Quality of management schools ..................................2.9.........118Local availability of research and training services ......3.1...........98Extent of staff training .................................................2.7.........109



Agricultural policy costs ...............................................3.2.........106Efficiency of legal framework ......................................4.1...........50Extent and effect of taxation .......................................3.1...........70No. of procedures required to start a business* .........n/a..........n/aTime required to start a business*...............................n/a..........n/aIntensity of local competition.......................................3.7.........118Effectiveness of antitrust policy...................................3.5...........77Imports*.....................................................................34.4...........81Prevalence of trade barriers .........................................4.2...........75Prevalence of foreign ownership .................................3.2.........126Exports* .....................................................................47.4...........47Hiring and firing practices ............................................2.4.........126Flexibility of wage determination.................................4.6...........94Cooperation in labor-employer relations ......................4.9...........47Reliance on professional management........................3.2.........122Pay and productivity.....................................................2.8.........122Brain drain ....................................................................2.6...........91Private sector employment of women ........................4.7...........56Financial market sophistication ....................................1.9.........126Ease of access to loans ...............................................2.6...........92Venture capital availability ............................................2.9...........82Soundness of banks.....................................................4.2.........122Local equity market access..........................................2.2.........124


Technological readiness ...............................................3.0...........89Firm-level technology absorption .................................4.6...........71Laws relating to ICT.....................................................1.9.........127FDI and technology transfer.........................................4.3.........108Mobile telephone subscribers*....................................4.1.........120Internet users*.............................................................3.6.........101Personal computers* ...................................................2.3...........92


Local supplier quantity .................................................4.7...........58Local supplier quality....................................................3.5.........100Production process sophistication ...............................2.8.........101Extent of marketing .....................................................2.5.........124Control of international distribution..............................4.8...........19Willingness to delegate authority.................................2.6.........116Nature of competitive advantage.................................2.9...........94Value chain presence ...................................................2.5.........113


Quality of scientific research institutions.....................3.3...........92Company spending on R&D ........................................2.3.........118University-industry research collaboration ...................2.5...........97Gov’t procurement of advanced tech products ...........3.4...........97Availability of scientists and engineers ........................4.3...........72Utility patents*.............................................................0.0...........80Intellectual property protection ....................................2.8...........95Capacity for innovation.................................................2.4.........117

Libya


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MadagascarKey indicators

Population (millions), 2006.......................................19.1GDP (billions, current US$), 2006 .............................5.5GDP (PPP US$) per capita, 2006 .............................989Sectoral value-added (as percentage of GDP), 2004












Inflation ...........................................................................11.2

Corruption.........................................................................9.3

Tax regulations ................................................................7.9

Tax rates ...........................................................................7.8







Crime and theft ................................................................4.6



500

1,000

1,500

2,000

2,500

3,000

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006


2–3

Factordriven

Efficiencydriven

Innovationdriven

3



Institutions

Infrastructure

Macro-economy

Health andprimary

education


Market efficiency



Innovation

2

1

3

4

5

6

7

Madagascar Factor-driven economies

0 5 10 15 20 25 30



Madagascar Africa


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* Hard data





Property rights..............................................................3.6.........103Diversion of public funds .............................................2.8.........102Public trust of politicians ..............................................2.2...........77Judicial independence..................................................3.0...........90Favoritism in decisions of government officials...........2.8...........81Government spending .................................................3.2...........65Burden of government regulation................................2.6...........95Business costs of terrorism.........................................5.1...........70Reliability of police services.........................................3.5...........86Business costs of crime and violence .........................2.8.........111Organized crime...........................................................3.6.........110Ethical behavior of firms ..............................................3.8...........87Efficacy of corporate boards ........................................3.9.........109Protection of minority shareholders’ interests.............3.7...........99Strength of auditing and accounting standards ...........3.5.........114




Government surplus/deficit* ......................................–5.4.........114National savings rate*................................................10.1.........118Inflation* ....................................................................18.4.........126Interest rate spread*....................................................8.3...........90Government debt*.....................................................48.7...........59Real effective exchange rate*..................................–14.8...........17


Business impact of malaria ..........................................3.9.........114Business impact of tuberculosis ..................................4.2.........107Business impact of HIV/AIDS ......................................3.7.........101Infant mortality* .........................................................76.0.........107Life expectancy*........................................................57.0.........106Tuberculosis incidence* ...........................................351.2.........106Malaria incidence* ..............................................12,151.7.........119HIV prevalence*...........................................................1.7.........102Primary enrollment*...................................................88.8...........84


Secondary enrollment* ................................................n/a..........n/aTertiary enrollment* .....................................................3.0.........107Quality of the educational system ...............................3.0...........91Quality of math and science education........................3.6...........81Quality of management schools ..................................3.9...........74Local availability of research and training services ......3.1.........102Extent of staff training .................................................2.9.........103



Agricultural policy costs ...............................................3.7...........54Efficiency of legal framework ......................................3.2...........86Extent and effect of taxation .......................................3.1...........71No. of procedures required to start a business* .......10.0...........63Time required to start a business* ............................21.0...........33Intensity of local competition.......................................3.9.........114Effectiveness of antitrust policy...................................3.0.........107Imports*.....................................................................56.9...........40Prevalence of trade barriers .........................................4.3...........69Prevalence of foreign ownership .................................4.9...........74Exports* .....................................................................32.7...........80Hiring and firing practices ............................................4.2...........46Flexibility of wage determination.................................5.1...........67Cooperation in labor-employer relations ......................4.1...........97Reliance on professional management........................3.8...........94Pay and productivity.....................................................3.6...........88Brain drain ....................................................................2.8...........77Private sector employment of women ........................4.7...........63Financial market sophistication ....................................2.5.........105Ease of access to loans ...............................................2.4.........108Venture capital availability ............................................2.9...........84Soundness of banks.....................................................5.5...........60Local equity market access..........................................2.4.........120


Technological readiness ...............................................2.8...........94Firm-level technology absorption .................................4.6...........68Laws relating to ICT.....................................................2.8...........97FDI and technology transfer.........................................4.7...........86Mobile telephone subscribers*....................................2.7.........124Internet users*.............................................................0.5.........118Personal computers* ...................................................0.5.........113


Local supplier quantity .................................................4.3...........85Local supplier quality....................................................3.3.........110Production process sophistication ...............................2.6.........115Extent of marketing .....................................................3.5...........92Control of international distribution..............................3.2.........114Willingness to delegate authority.................................2.8.........105Nature of competitive advantage.................................2.6.........116Value chain presence ...................................................3.1...........83



Madagascar


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MalawiKey indicators

Population (millions), 2006.......................................13.2GDP (billions, current US$), 2006 .............................2.2GDP (PPP US$) per capita, 2006 .............................706Sectoral value-added (as percentage of GDP), 2004













Tax rates .........................................................................11.1

Tax regulations ................................................................9.9



Corruption.........................................................................7.9

Inflation .............................................................................6.7

Crime and theft ................................................................6.7






0

500

1,000

1,500

2,000

2,500

3,000

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006


2–3

Factordriven

Efficiencydriven

Innovationdriven

3



Institutions

Infrastructure

Macro-economy

Health andprimary

education


Market efficiency



Innovation

2

1

3

4

5

6

7

Malawi Factor-driven economies

0 5 10 15 20 25 30



Malawi Africa


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* Hard data









Government surplus/deficit* ......................................–5.3.........113National savings rate*..................................................6.0.........123Inflation* ....................................................................12.3.........115Interest rate spread*..................................................22.2.........119Government debt*...................................................600.1.........115Real effective exchange rate*..................................–24.0.............6


Business impact of malaria ..........................................2.8.........127Business impact of tuberculosis ..................................2.8.........125Business impact of HIV/AIDS ......................................2.3.........123Infant mortality* .......................................................109.0.........123Life expectancy*........................................................41.0.........123Tuberculosis incidence* ...........................................500.9.........111Malaria incidence* ..............................................24,180.7.........124HIV prevalence*.........................................................14.2.........122Primary enrollment*...................................................95.3...........42





Agricultural policy costs ...............................................3.8...........49Efficiency of legal framework ......................................3.6...........65Extent and effect of taxation .......................................2.9...........89No. of procedures required to start a business* .......10.0...........63Time required to start a business* ............................37.0...........73Intensity of local competition.......................................3.8.........116Effectiveness of antitrust policy...................................3.0.........105Imports*.....................................................................42.0...........63Prevalence of trade barriers .........................................3.9...........98Prevalence of foreign ownership .................................5.2...........60Exports* .....................................................................26.5...........96Hiring and firing practices ............................................3.7...........75Flexibility of wage determination.................................5.2...........65Cooperation in labor-employer relations ......................4.6...........72Reliance on professional management........................4.8...........48Pay and productivity.....................................................3.6...........89Brain drain ....................................................................2.5...........98Private sector employment of women ........................4.8...........50Financial market sophistication ....................................2.4.........113Ease of access to loans ...............................................2.9...........76Venture capital availability ............................................2.3.........112Soundness of banks.....................................................5.6...........57Local equity market access..........................................4.9...........66




Local supplier quantity .................................................3.8.........108Local supplier quality....................................................2.9.........117Production process sophistication ...............................2.2.........124Extent of marketing .....................................................3.3...........98Control of international distribution..............................3.2.........116Willingness to delegate authority.................................3.0...........94Nature of competitive advantage.................................3.1...........81Value chain presence ...................................................2.6.........107


Quality of scientific research institutions.....................3.5...........81Company spending on R&D ........................................2.9...........85University-industry research collaboration ...................2.5...........98Gov’t procurement of advanced tech products ...........3.5...........90Availability of scientists and engineers ........................2.9.........123Utility patents*.............................................................0.0...........80Intellectual property protection ....................................2.7.........100Capacity for innovation.................................................2.5.........106

Malawi


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MaliKey indicators

Population (millions), 2006.......................................13.9GDP (billions, current US$), 2006 .............................6.2GDP (PPP US$) per capita, 2006 ..........................1,300Sectoral value-added (as percentage of GDP) ....n/aHuman Development Indicator rank

(out of 177 economies), 2004 ................................175

Source: UNFPA; IMF; EIU; UNDP










Tax regulations ..............................................................10.4



Corruption.........................................................................9.0

Tax rates ...........................................................................7.6


Inflation .............................................................................4.5





Crime and theft ................................................................2.0

0

500

1,000

1,500

2,000

2,500

3,000

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006


2–3

Factordriven

Efficiencydriven

Innovationdriven

3



Institutions

Infrastructure

Macro-economy

Health andprimary

education


Market efficiency



Innovation

2

1

3

4

5

6

7

Mali Factor-driven economies

0 5 10 15 20 25 30



Mali Africa


155

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* Hard data





Property rights..............................................................4.1...........78Diversion of public funds .............................................2.8.........103Public trust of politicians ..............................................2.3...........72Judicial independence..................................................3.7...........67Favoritism in decisions of government officials...........2.9...........74Government spending .................................................3.2...........61Burden of government regulation................................3.0...........61Business costs of terrorism.........................................5.3...........51Reliability of police services.........................................4.3...........59Business costs of crime and violence .........................3.8...........82Organized crime...........................................................4.4...........78Ethical behavior of firms ..............................................4.2...........60Efficacy of corporate boards ........................................4.0.........104Protection of minority shareholders’ interests.............4.7...........48Strength of auditing and accounting standards ...........3.9...........95


Quality of overall infrastructure....................................2.6...........92Quality of railroad infrastructure...................................1.6...........90Quality of port infrastructure........................................1.4.........125Quality of air transport infrastructure...........................2.7.........117Quality of electricity supply..........................................3.3...........97Telephone lines* ..........................................................0.7.........118


Government surplus/deficit* ......................................–4.1.........105National savings rate*................................................14.1...........99Inflation* ......................................................................5.0...........71Interest rate spread*....................................................n/a..........n/aGovernment debt* .......................................................n/a..........n/aReal effective exchange rate* .....................................2.1...........71


Business impact of malaria ..........................................3.3.........121Business impact of tuberculosis ..................................4.8...........96Business impact of HIV/AIDS ......................................3.3.........108Infant mortality* .......................................................121.0.........127Life expectancy*........................................................46.0.........118Tuberculosis incidence* ...........................................577.9.........119Malaria incidence* ................................................6,226.4.........115HIV prevalence*...........................................................1.9.........106Primary enrollment*...................................................46.5.........120


Secondary enrollment* ..............................................22.3.........118Tertiary enrollment* .....................................................2.0.........115Quality of the educational system ...............................2.6.........111Quality of math and science education........................2.9.........102Quality of management schools ..................................3.6...........88Local availability of research and training services ......3.2...........94Extent of staff training .................................................2.5.........121



Agricultural policy costs ...............................................4.0...........42Efficiency of legal framework ......................................3.3...........80Extent and effect of taxation .......................................2.9...........87No. of procedures required to start a business* .......13.0...........99Time required to start a business* ............................42.0...........80Intensity of local competition.......................................3.8.........115Effectiveness of antitrust policy...................................3.3...........84Imports*.....................................................................36.0...........74Prevalence of trade barriers .........................................4.0...........90Prevalence of foreign ownership .................................5.0...........71Exports* .....................................................................28.0...........93Hiring and firing practices ............................................4.3...........40Flexibility of wage determination.................................4.7...........93Cooperation in labor-employer relations ......................4.9...........44Reliance on professional management........................4.1...........82Pay and productivity.....................................................3.0.........117Brain drain ....................................................................2.7...........82Private sector employment of women ........................5.4...........17Financial market sophistication ....................................2.5.........101Ease of access to loans ...............................................2.2.........111Venture capital availability ............................................2.5.........101Soundness of banks.....................................................5.0...........86Local equity market access..........................................3.2.........108


Technological readiness ...............................................2.5.........105Firm-level technology absorption .................................4.3...........91Laws relating to ICT.....................................................2.5.........106FDI and technology transfer.........................................4.1.........115Mobile telephone subscribers*....................................7.7.........111Internet users*.............................................................0.5.........120Personal computers* ...................................................0.4.........118


Local supplier quantity .................................................4.2...........94Local supplier quality....................................................3.3.........106Production process sophistication ...............................2.6.........116Extent of marketing .....................................................3.1.........112Control of international distribution..............................3.7...........86Willingness to delegate authority.................................2.7.........114Nature of competitive advantage.................................2.6.........114Value chain presence ...................................................2.3.........122


Quality of scientific research institutions.....................3.4...........87Company spending on R&D ........................................2.8...........91University-industry research collaboration ...................2.2.........118Gov’t procurement of advanced tech products ...........4.2...........28Availability of scientists and engineers ........................4.3...........72Utility patents*.............................................................0.0...........80Intellectual property protection ....................................3.4...........67Capacity for innovation.................................................3.1...........64

Mali


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MauritaniaKey indicators

Population (millions), 2006.........................................3.2GDP (billions, current US$), 2006 .............................2.7GDP (PPP US$) per capita, 2006 ..........................2,553Sectoral value-added (as percentage of GDP) ....n/aHuman Development Indicator rank

(out of 177 economies), 2004 ................................153

Source: UNFPA; IMF; EIU; UNDP





Efficiency enhancers...............................................113 ..........2.95th pillar: Higher education and training..............124 ..........2.36th pillar: Market efficiency....................................103 ..........3.67th pillar: Technological readiness .........................85 ..........2.9








Corruption.........................................................................6.9


Tax rates ...........................................................................6.2

Inflation .............................................................................6.1


Tax regulations ................................................................5.6



Crime and theft ................................................................3.6

500

1,000

1,500

2,000

2,500

3,000

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006


2–3

Factordriven

Efficiencydriven

Innovationdriven

3



Institutions

Infrastructure

Macro-economy

Health andprimary

education


Market efficiency



Innovation

2

1

3

4

5

6

7

Mauritania Factor-driven economies

0 5 10 15 20 25 30



Mauritania Africa


157

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* Hard data





Property rights..............................................................3.7...........95Diversion of public funds .............................................3.2...........85Public trust of politicians ..............................................2.5...........58Judicial independence..................................................3.8...........60Favoritism in decisions of government officials...........3.6...........36Government spending .................................................2.5.........108Burden of government regulation................................4.6.............6Business costs of terrorism.........................................5.4...........40Reliability of police services.........................................4.2...........63Business costs of crime and violence .........................4.5...........61Organized crime...........................................................4.9...........63Ethical behavior of firms ..............................................4.0...........73Efficacy of corporate boards ........................................4.2...........92Protection of minority shareholders’ interests.............4.2...........68Strength of auditing and accounting standards ...........3.3.........119




Government surplus/deficit* ......................................–6.8.........122National savings rate*................................................10.0.........119Inflation* ....................................................................12.1.........114Interest rate spread*....................................................n/a..........n/aGovernment debt*...................................................109.3.........106Real effective exchange rate*....................................–4.6...........46


Business impact of malaria ..........................................4.1.........110Business impact of tuberculosis ..................................4.4.........104Business impact of HIV/AIDS ......................................3.4.........106Infant mortality* .........................................................78.0.........108Life expectancy*........................................................58.0.........105Tuberculosis incidence* ...........................................502.4.........112Malaria incidence* ................................................5,979.4.........114HIV prevalence*...........................................................0.6...........82Primary enrollment*...................................................74.3.........111


Secondary enrollment* ..............................................20.2.........119Tertiary enrollment* .....................................................3.0.........107Quality of the educational system ...............................2.6.........112Quality of math and science education........................3.1...........97Quality of management schools ..................................2.4.........126Local availability of research and training services ......2.2.........124Extent of staff training .................................................3.3...........78



Agricultural policy costs ...............................................2.9.........119Efficiency of legal framework ......................................4.1...........53Extent and effect of taxation .......................................5.0...........14No. of procedures required to start a business* .......11.0...........82Time required to start a business* ............................82.0.........110Intensity of local competition.......................................3.4.........123Effectiveness of antitrust policy...................................3.2...........88Imports*.....................................................................70.0...........21Prevalence of trade barriers .........................................3.0.........128Prevalence of foreign ownership .................................4.4...........97Exports* .....................................................................29.0...........88Hiring and firing practices ............................................5.7.............3Flexibility of wage determination.................................4.5...........99Cooperation in labor-employer relations ......................5.7...........11Reliance on professional management........................4.0...........84Pay and productivity.....................................................3.7...........85Brain drain ....................................................................2.6...........93Private sector employment of women ........................4.9...........42Financial market sophistication ....................................2.5.........106Ease of access to loans ...............................................2.2.........115Venture capital availability ............................................2.3.........116Soundness of banks.....................................................4.8.........102Local equity market access..........................................2.5.........118


Technological readiness ...............................................2.2.........121Firm-level technology absorption .................................5.8...........16Laws relating to ICT.....................................................2.3.........116FDI and technology transfer.........................................5.9.............6Mobile telephone subscribers*..................................24.3...........90Internet users*.............................................................0.7.........117Personal computers* ...................................................1.4.........100


Local supplier quantity .................................................3.7.........114Local supplier quality....................................................3.3.........111Production process sophistication ...............................3.1...........81Extent of marketing .....................................................3.1.........110Control of international distribution..............................3.6...........98Willingness to delegate authority.................................3.0...........97Nature of competitive advantage.................................3.6...........48Value chain presence ...................................................3.0...........88


Quality of scientific research institutions.....................1.7.........128Company spending on R&D ........................................1.7.........128University-industry research collaboration ...................1.6.........127Gov’t procurement of advanced tech products ...........4.5...........19Availability of scientists and engineers ........................4.2...........80Utility patents*.............................................................0.0...........80Intellectual property protection ....................................3.3...........78Capacity for innovation.................................................2.9...........77

Mauritania


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MauritiusKey indicators

Population (millions), 2006.........................................1.3GDP (billions, current US$), 2006 .............................6.4GDP (PPP US$) per capita, 2006 ........................13,240Sectoral value-added (as percentage of GDP), 2004







Basic requirements ...................................................50 ..........4.71st pillar: Institutions..................................................43 ..........4.42nd pillar: Infrastructure ...........................................42 ..........4.23rd pillar: Macroeconomy.......................................107 ..........3.84th pillar: Health and primary education................44 ..........6.6





Restrictive labor regulations.......................................13.5





Corruption.........................................................................7.4

Tax rates ...........................................................................6.6

Inflation .............................................................................3.3


Tax regulations ................................................................1.9


Crime and theft ................................................................1.1


0

3,000

6,000

9,000

12,000

15,000

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006


2–3

Factordriven

Efficiencydriven

Innovationdriven

3



Institutions

Infrastructure

Macro-economy

Health andprimary

education


Market efficiency



Innovation

2

1

3

4

5

6

7

Mauritius Efficiency-driven economies

0 5 10 15 20 25 30



Mauritius Africa


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* Hard data





Property rights..............................................................5.6...........29Diversion of public funds .............................................4.0...........47Public trust of politicians ..............................................2.4...........59Judicial independence..................................................4.7...........43Favoritism in decisions of government officials...........3.0...........60Government spending .................................................3.4...........53Burden of government regulation................................2.3.........118Business costs of terrorism.........................................5.9...........15Reliability of police services.........................................4.3...........58Business costs of crime and violence .........................4.7...........55Organized crime...........................................................5.7...........31Ethical behavior of firms ..............................................4.3...........56Efficacy of corporate boards ........................................4.9...........37Protection of minority shareholders’ interests.............4.9...........37Strength of auditing and accounting standards ...........5.4...........34




Government surplus/deficit* ......................................–5.0.........110National savings rate*................................................20.6...........63Inflation* ......................................................................5.6...........76Interest rate spread*..................................................13.8.........113Government debt*.....................................................58.6...........72Real effective exchange rate*....................................–8.8...........27


Business impact of malaria ..........................................6.1...........63Business impact of tuberculosis ..................................6.4...........28Business impact of HIV/AIDS ......................................5.3...........59Infant mortality* .........................................................12.0...........49Life expectancy*........................................................72.0...........54Tuberculosis incidence* ...........................................135.4...........82Malaria incidence* .......................................................1.8...........70HIV prevalence*...........................................................0.0.............1Primary enrollment*...................................................95.1...........46


Secondary enrollment* ..............................................85.4...........64Tertiary enrollment* ...................................................17.0...........83Quality of the educational system ...............................3.4...........66Quality of math and science education........................4.2...........60Quality of management schools ..................................3.9...........70Local availability of research and training services ......3.4...........86Extent of staff training .................................................4.4...........34



Agricultural policy costs ...............................................4.0...........36Efficiency of legal framework ......................................4.9...........34Extent and effect of taxation .......................................4.7...........18No. of procedures required to start a business* .........6.0...........16Time required to start a business* ............................46.0...........89Intensity of local competition.......................................4.4...........85Effectiveness of antitrust policy...................................3.4...........83Imports*.....................................................................59.1...........37Prevalence of trade barriers .........................................4.7...........50Prevalence of foreign ownership .................................4.8...........79Exports* .....................................................................56.2...........32Hiring and firing practices ............................................2.6.........118Flexibility of wage determination.................................3.1.........122Cooperation in labor-employer relations ......................4.6...........64Reliance on professional management........................4.2...........75Pay and productivity.....................................................3.0.........115Brain drain ....................................................................3.0...........71Private sector employment of women ........................3.7.........119Financial market sophistication ....................................4.4...........44Ease of access to loans ...............................................4.2...........36Venture capital availability ............................................3.5...........46Soundness of banks.....................................................6.0...........38Local equity market access..........................................5.7...........36


Technological readiness ...............................................4.1...........55Firm-level technology absorption .................................4.5...........75Laws relating to ICT.....................................................4.3...........35FDI and technology transfer.........................................4.8...........74Mobile telephone subscribers*..................................57.3...........55Internet users*...........................................................14.6...........63Personal computers* .................................................16.2...........43





Mauritius


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MoroccoKey indicators








Basic requirements ...................................................70 ..........4.41st pillar: Institutions..................................................68 ..........3.92nd pillar: Infrastructure ...........................................61 ..........3.63rd pillar: Macroeconomy.........................................81 ..........4.24th pillar: Health and primary education................89 ..........6.1





Tax rates .........................................................................14.0

Corruption.......................................................................13.0

Tax regulations ..............................................................11.8







Inflation .............................................................................2.3



Crime and theft ................................................................1.4

1,000

2,000

3,000

4,000

5,000

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006


2–3

Factordriven

Efficiencydriven

Innovationdriven

3



Institutions

Infrastructure

Macro-economy

Health andprimary

education


Market efficiency



Innovation

2

1

3

4

5

6

7

Morocco Factor-driven economies

0 5 10 15 20 25 30



Morocco Africa


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* Hard data





Property rights..............................................................4.8...........57Diversion of public funds .............................................3.3...........77Public trust of politicians ..............................................2.7...........53Judicial independence..................................................3.4...........77Favoritism in decisions of government officials...........3.2...........53Government spending .................................................3.4...........52Burden of government regulation................................3.1...........48Business costs of terrorism.........................................4.7...........91Reliability of police services.........................................5.0...........36Business costs of crime and violence .........................5.0...........47Organized crime...........................................................5.3...........49Ethical behavior of firms ..............................................3.7...........96Efficacy of corporate boards ........................................4.0.........102Protection of minority shareholders’ interests.............4.4...........64Strength of auditing and accounting standards ...........4.0...........88


Quality of overall infrastructure....................................3.7...........60Quality of railroad infrastructure...................................3.1...........50Quality of port infrastructure........................................3.8...........54Quality of air transport infrastructure...........................4.5...........66Quality of electricity supply..........................................5.0...........53Telephone lines* ..........................................................4.4.........100


Government surplus/deficit* ......................................–5.7.........116National savings rate*................................................25.7...........29Inflation* ......................................................................1.0.............8Interest rate spread*....................................................8.0...........87Government debt*.....................................................70.0...........85Real effective exchange rate*....................................–4.7...........45


Business impact of malaria ..........................................6.0...........66Business impact of tuberculosis ..................................5.7...........68Business impact of HIV/AIDS ......................................4.6...........81Infant mortality* .........................................................38.0...........91Life expectancy*........................................................71.0...........69Tuberculosis incidence* ...........................................105.2...........76Malaria incidence* .......................................................0.2...........63HIV prevalence*...........................................................0.1...........28Primary enrollment*...................................................86.1...........94


Secondary enrollment* ..............................................47.6.........103Tertiary enrollment* ...................................................11.0...........94Quality of the educational system ...............................2.9...........92Quality of math and science education........................4.4...........49Quality of management schools ..................................5.1...........26Local availability of research and training services ......3.9...........59Extent of staff training .................................................3.2...........87



Agricultural policy costs ...............................................3.3...........98Efficiency of legal framework ......................................4.0...........56Extent and effect of taxation .......................................3.2...........64No. of procedures required to start a business* .........6.0...........16Time required to start a business* ............................12.0...........15Intensity of local competition.......................................4.6...........71Effectiveness of antitrust policy...................................3.9...........55Imports*.....................................................................34.1...........82Prevalence of trade barriers .........................................4.0...........93Prevalence of foreign ownership .................................5.3...........48Exports* .....................................................................26.5...........96Hiring and firing practices ............................................4.2...........49Flexibility of wage determination.................................5.5...........44Cooperation in labor-employer relations ......................4.4...........84Reliance on professional management........................3.6.........108Pay and productivity.....................................................4.3...........52Brain drain ....................................................................2.8...........79Private sector employment of women ........................4.5...........84Financial market sophistication ....................................3.2...........83Ease of access to loans ...............................................2.7...........87Venture capital availability ............................................2.7...........94Soundness of banks.....................................................5.4...........70Local equity market access..........................................4.3...........76


Technological readiness ...............................................3.6...........72Firm-level technology absorption .................................5.0...........42Laws relating to ICT.....................................................3.2...........74FDI and technology transfer.........................................5.2...........44Mobile telephone subscribers*..................................40.9...........71Internet users*...........................................................15.2...........62Personal computers* ...................................................2.4...........91





Morocco


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MozambiqueKey indicators














Corruption.......................................................................10.6




Inflation .............................................................................6.9


Tax rates ...........................................................................6.0

Tax regulations ................................................................5.8

Crime and theft ................................................................5.7




0

500

1,000

1,500

2,000

2,500

3,000

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006


2–3

Factordriven

Efficiencydriven

Innovationdriven

3



Institutions

Infrastructure

Macro-economy

Health andprimary

education


Market efficiency



Innovation

2

1

3

4

5

6

7

Mozambique Factor-driven economies

0 5 10 15 20 25 30



Mozambique Africa


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* Hard data





Property rights..............................................................3.9...........87Diversion of public funds .............................................2.6.........109Public trust of politicians ..............................................1.6.........114Judicial independence..................................................2.5.........106Favoritism in decisions of government officials...........2.7...........94Government spending .................................................2.7...........92Burden of government regulation................................2.2.........120Business costs of terrorism.........................................5.2...........57Reliability of police services.........................................2.8.........113Business costs of crime and violence .........................2.7.........113Organized crime...........................................................3.6.........108Ethical behavior of firms ..............................................3.2.........119Efficacy of corporate boards ........................................4.2...........88Protection of minority shareholders’ interests.............3.9...........88Strength of auditing and accounting standards ...........3.8.........100


Quality of overall infrastructure....................................2.3.........106Quality of railroad infrastructure...................................1.8...........85Quality of port infrastructure........................................2.6...........93Quality of air transport infrastructure...........................3.5...........95Quality of electricity supply..........................................3.4...........95Telephone lines* ..........................................................0.4.........123


Government surplus/deficit* ......................................–5.7.........115National savings rate*................................................10.4.........117Inflation* ......................................................................7.2...........90Interest rate spread*..................................................11.1.........103Government debt*.....................................................71.5...........87Real effective exchange rate*....................................–8.2...........30


Business impact of malaria ..........................................2.9.........126Business impact of tuberculosis ..................................3.3.........122Business impact of HIV/AIDS ......................................2.1.........126Infant mortality* .......................................................102.0.........120Life expectancy*........................................................45.0.........121Tuberculosis incidence* ...........................................635.1.........121Malaria incidence* ..............................................26,919.9.........125HIV prevalence*.........................................................12.2.........121Primary enrollment*...................................................71.0.........113


Secondary enrollment* ..............................................10.8.........124Tertiary enrollment* .....................................................1.0.........118Quality of the educational system ...............................2.6.........115Quality of math and science education........................3.0...........99Quality of management schools ..................................2.8.........120Local availability of research and training services ......2.6.........114Extent of staff training .................................................3.3...........79



Agricultural policy costs ...............................................3.3.........102Efficiency of legal framework ......................................2.6.........110Extent and effect of taxation .......................................2.7...........99No. of procedures required to start a business* .......13.0...........99Time required to start a business* ..........................113.0.........117Intensity of local competition.......................................3.9.........111Effectiveness of antitrust policy...................................3.0.........101Imports*.....................................................................62.6...........31Prevalence of trade barriers .........................................3.8.........103Prevalence of foreign ownership .................................5.1...........65Exports* .....................................................................38.1...........70Hiring and firing practices ............................................2.8.........110Flexibility of wage determination.................................4.1.........110Cooperation in labor-employer relations ......................3.9.........109Reliance on professional management........................4.1...........81Pay and productivity.....................................................2.8.........124Brain drain ....................................................................2.9...........73Private sector employment of women ........................5.0...........41Financial market sophistication ....................................2.3.........115Ease of access to loans ...............................................1.9.........122Venture capital availability ............................................1.7.........127Soundness of banks.....................................................4.5.........112Local equity market access..........................................3.8...........96






Quality of scientific research institutions.....................3.2...........97Company spending on R&D ........................................2.6.........107University-industry research collaboration ...................2.5...........96Gov’t procurement of advanced tech products ...........3.2.........103Availability of scientists and engineers ........................3.0.........121Utility patents*.............................................................0.0...........80Intellectual property protection ....................................2.5.........107Capacity for innovation.................................................2.6...........98

Mozambique


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NamibiaKey indicators









Efficiency enhancers.................................................93 ..........3.35th pillar: Higher education and training..............108 ..........2.86th pillar: Market efficiency......................................80 ..........4.07th pillar: Technological readiness .........................79 ..........3.0




Poor work ethic in national labor force ....................12.7


Crime and theft ..............................................................11.5


Access to financing........................................................8.1

Corruption.........................................................................8.1

Tax rates ...........................................................................5.5


Tax regulations ................................................................3.7


Inflation .............................................................................2.2



0

2,000

4,000

6,000

8,000

10,000

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006


Institutions

Infrastructure

Macro-economy

Health andprimary

education


Market efficiency



Innovation

2

1

3

4

5

6

7

Namibia Economies in transition from 1 to 2

0 5 10 15 20 25 30



Namibia Africa


2–3

Factordriven

Efficiencydriven

Innovationdriven

3



165

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* Hard data





Property rights..............................................................5.5...........32Diversion of public funds .............................................3.3...........76Public trust of politicians ..............................................2.7...........50Judicial independence..................................................5.2...........28Favoritism in decisions of government officials...........3.0...........66Government spending .................................................2.9...........81Burden of government regulation................................2.7...........87Business costs of terrorism.........................................5.4...........41Reliability of police services.........................................3.2.........101Business costs of crime and violence .........................3.6...........87Organized crime...........................................................4.5...........77Ethical behavior of firms ..............................................4.3...........53Efficacy of corporate boards ........................................4.3...........79Protection of minority shareholders’ interests.............4.7...........47Strength of auditing and accounting standards ...........5.3...........39




Government surplus/deficit* ......................................–3.8...........96National savings rate*................................................31.3...........19Inflation* ......................................................................2.4...........32Interest rate spread*....................................................4.4...........46Government debt*.....................................................35.0...........35Real effective exchange rate* ...................................12.4.........105


Business impact of malaria ..........................................4.2.........107Business impact of tuberculosis ..................................3.8.........116Business impact of HIV/AIDS ......................................2.4.........119Infant mortality* .........................................................42.0...........94Life expectancy*........................................................54.0.........108Tuberculosis incidence* ...........................................585.7.........120Malaria incidence* ..............................................22,204.1.........123HIV prevalence*.........................................................21.3.........124Primary enrollment*...................................................78.2.........106


Secondary enrollment* ..............................................58.0...........98Tertiary enrollment* .....................................................6.0.........102Quality of the educational system ...............................2.6.........110Quality of math and science education........................2.5.........118Quality of management schools ..................................2.7.........121Local availability of research and training services ......2.4.........122Extent of staff training .................................................3.6...........65



Agricultural policy costs ...............................................3.3...........97Efficiency of legal framework ......................................4.6...........39Extent and effect of taxation .......................................3.6...........43No. of procedures required to start a business* .......10.0...........63Time required to start a business* ............................95.0.........113Intensity of local competition.......................................4.9...........60Effectiveness of antitrust policy...................................3.6...........73Imports*.....................................................................43.5...........62Prevalence of trade barriers .........................................4.1...........76Prevalence of foreign ownership .................................5.2...........55Exports* .....................................................................45.6...........53Hiring and firing practices ............................................3.2...........96Flexibility of wage determination.................................4.7...........88Cooperation in labor-employer relations ......................4.1.........105Reliance on professional management........................4.3...........70Pay and productivity.....................................................3.4...........97Brain drain ....................................................................3.5...........55Private sector employment of women ........................4.4...........88Financial market sophistication ....................................4.1...........61Ease of access to loans ...............................................3.8...........45Venture capital availability ............................................3.4...........50Soundness of banks.....................................................5.9...........44Local equity market access..........................................4.1...........89


Technological readiness ...............................................3.7...........66Firm-level technology absorption .................................4.3...........92Laws relating to ICT.....................................................3.2...........75FDI and technology transfer.........................................5.1...........49Mobile telephone subscribers*..................................24.4...........89Internet users*.............................................................3.7.........100Personal computers* .................................................10.9...........55


Local supplier quantity .................................................3.8.........110Local supplier quality....................................................4.1...........72Production process sophistication ...............................2.8.........102Extent of marketing .....................................................3.8...........79Control of international distribution..............................3.4.........104Willingness to delegate authority.................................3.4...........73Nature of competitive advantage.................................3.5...........49Value chain presence ...................................................2.5.........112


Quality of scientific research institutions.....................3.0.........105Company spending on R&D ........................................3.0...........80University-industry research collaboration ...................2.8...........78Gov’t procurement of advanced tech products ...........3.6...........83Availability of scientists and engineers ........................3.0.........122Utility patents*.............................................................0.0...........80Intellectual property protection ....................................4.3...........41Capacity for innovation.................................................2.6.........102

Namibia


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NigeriaKey indicators

Population (millions), 2006.....................................134.4GDP (billions, current US$), 2006 .........................115.4GDP (PPP US$) per capita, 2006 ..........................1,213Sectoral value-added (as percentage of GDP), 2004






Global Competitiveness Index 2007.............102.........3.5GCR 2005–06 (out of 117 economies) ......................83 ..........3.7







Corruption.......................................................................14.1


Inflation .............................................................................9.1

Crime and theft ................................................................6.9






Tax rates ...........................................................................3.1

Tax regulations ................................................................2.5


500

1,000

1,500

2,000

2,500

3,000

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006


2–3

Factordriven

Efficiencydriven

Innovationdriven

3



Institutions

Infrastructure

Macro-economy

Health andprimary

education


Market efficiency



Innovation

2

1

3

4

5

6

7

Nigeria Factor-driven economies

0 5 10 15 20 25 30



Nigeria Africa


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* Hard data





Property rights..............................................................3.8...........90Diversion of public funds .............................................2.3.........118Public trust of politicians ..............................................2.2...........78Judicial independence..................................................3.2...........85Favoritism in decisions of government officials...........2.5.........100Government spending .................................................2.8...........89Burden of government regulation................................3.2...........45Business costs of terrorism.........................................3.7.........119Reliability of police services.........................................2.7.........119Business costs of crime and violence .........................2.9.........110Organized crime...........................................................3.0.........119Ethical behavior of firms ..............................................3.8...........89Efficacy of corporate boards ........................................4.8...........42Protection of minority shareholders’ interests.............4.1...........74Strength of auditing and accounting standards ...........4.1...........85


Quality of overall infrastructure....................................2.6...........94Quality of railroad infrastructure...................................1.8...........83Quality of port infrastructure........................................2.8...........85Quality of air transport infrastructure...........................3.5...........96Quality of electricity supply..........................................1.8.........122Telephone lines* ..........................................................0.9.........111


Government surplus/deficit*........................................9.9.............8National savings rate*................................................33.4...........14Inflation* ....................................................................17.9.........124Interest rate spread*....................................................7.4...........81Government debt* .......................................................n/a..........n/aReal effective exchange rate*....................................–1.2...........58


Business impact of malaria ..........................................3.7.........116Business impact of tuberculosis ..................................4.1.........111Business impact of HIV/AIDS ......................................3.1.........112Infant mortality* .......................................................103.0.........121Life expectancy*........................................................46.0.........118Tuberculosis incidence* ...........................................531.3.........113Malaria incidence* ................................................2,103.6.........109HIV prevalence*...........................................................5.4.........116Primary enrollment*...................................................60.1.........116


Secondary enrollment* ..............................................34.6.........111Tertiary enrollment* ...................................................10.0...........96Quality of the educational system ...............................3.3...........72Quality of math and science education........................2.9.........105Quality of management schools ..................................3.4...........95Local availability of research and training services ......3.9...........61Extent of staff training .................................................3.5...........66



Agricultural policy costs ...............................................4.0...........43Efficiency of legal framework ......................................3.2...........85Extent and effect of taxation .......................................4.4...........24No. of procedures required to start a business* .........9.0...........50Time required to start a business* ............................43.0...........81Intensity of local competition.......................................4.1.........106Effectiveness of antitrust policy...................................3.6...........72Imports*.....................................................................36.8...........73Prevalence of trade barriers .........................................3.7.........108Prevalence of foreign ownership .................................5.1...........66Exports* .....................................................................64.5...........27Hiring and firing practices ............................................5.0...........19Flexibility of wage determination.................................5.0...........75Cooperation in labor-employer relations ......................3.8.........112Reliance on professional management........................4.6...........55Pay and productivity.....................................................3.3.........103Brain drain ....................................................................2.4.........104Private sector employment of women ........................5.4...........19Financial market sophistication ....................................3.2...........80Ease of access to loans ...............................................2.5...........97Venture capital availability ............................................3.0...........75Soundness of banks.....................................................4.8...........92Local equity market access..........................................5.3...........49


Technological readiness ...............................................3.0...........88Firm-level technology absorption .................................4.4...........80Laws relating to ICT.....................................................3.4...........69FDI and technology transfer.........................................5.2...........45Mobile telephone subscribers*..................................14.1...........99Internet users*.............................................................3.8...........99Personal computers* ...................................................0.7.........111





Nigeria


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South AfricaKey indicators

Population (millions), 2006.......................................47.6GDP (billions, current US$), 2006 .........................255.2GDP (PPP US$) per capita, 2006 ........................12,796Sectoral value-added (as percentage of GDP), 2004












Restrictive labor regulations.......................................18.3

Crime and theft ..............................................................15.4






Tax rates ...........................................................................4.0

Corruption.........................................................................2.4


Tax regulations ................................................................1.6


Inflation .............................................................................0.4

0

3,000

6,000

9,000

12,000

15,000

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006


Institutions

Infrastructure

Macro-economy

Health andprimary

education


Market efficiency



Innovation

2

1

3

4

5

6

7

South Africa Efficiency-driven economies

0 5 10 15 20 25 30



South Africa Africa


2–3

Factordriven

Efficiencydriven

Innovationdriven

3



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* Hard data





Property rights..............................................................5.8...........23Diversion of public funds .............................................3.9...........50Public trust of politicians ..............................................3.0...........43Judicial independence..................................................5.6...........21Favoritism in decisions of government officials...........3.1...........55Government spending .................................................4.2...........22Burden of government regulation................................3.0...........64Business costs of terrorism.........................................5.4...........46Reliability of police services.........................................3.3...........92Business costs of crime and violence .........................2.6.........116Organized crime...........................................................3.8...........97Ethical behavior of firms ..............................................4.9...........30Efficacy of corporate boards ........................................5.7.............8Protection of minority shareholders’ interests.............5.6...........17Strength of auditing and accounting standards ...........6.3.............7




Government surplus/deficit* ......................................–0.2...........46National savings rate*................................................13.0.........104Inflation* ......................................................................3.4...........53Interest rate spread*....................................................4.6...........49Government debt*.....................................................34.6...........34Real effective exchange rate* .....................................8.6...........99


Business impact of malaria ..........................................4.6.........105Business impact of tuberculosis ..................................3.6.........118Business impact of HIV/AIDS ......................................2.2.........124Infant mortality* .........................................................54.0...........96Life expectancy*........................................................48.0.........115Tuberculosis incidence* ...........................................669.9.........123Malaria incidence* .....................................................29.9...........82HIV prevalence*.........................................................21.5.........125Primary enrollment*...................................................89.5...........78


Secondary enrollment* ..............................................90.0...........51Tertiary enrollment* ...................................................15.0...........88Quality of the educational system ...............................2.8.........100Quality of math and science education........................2.4.........120Quality of management schools ..................................5.4...........19Local availability of research and training services ......4.7...........30Extent of staff training .................................................4.9...........26



Agricultural policy costs ...............................................4.3...........20Efficiency of legal framework ......................................5.6...........15Extent and effect of taxation .......................................4.2...........28No. of procedures required to start a business* .........9.0...........50Time required to start a business* ............................35.0...........67Intensity of local competition.......................................5.2...........38Effectiveness of antitrust policy...................................5.4...........20Imports*.....................................................................28.6.........103Prevalence of trade barriers .........................................5.0...........38Prevalence of foreign ownership .................................5.4...........42Exports* .....................................................................27.1...........95Hiring and firing practices ............................................2.4.........123Flexibility of wage determination.................................3.3.........118Cooperation in labor-employer relations ......................3.8.........114Reliance on professional management........................5.8...........14Pay and productivity.....................................................3.5...........96Brain drain ....................................................................3.2...........60Private sector employment of women ........................4.9...........47Financial market sophistication ....................................5.7...........19Ease of access to loans ...............................................3.8...........41Venture capital availability ............................................3.8...........38Soundness of banks.....................................................6.5...........19Local equity market access..........................................6.2...........10


Technological readiness ...............................................4.6...........38Firm-level technology absorption .................................5.3...........30Laws relating to ICT.....................................................4.8...........28FDI and technology transfer.........................................5.3...........36Mobile telephone subscribers*..................................71.6...........46Internet users*...........................................................10.8...........70Personal computers* ...................................................8.4...........61





South Africa


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TanzaniaKey indicators

Population (millions), 2006.......................................39.0GDP (billions, current US$), 2006 ...........................12.8GDP (PPP US$) per capita, 2006 .............................801Sectoral value-added (as percentage of GDP), 2004













Corruption.......................................................................11.7

Tax rates .........................................................................11.5

Tax regulations ................................................................9.2


Crime and theft ................................................................8.0




Inflation .............................................................................2.6




0

500

1,000

1,500

2,000

2,500

3,000

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006


2–3

Factordriven

Efficiencydriven

Innovationdriven

3



Institutions

Infrastructure

Macro-economy

Health andprimary

education


Market efficiency



Innovation

2

1

3

4

5

6

7

Tanzania Factor-driven economies

0 5 10 15 20 25 30



Tanzania Africa


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* Hard data







Quality of overall infrastructure....................................2.9...........77Quality of railroad infrastructure...................................2.8...........56Quality of port infrastructure........................................3.4...........69Quality of air transport infrastructure...........................3.7...........90Quality of electricity supply..........................................2.1.........118Telephone lines* ..........................................................0.4.........121


Government surplus/deficit* ......................................–3.3...........89National savings rate*................................................16.1...........89Inflation* ......................................................................4.6...........70Interest rate spread*..................................................10.4...........99Government debt* .......................................................n/a..........n/aReal effective exchange rate*......................................n/a..........n/a


Business impact of malaria ..........................................3.2.........123Business impact of tuberculosis ..................................3.3.........123Business impact of HIV/AIDS ......................................2.1.........127Infant mortality* .........................................................78.0.........108Life expectancy*........................................................48.0.........115Tuberculosis incidence* ...........................................478.6.........110Malaria incidence* ................................................3,000.0.........111HIV prevalence*...........................................................8.8.........120Primary enrollment*...................................................54.4.........119


Secondary enrollment* ................................................7.5.........125Tertiary enrollment* .....................................................1.0.........118Quality of the educational system ...............................3.1...........85Quality of math and science education........................2.9.........106Quality of management schools ..................................3.3...........97Local availability of research and training services ......4.0...........55Extent of staff training .................................................3.1...........89



Agricultural policy costs ...............................................4.6...........12Efficiency of legal framework ......................................3.7...........64Extent and effect of taxation .......................................3.4...........54No. of procedures required to start a business* .......13.0...........99Time required to start a business* ............................30.0...........52Intensity of local competition.......................................4.4...........83Effectiveness of antitrust policy...................................3.7...........67Imports*.....................................................................32.5...........89Prevalence of trade barriers .........................................4.0...........95Prevalence of foreign ownership .................................5.4...........41Exports* .....................................................................22.4.........109Hiring and firing practices ............................................4.1...........56Flexibility of wage determination.................................5.5...........54Cooperation in labor-employer relations ......................4.6...........62Reliance on professional management........................4.8...........45Pay and productivity.....................................................3.5...........93Brain drain ....................................................................2.6...........88Private sector employment of women ........................5.4...........16Financial market sophistication ....................................2.9...........90Ease of access to loans ...............................................2.7...........86Venture capital availability ............................................3.2...........58Soundness of banks.....................................................5.7...........53Local equity market access..........................................4.8...........68




Local supplier quantity .................................................4.4...........81Local supplier quality....................................................3.6...........92Production process sophistication ...............................2.9...........97Extent of marketing .....................................................3.7...........86Control of international distribution..............................3.6...........97Willingness to delegate authority.................................4.1...........33Nature of competitive advantage.................................3.3...........68Value chain presence ...................................................2.6.........106



Tanzania


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TunisiaKey indicators








Basic requirements ...................................................33 ..........5.31st pillar: Institutions..................................................26 ..........5.12nd pillar: Infrastructure ...........................................37 ..........4.43rd pillar: Macroeconomy.........................................39 ..........4.94th pillar: Health and primary education................33 ..........6.7





Tax rates .........................................................................12.2

Tax regulations ..............................................................11.8






Inflation .............................................................................5.5


Corruption.........................................................................4.2



Crime and theft ................................................................2.2

0

2,000

4,000

6,000

8,000

10,000

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006


Institutions

Infrastructure

Macro-economy

Health andprimary

education


Market efficiency



Innovation

2

1

3

4

5

6

7

Tunisia Economies in transition from 1 to 2

0 5 10 15 20 25 30



Tunisia Africa


2–3

Factordriven

Efficiencydriven

Innovationdriven

3



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* Hard data





Property rights..............................................................5.4...........36Diversion of public funds .............................................5.2...........24Public trust of politicians ..............................................4.6...........13Judicial independence..................................................5.1...........34Favoritism in decisions of government officials...........4.7...........10Government spending .................................................5.3.............3Burden of government regulation................................4.2...........11Business costs of terrorism.........................................5.9...........16Reliability of police services.........................................5.5...........25Business costs of crime and violence .........................5.6...........23Organized crime...........................................................5.5...........42Ethical behavior of firms ..............................................5.0...........29Efficacy of corporate boards ........................................4.6...........58Protection of minority shareholders’ interests.............5.5...........19Strength of auditing and accounting standards ...........5.1...........50




Government surplus/deficit* ......................................–2.8...........78National savings rate*................................................22.1...........50Inflation* ......................................................................2.0...........22Interest rate spread*....................................................3.0...........22Government debt*.....................................................56.9...........70Real effective exchange rate*..................................–12.4...........20


Business impact of malaria ..........................................6.6...........35Business impact of tuberculosis ..................................6.4...........27Business impact of HIV/AIDS ......................................6.3...........12Infant mortality* .........................................................21.0...........70Life expectancy*........................................................72.0...........54Tuberculosis incidence* .............................................24.0...........36Malaria incidence* .......................................................0.0.............1HIV prevalence*...........................................................0.0.............1Primary enrollment*...................................................97.6...........26


Secondary enrollment* ..............................................81.3...........74Tertiary enrollment* ...................................................29.0...........61Quality of the educational system ...............................5.1...........11Quality of math and science education........................5.6.............9Quality of management schools ..................................5.3...........20Local availability of research and training services ......4.6...........33Extent of staff training .................................................4.3...........37



Agricultural policy costs ...............................................4.7.............5Efficiency of legal framework ......................................5.0...........31Extent and effect of taxation .......................................4.6...........19No. of procedures required to start a business* .......10.0...........63Time required to start a business* ............................11.0...........12Intensity of local competition.......................................5.2...........43Effectiveness of antitrust policy...................................5.1...........26Imports*.....................................................................47.4...........53Prevalence of trade barriers .........................................4.8...........44Prevalence of foreign ownership .................................5.3...........52Exports* .....................................................................44.8...........56Hiring and firing practices ............................................4.5...........32Flexibility of wage determination.................................4.6...........96Cooperation in labor-employer relations ......................5.1...........29Reliance on professional management........................4.6...........57Pay and productivity.....................................................4.6...........29Brain drain ....................................................................3.8...........43Private sector employment of women ........................5.8.............5Financial market sophistication ....................................4.1...........60Ease of access to loans ...............................................4.0...........38Venture capital availability ............................................4.1...........31Soundness of banks.....................................................5.5...........66Local equity market access..........................................4.8...........70


Technological readiness ...............................................4.8...........30Firm-level technology absorption .................................5.2...........36Laws relating to ICT.....................................................4.0...........49FDI and technology transfer.........................................5.3...........34Mobile telephone subscribers*..................................56.3...........57Internet users*.............................................................9.5...........75Personal computers* ...................................................5.6...........69




Quality of scientific research institutions.....................4.4...........33Company spending on R&D ........................................3.7...........36University-industry research collaboration ...................3.7...........32Gov’t procurement of advanced tech products ...........5.0.............4Availability of scientists and engineers ........................5.8...........10Utility patents*.............................................................0.1...........70Intellectual property protection ....................................4.6...........31Capacity for innovation.................................................4.1...........31

Tunisia


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UgandaKey indicators








Basic requirements .................................................121 ..........3.31st pillar: Institutions................................................103 ..........3.42nd pillar: Infrastructure .........................................122 ..........2.03rd pillar: Macroeconomy.........................................69 ..........4.44th pillar: Health and primary education..............126 ..........3.3





Corruption.......................................................................21.0


Tax rates ...........................................................................7.4




Tax regulations ................................................................4.1

Inflation .............................................................................2.8


Crime and theft ................................................................2.5




0

500

1,000

1,500

2,000

2,500

3,000

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006


2–3

Factordriven

Efficiencydriven

Innovationdriven

3



Institutions

Infrastructure

Macro-economy

Health andprimary

education


Market efficiency



Innovation

2

1

3

4

5

6

7

Uganda Factor-driven economies

0 5 10 15 20 25 30



Uganda Africa


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* Hard data





Property rights..............................................................3.6.........104Diversion of public funds .............................................2.0.........125Public trust of politicians ..............................................1.9...........92Judicial independence..................................................3.8...........62Favoritism in decisions of government officials...........2.0.........123Government spending .................................................2.4.........115Burden of government regulation................................3.3...........41Business costs of terrorism.........................................3.4.........123Reliability of police services.........................................3.4...........90Business costs of crime and violence .........................3.6...........88Organized crime...........................................................4.1...........91Ethical behavior of firms ..............................................3.5.........104Efficacy of corporate boards ........................................4.6...........57Protection of minority shareholders’ interests.............3.9...........86Strength of auditing and accounting standards ...........3.6.........111


Quality of overall infrastructure....................................2.8...........85Quality of railroad infrastructure...................................1.5.........103Quality of port infrastructure........................................1.9.........113Quality of air transport infrastructure...........................3.3...........98Quality of electricity supply..........................................1.5.........126Telephone lines* ..........................................................0.3.........125


Government surplus/deficit* ......................................–0.3...........47National savings rate*................................................21.5...........54Inflation* ......................................................................8.0...........95Interest rate spread*..................................................11.0.........102Government debt*.....................................................56.8...........69Real effective exchange rate*..................................–12.3...........22


Business impact of malaria ..........................................3.2.........122Business impact of tuberculosis ..................................3.8.........117Business impact of HIV/AIDS ......................................2.6.........117Infant mortality* .........................................................81.0.........113Life expectancy*........................................................49.0.........114Tuberculosis incidence* ...........................................646.4.........122Malaria incidence* ..............................................47,842.7.........127HIV prevalence*...........................................................4.1.........112Primary enrollment*.....................................................n/a..........n/a


Secondary enrollment* ..............................................18.6.........120Tertiary enrollment* .....................................................3.0.........107Quality of the educational system ...............................3.4...........65Quality of math and science education........................3.0...........98Quality of management schools ..................................3.3.........100Local availability of research and training services ......3.9...........62Extent of staff training .................................................3.4...........75



Agricultural policy costs ...............................................3.8...........46Efficiency of legal framework ......................................3.5...........74Extent and effect of taxation .......................................2.5.........107No. of procedures required to start a business* .......17.0.........118Time required to start a business* ............................30.0...........52Intensity of local competition.......................................5.0...........51Effectiveness of antitrust policy...................................3.2...........89Imports*.....................................................................29.1.........101Prevalence of trade barriers .........................................3.5.........118Prevalence of foreign ownership .................................5.8...........17Exports* .....................................................................14.0.........123Hiring and firing practices ............................................5.1...........14Flexibility of wage determination.................................6.2.............3Cooperation in labor-employer relations ......................4.3...........88Reliance on professional management........................4.0...........83Pay and productivity.....................................................3.2.........111Brain drain ....................................................................2.6...........94Private sector employment of women ........................5.6.............9Financial market sophistication ....................................2.4.........112Ease of access to loans ...............................................2.7...........84Venture capital availability ............................................3.0...........76Soundness of banks.....................................................4.8...........98Local equity market access..........................................4.1...........86




Local supplier quantity .................................................4.5...........73Local supplier quality....................................................3.2.........114Production process sophistication ...............................2.6.........117Extent of marketing .....................................................3.3.........100Control of international distribution..............................3.4.........105Willingness to delegate authority.................................3.1...........86Nature of competitive advantage.................................3.5...........56Value chain presence ...................................................3.0...........89


Quality of scientific research institutions.....................4.3...........34Company spending on R&D ........................................3.0...........72University-industry research collaboration ...................3.1...........59Gov’t procurement of advanced tech products ...........3.9...........47Availability of scientists and engineers ........................4.1...........85Utility patents*.............................................................0.0...........80Intellectual property protection ....................................2.5.........109Capacity for innovation.................................................2.8...........87

Uganda


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ZambiaKey indicators












Corruption.......................................................................20.3



Crime and theft ..............................................................14.2

Tax rates .........................................................................12.7




Tax regulations ................................................................2.5



Inflation .............................................................................1.5



500

1,000

1,500

2,000

2,500

3,000

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006


2–3

Factordriven

Efficiencydriven

Innovationdriven

3



Institutions

Infrastructure

Macro-economy

Health andprimary

education


Market efficiency



Innovation

2

1

3

4

5

6

7

Zambia Factor-driven economies

0 5 10 15 20 25 30



Zambia Africa


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* Hard data





Property rights..............................................................4.6...........62Diversion of public funds .............................................2.1.........123Public trust of politicians ..............................................1.6.........112Judicial independence..................................................2.7.........100Favoritism in decisions of government officials...........2.2.........116Government spending .................................................1.9.........124Burden of government regulation................................4.2...........10Business costs of terrorism.........................................6.1.............8Reliability of police services.........................................4.0...........70Business costs of crime and violence .........................3.0.........107Organized crime...........................................................5.7...........34Ethical behavior of firms ..............................................4.2...........61Efficacy of corporate boards ........................................5.6...........10Protection of minority shareholders’ interests.............5.5...........21Strength of auditing and accounting standards ...........5.6...........27


Quality of overall infrastructure....................................1.9.........124Quality of railroad infrastructure...................................1.6...........94Quality of port infrastructure........................................1.9.........114Quality of air transport infrastructure...........................4.6...........59Quality of electricity supply..........................................5.5...........41Telephone lines* ..........................................................0.8.........113


Government surplus/deficit* ......................................–2.3...........70National savings rate*................................................11.4.........111Inflation* ....................................................................18.3.........125Interest rate spread*..................................................17.0.........117Government debt*.....................................................16.5...........15Real effective exchange rate* ...................................29.2.........123


Business impact of malaria ..........................................3.3.........120Business impact of tuberculosis ..................................3.2.........124Business impact of HIV/AIDS ......................................2.9.........113Infant mortality* .......................................................104.0.........122Life expectancy*........................................................40.0.........125Tuberculosis incidence* ...........................................707.3.........126Malaria incidence* ..............................................18,964.0.........122HIV prevalence*.........................................................16.5.........123Primary enrollment*...................................................79.8.........105


Secondary enrollment* ..............................................25.8.........117Tertiary enrollment* .....................................................n/a..........n/aQuality of the educational system ...............................3.6...........60Quality of math and science education........................3.2...........95Quality of management schools ..................................3.2.........104Local availability of research and training services ......2.2.........127Extent of staff training .................................................1.7.........128



Agricultural policy costs ...............................................5.3.............2Efficiency of legal framework ......................................4.0...........57Extent and effect of taxation .......................................2.1.........125No. of procedures required to start a business* .........6.0...........16Time required to start a business* ............................35.0...........67Intensity of local competition.......................................2.3.........128Effectiveness of antitrust policy...................................2.8.........113Imports*.....................................................................29.6.........100Prevalence of trade barriers .........................................4.0...........89Prevalence of foreign ownership .................................5.8...........16Exports* .....................................................................22.9.........107Hiring and firing practices ............................................5.9.............1Flexibility of wage determination.................................6.2.............4Cooperation in labor-employer relations ......................5.2...........22Reliance on professional management........................5.1...........33Pay and productivity.....................................................2.1.........128Brain drain ....................................................................1.9.........125Private sector employment of women ........................6.0.............1Financial market sophistication ....................................2.5.........107Ease of access to loans ...............................................1.5.........128Venture capital availability ............................................1.5.........128Soundness of banks.....................................................5.8...........45Local equity market access..........................................5.6...........42


Technological readiness ...............................................2.2.........119Firm-level technology absorption .................................4.9...........49Laws relating to ICT.....................................................2.5.........104FDI and technology transfer.........................................5.7...........12Mobile telephone subscribers*....................................8.1.........110Internet users*.............................................................2.0.........110Personal computers* ...................................................1.0.........107




Quality of scientific research institutions.....................3.0.........104Company spending on R&D ........................................1.7.........127University-industry research collaboration ...................2.2.........109Gov’t procurement of advanced tech products ...........2.3.........126Availability of scientists and engineers ........................3.9...........94Utility patents*.............................................................0.0...........80Intellectual property protection ....................................2.4.........116Capacity for innovation.................................................2.2.........127

Zambia


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ZimbabweKey indicators









Efficiency enhancers...............................................108 ..........3.05th pillar: Higher education and training................99 ..........3.16th pillar: Market efficiency....................................115 ..........3.57th pillar: Technological readiness .......................110 ..........2.5



Inflation ...........................................................................25.1

Foreign currency regulations......................................24.2



Corruption.........................................................................6.5



Tax rates ...........................................................................2.5

Crime and theft ................................................................1.9



Tax regulations ................................................................1.0



1,000

1,500

2,000

2,500

3,000

3,500

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006


2–3

Factordriven

Efficiencydriven

Innovationdriven

3



Institutions

Infrastructure

Macro-economy

Health andprimary

education


Market efficiency



Innovation

2

1

3

4

5

6

7

Zimbabwe Factor-driven economies

0 5 10 15 20 25 30



Zimbabwe Africa


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* Hard data





Property rights..............................................................1.9.........128Diversion of public funds .............................................2.4.........115Public trust of politicians ..............................................1.3.........127Judicial independence..................................................1.7.........125Favoritism in decisions of government officials...........2.2.........119Government spending .................................................1.9.........123Burden of government regulation................................2.2.........121Business costs of terrorism.........................................6.1.............5Reliability of police services.........................................2.8.........116Business costs of crime and violence .........................3.3...........95Organized crime...........................................................4.7...........69Ethical behavior of firms ..............................................3.9...........82Efficacy of corporate boards ........................................4.9...........36Protection of minority shareholders’ interests.............4.4...........63Strength of auditing and accounting standards ...........5.3...........40


Quality of overall infrastructure....................................2.9...........78Quality of railroad infrastructure...................................2.7...........57Quality of port infrastructure........................................3.0...........82Quality of air transport infrastructure...........................2.6.........118Quality of electricity supply..........................................2.2.........116Telephone lines* ..........................................................2.8.........106


Government surplus/deficit* ......................................–6.1.........120National savings rate* ................................................–6.7.........127Inflation* ..................................................................237.8.........128Interest rate spread*................................................144.6.........123Government debt* .......................................................n/a..........n/aReal effective exchange rate*..................................–54.9.............2


Business impact of malaria ..........................................4.0.........113Business impact of tuberculosis ..................................2.8.........126Business impact of HIV/AIDS ......................................2.3.........121Infant mortality* .........................................................78.0.........108Life expectancy*........................................................36.0.........128Tuberculosis incidence* ...........................................672.6.........124Malaria incidence* ................................................9,562.4.........116HIV prevalence*.........................................................24.6.........126Primary enrollment*...................................................82.7.........101


Secondary enrollment* ..............................................36.0.........110Tertiary enrollment* .....................................................4.0.........106Quality of the educational system ...............................4.1...........40Quality of math and science education........................3.9...........71Quality of management schools ..................................3.8...........76Local availability of research and training services ......2.8.........111Extent of staff training .................................................3.8...........51



Agricultural policy costs ...............................................1.9.........128Efficiency of legal framework ......................................2.3.........124Extent and effect of taxation .......................................2.5.........106No. of procedures required to start a business* .......10.0...........63Time required to start a business* ............................96.0.........114Intensity of local competition.......................................3.1.........126Effectiveness of antitrust policy...................................3.5...........78Imports*.....................................................................36.0...........74Prevalence of trade barriers .........................................3.8.........104Prevalence of foreign ownership .................................4.0.........115Exports* .....................................................................37.0...........74Hiring and firing practices ............................................2.6.........118Flexibility of wage determination.................................2.7.........127Cooperation in labor-employer relations ......................4.2...........95Reliance on professional management........................5.3...........28Pay and productivity.....................................................2.7.........127Brain drain ....................................................................1.7.........126Private sector employment of women ........................4.9...........44Financial market sophistication ....................................3.8...........70Ease of access to loans ...............................................2.4.........104Venture capital availability ............................................2.6...........96Soundness of banks.....................................................4.2.........121Local equity market access..........................................5.9...........28


Technological readiness ...............................................2.7...........99Firm-level technology absorption .................................3.8.........108Laws relating to ICT.....................................................2.7.........100FDI and technology transfer.........................................3.9.........123Mobile telephone subscribers*....................................5.9.........116Internet users*.............................................................8.4...........78Personal computers* .................................................10.1...........57


Local supplier quantity .................................................4.4...........82Local supplier quality....................................................3.8...........84Production process sophistication ...............................2.3.........123Extent of marketing .....................................................3.8...........81Control of international distribution..............................3.4.........101Willingness to delegate authority.................................3.5...........62Nature of competitive advantage.................................2.2.........126Value chain presence ...................................................2.3.........123


Quality of scientific research institutions.....................3.8...........59Company spending on R&D ........................................3.1...........68University-industry research collaboration ...................3.0...........65Gov’t procurement of advanced tech products ...........2.8.........121Availability of scientists and engineers ........................3.9...........92Utility patents*.............................................................0.1...........74Intellectual property protection ....................................2.9...........87Capacity for innovation.................................................2.3.........124

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The Investment Climate Profiles are based on the WorldBank’s Enterprise Surveys, which are establishment-levelsurveys designed to analyze the investment climates ofthe participating countries and to advise them onreforms aimed at fostering growth and employment.Standard Enterprise Surveys are administered to themanufacturing and service sectors in three to four urbanareas.The survey captures firms’ experiences in a rangeof areas, including infrastructure, access to finance, gov-ernance, regulation, tax policy, labor relations, conflictresolution, infrastructure services, supplies and market-ing, technology, and training. Every year, surveys areimplemented in 15–30 countries, with updates plannedfor each country every three to five years. So far over100 countries have been surveyed, and participants haveincluded 11,600 entrepreneurs, senior managers, andCEOs in 34 African countries.The average sample sizeof the firms surveyed in Africa is approximately 350observations.

Top 10 constraints perceived by entrepreneursThis chart summarizes the top 10 “major” or “verysevere” obstacles to the operation and growth of thebusiness as perceived by senior managers or entrepre-neurs. Respondents were given a list of 17 factors andasked to indicate whether the factors represented aproblem for the operation and growth of their businesson a five-point scale (“no obstacle,”“minor obstacle,”“moderate obstacle,”“major obstacle,” and “very severeobstacle”). Each bar in the graph shows the share ofsenior managers or entrepreneurs that ranked as a“major” or “very severe” obstacle the following con-straints: telecommunications, electricity, transportation,access to land, tax rates, tax administration, customs andtrade regulations, labor regulations, skills and educationof available workers, business licensing and operatingpermits, access to finance (availability and cost), eco-nomic and regulatory policy uncertainty, macroeconom-ic instability, corruption, crime, theft and disorder, anti-competitive or informal practices, and legal system /conflict resolution.

Investment climate indicatorsThe investment climate indicators in the country pro-files are shown by macro dimension (country, region,income)1 and by micro dimension (small, medium, large,exporter, nonexporter, domestic ownership, foreignownership).2

BUREAUCRACY

• Senior management time spent in dealing with require-ments of government regulation (percent) This indicator provides the average percentage ofsenior management’s time that is spent in a typicalweek dealing with requirements imposed by govern-ment regulations (for example, taxes, customs, laborregulations, licensing, and registration), includingdealings with officials, completing forms, and so on.

MACRO DIMENSION MICRO DIMENSION

BUREAUCRACY Algeria Region Income Small Medium Large Exporter Nonexporter Domestic Foreign

Senior management time spent in dealing with

requirements of government regulation (percent) n/a 5.45 5.68 n/a n/a n/a n/a n/a n/a n/a

Consistency/predictability of officials’ interpre-

tations of regulations affecting the firm 55.21 51.96 56.98 52.90 51.71 71.83 60.00 55.79 54.92 80.00


CORRUPTION Algeria Region Income Small Medium Large Exporter Nonexporter Domestic Foreign

Unofficial payments for typical firm to get

things done (percent of sales) 6.04 2.23 0.80 7.14 5.10 3.51 — 6.24 6.04 n/a

Firms expected to give gifts in meetings with

tax inspectors (percent) n/a 18.53 13.14 n/a n/a n/a n/a n/a n/a n/a

Value of gift expected to secure government

contract (percent of contract) 1.49 3.18 0.97 1.77 1.25 1.21 0.00 1.53 1.52 0.00


COURTS Algeria Region Income Small Medium Large Exporter Nonexporter Domestic Foreign

Confidence level in the judiciary system (percent) 72.74 62.86 66.47 69.35 73.20 80.60 88.89 72.76 72.62 —


CRIME Algeria Region Income Small Medium Large Exporter Nonexporter Domestic Foreign

Security costs (percent of sales) n/a 1.25 0.96 n/a n/a n/a n/a n/a n/a n/a

Losses due to theft, robbery, vandalism, and

arson against the firm (percent of sales) 0.51 0.67 0.76 0.58 0.40 0.36 0.80 0.51 0.52 0.00


INFORMALITY Algeria Region Income Small Medium Large Exporter Nonexporter Domestic Foreign

Sales amount reported by a typical firm for

tax purposes (percent) 72.51 63.02 72.56 72.82 68.95 80.00 — 72.54 72.48 —

Algeria 2002 Investment Climate Profile

Top 10 constraints perceived by entrepreneurs

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iles • Consistency/predictability of officials’ interpretations of

regulations affecting the firm This indicator shows the percentage of firms whoagree with the statement “In general, governmentofficials’ interpretations of regulations affecting myestablishment are consistent and predictable.”

CORRUPTION

• Unofficial payments for typical firm to get things done (percent of sales)This indicator provides the average value of gifts orinformal payments to public officials to “get thingsdone” with regard to customs, taxes, licenses, regula-tions, services, and so on.The values shown indicate apercentage of annual sales.

• Firms expected to give gifts in meetings with tax inspec-tors (percent)These figures show the percentage of firms for whicha gift was expected in meeting with tax inspectors.

• Value of gift expected to secure government contract (per-cent of contract)These figures provide the percentage of contractvalue expected as a gift to secure government con-tract.

COURTS

• Confidence level in the judiciary system (percent)These numbers show the percentage of firms thatagree with the statement “I am confident that thejudicial system will enforce my contractual and prop-erty rights in business disputes.”

CRIME

• Security costs (percent of sales)This indicator shows the cost to firms, as a percent-age of total sales, of providing security (equipment,personnel, or professional security service).

• Losses due to theft, robbery, vandalism, and arson againstthe firm (percent of sales)These figures show firms’ losses, as a percentage oftotal sales, that can be attributed to theft, robbery,vandalism, arson, or other crimes.

INFORMALITY

• Sales amount reported by a typical firm for tax purposes(percent)The figures here provide the average percentage oftotal sales that firms estimated they reported for taxpurposes.

FINANCE

• Internal finance for investment (percent)This indicator provides the percentage of firms’ newinvestments that are financed by internal funds orretained earnings.

• Bank finance for investment (percent)These figures are the percentage of firms’ new invest-ments that are financed by commercial bank credit orloan.

• Informal finance for investment (percent)These figures are the percentage of firms’ new invest-ments that are financed by informal sources, family,or friends.

• Supplier credit financing (percent)These figures are the percentage of establishment’sworking capital that is financed with credit from sup-pliers or clients.

• Value of collateral needed for a loan (percent of the loanamount)This indicator shows the average value of the collat-eral required as a percentage of the loan value, forfirms with a recent loan or overdraft that requiredcollateral or a deposit.

• Loans requiring collateral (percent)These figures show the percent of firms that providecollateral for loans.

• Annual financial statement reviewed by external auditor(percent)This indicator shows the percentage of establishmentswith annual financial statements reviewed by anexternal auditor.

INFRASTRUCTURE

• Delay in obtaining an electrical connection (days)This indicator provides the average actual delay, indays, that firms experience when obtaining an elec-trical connection, measured from the day the estab-lishment applied to the day they received the serviceor approval.

• Number of electrical outages (days)This indicator provides the average number of daysper year the establishment experienced power out-ages or surges from the public grid.

• Value lost due to electrical outages (percent of sales)This indicator shows the total losses over the courseof a year resulting from interruptions in electricityservice, as a percentage of sales, including losses dueto lost production time from the outage, time neededto reset machines, and production and sales lostbecause of processes being interrupted.


• Delay in obtaining a mainline telephone connection (days)These figures show the average actual delay, in days,that firms experience when obtaining a telephoneconnection, measured from the day the establishmentapplied to the day they received the service orapproval.

• Cargo lost in transit (percent of value)These figures show the value of average cargo con-signment lost while in transit due to breakage, theft,or spoilage (as percentage of consignment value).

• Firms using the Web in interaction with clients/suppliers(percent)This indicator provides the percentage of firms thatregularly make use of the web in interactions withclients and / or suppliers.

INNOVATION

• ISO certification ownership (percent)This indicator provides the percentage of firms thathave received ISO (for example, 9000, 9002, or14,000) certification.

• New production technology (percent)This indicator provides the percentage of firms thatintroduced new production technology.

JOBS

• Firms offering formal training (percent)This indicator provides the percentage of firms thatoffer formal (beyond “on the job”) training to per-manent employees.

• Permanent skilled workers receiving training (percent)These figures show the average percentage of totalpermanent skilled employees that received formaltraining last year.

TAX ADMINISTRATION

• Average time firms spent in meetings with tax officials(days)These figures show the average number of days firmsspent in inspections and mandatory meetings withtax officials in the last two years.

TRADE

• Average time to clear direct exports through customs(days)These figures show the average number of days ittakes from the time goods arrive at their point of exit(for example, at the port or airport) until the timethey clear customs.

• Longest time to clear direct exports through customs(days)These figures show the longest number of days ittakes from the time goods arrive at their point of exit(e.g. port or airport) until the time they clear cus-toms.

• Average time to claim imports from customs (days)This indicator shows the average number of days ittakes from the time goods arrive at their point ofentry (for example, at the port or airport) until thetime they can be claimed from customs.

• Longest time to claim imports from customs (days)These figures show the most number of days it takesfrom the time goods arrive at their point of entry(for example, at the port or airport) until the timethey can be claimed from customs.

• Firms that export directly (percent)This indicator shows the percent of firms exportinggoods directly rather than through a distributor.

Notes1 Region: Algeria, Angola, Benin, Botswana, Burkina Faso, Burundi,

Cameroon, Cape Verde, Democratic Republic of Congo, Egypt, Eritrea,Ethiopia, The Gambia, Guinea, Guinea Bissau, Kenya, Lesotho, Madagascar,Malawi, Mali, Mauritania, Mauritius, Morocco, Namibia, Niger, Rwanda,Senegal, South Africa, Swaziland, Tanzania, Uganda, and Zambia.

2 Size: Small: firms with fewer than 20 employees; Medium: firms with 20 ormore employees and fewer than 100 employees; Large: firms with 100 ormore employees.

Market orientation: Exporters: firms with 10 percent or more of salesexported directly; Nonexporters: firms with less than 10 percent of salesdirectly exported.

Ownership status: Domestic: firms with less than 10 percent of capitalshare owned by the foreign private sector; Foreign: firms with 10 percent ormore of capital share owned by the foreign private sector

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Country Page

Algeria 188

Angola 190

Benin 192

Botswana 194

Burkina Faso 196

Burundi 198

Cameroon 200

Cape Verde 202

Congo, Democratic Republic of 204

Egypt 206

Eritrea 208

Ethiopia 210

Gambia 212

Guinea-Bissau 214

Guinea-Conakry 216

Kenya 218

Lesotho 220

Madagascar 222

Malawi 224

Mali 226

Mauritania 228

Mauritius 230

Morocco 232

Namibia 234

Niger 236

Rwanda 238

Senegal 240

South Africa 242

Swaziland 244

Tanzania 246

Uganda 248

Zambia 250


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BUREAUCRACY Algeria Region Income Small Medium Large Exporter Nonexporter Domestic Foreign

Senior management time spent in dealing with requirements of government regulation (percent) n/a 5.45 5.68 n/a n/a n/a n/a n/a n/a n/a

Consistency/predictability of officials’ interpre-tations of regulations affecting the firm 55.21 51.96 56.98 52.90 51.71 71.83 60.00 55.79 54.92 80.00


CORRUPTION Algeria Region Income Small Medium Large Exporter Nonexporter Domestic Foreign

Unofficial payments for typical firm to get things done (percent of sales) 6.04 2.23 0.80 7.14 5.10 3.51 — 6.24 6.04 n/a

Firms expected to give gifts in meetings with tax inspectors (percent) n/a 18.53 13.14 n/a n/a n/a n/a n/a n/a n/a

Value of gift expected to secure government contract (percent of contract) 1.49 3.18 0.97 1.77 1.25 1.21 0.00 1.53 1.52 0.00


COURTS Algeria Region Income Small Medium Large Exporter Nonexporter Domestic Foreign

Confidence level in the judiciary system (percent) 72.74 62.86 66.47 69.35 73.20 80.60 88.89 72.76 72.62 —


CRIME Algeria Region Income Small Medium Large Exporter Nonexporter Domestic Foreign


Losses due to theft, robbery, vandalism, and arson against the firm (percent of sales) 0.51 0.67 0.76 0.58 0.40 0.36 0.80 0.51 0.52 0.00


INFORMALITY Algeria Region Income Small Medium Large Exporter Nonexporter Domestic Foreign

Sales amount reported by a typical firm for tax purposes (percent) 72.51 63.02 72.56 72.82 68.95 80.00 — 72.54 72.48 —

Algeria 2002 Investment Climate Profile


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FINANCE Algeria Region Income Small Medium Large Exporter Nonexporter Domestic Foreign

Internal finance for investment (percent) 74.25 77.39 74.25 76.30 76.46 59.42 83.33 74.31 74.38 —

Bank finance for investment (percent) 16.28 11.50 13.69 13.91 13.93 31.70 10.00 16.07 16.11 —

Informal finance for investment (percent) 3.96 3.62 2.24 5.85 2.96 0.43 0.00 4.08 3.99 —

Supplier credit financing (percent) 8.90 14.32 15.54 7.62 9.96 11.75 20.00 8.76 8.91 —

Value of collateral needed for a loan (percent of the loan amount) 168.57 151.32 156.89 192.10 157.93 151.28 151.43 168.96 169.46 —

Loans requiring collateral (percent) 82.39 84.13 79.28 85.15 79.84 84.31 100.00 81.85 82.21 —

Annual financial statement reviewed by external auditor (percent) 59.56 53.65 69.08 52.73 58.33 84.51 60.00 59.62 58.96 100.00


INFRASTRUCTURE Algeria Region Income Small Medium Large Exporter Nonexporter Domestic Foreign

Delay in obtaining an electrical connection (days) 94.26 27.28 15.82 90.97 112.89 60.63 — 93.61 95.09 —

Number of electrical outages (days) 12.42 12.94 4.49 12.92 12.54 10.30 11.00 12.55 12.59 2.00

Value lost due to electrical outages (percent of sales) 4.27 7.68 2.93 4.64 4.08 3.64 4.00 4.31 4.30 2.60

Delay in obtaining a mainline telephone connection (days) 174.26 27.51 14.58 203.35 157.16 106.14 — 176.09 175.67 —

Cargo lost in transit (percent of value) 2.40 1.34 1.19 3.17 1.70 1.33 2.51 2.45 2.44 0.00

Firms using the Web in interaction with clients/suppliers (percent) 24.74 18.13 24.99 17.33 27.32 42.62 44.44 24.41 24.26 —


INNOVATION Algeria Region Income Small Medium Large Exporter Nonexporter Domestic Foreign

ISO certification ownership (percent) n/a 13.75 16.97 n/a n/a n/a n/a n/a n/a n/a

New production technology (percent) n/a 45.85 38.32 n/a n/a n/a n/a n/a n/a n/a


JOBS Algeria Region Income Small Medium Large Exporter Nonexporter Domestic Foreign

Firms offering formal training (percent) 31.84 32.56 29.20 23.72 29.35 64.29 70.00 31.08 31.19 80.00

Permanent skilled workers receiving training (percent) n/a 18.94 16.10 n/a n/a n/a n/a n/a n/a n/a


TAX ADMINISTRATION Algeria Region Income Small Medium Large Exporter Nonexporter Domestic Foreign

Average time firms spent in meetings with tax officials (days) n/a 3.06 1.94 n/a n/a n/a n/a n/a n/a n/a


TRADE Algeria Region Income Small Medium Large Exporter Nonexporter Domestic Foreign

Average time to clear direct exports through customs (days) 8.60 4.32 3.96 — 10.14 9.33 3.29 11.46 8.60 n/a

Longest time to clear direct exports through customs (days) 11.67 13.35 6.80 — 11.50 14.38 6.71 14.82 11.67 n/a

Average time to claim imports from customs (days) 21.57 10.04 5.39 21.79 21.43 21.57 9.43 21.79 21.90 7.60

Longest time to claim imports from customs (days) 47.30 14.52 10.15 46.63 46.86 49.06 17.57 48.06 47.71 31.00

Firms that export directly (percent) 3.13 11.64 19.56 1.19 2.91 9.86 100.00 1.31 2.99 20.00

Data source: Enterprise SurveysMore data available at http://www.enterprisesurveys.org/

Note: Statistics with fewer than five firms are displayed with a “—” to maintain confidentiality and should be distinguished from “n/a,” which represents missing values.

2002 Investment Climate Profile Algeria


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BUREAUCRACY Angola Region Income Small Medium Large Exporter Nonexporter Domestic Foreign

Senior management time spent in dealing with requirements of government regulation (percent) 7.14 5.64 6.38 6.81 8.16 13.83 — 7.06 6.94 8.38



CORRUPTION Angola Region Income Small Medium Large Exporter Nonexporter Domestic Foreign

Unofficial payments for typical firm to get things done (percent of sales) 2.48 2.24 0.70 2.55 2.20 1.33 0.76 2.50 2.61 1.63

Firms expected to give gifts in meetings with tax inspectors (percent) 14.84 18.64 12.93 13.07 17.60 50.00 19.03 14.77 14.22 17.64

Value of gift expected to secure government contract (percent of contract) 3.41 3.11 0.66 3.43 3.33 — 1.79 3.42 3.48 2.98


COURTS Angola Region Income Small Medium Large Exporter Nonexporter Domestic Foreign

Confidence level in the judiciary system (percent) n/a 63.55 68.96 n/a n/a n/a n/a n/a n/a n/a


CRIME Angola Region Income Small Medium Large Exporter Nonexporter Domestic Foreign

Security costs (percent of sales) 3.35 1.26 0.96 3.57 2.79 — — 3.37 3.65 2.24

Losses due to theft, robbery, vandalism, and arson against the firm (percent of sales) 2.41 0.68 0.80 2.61 1.78 n/a n/a 2.41 2.39 2.53


INFORMALITY Angola Region Income Small Medium Large Exporter Nonexporter Domestic Foreign

Sales amount reported by a typical firm for tax purposes (percent) 47.64 63.59 75.05 44.36 66.80 41.67 32.68 47.80 48.15 44.63

Angola 2006 Investment Climate Profile


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FINANCE Angola Region Income Small Medium Large Exporter Nonexporter Domestic Foreign

Internal finance for investment (percent) 88.47 77.07 73.39 91.49 79.07 75.00 — 88.40 90.46 75.33

Bank finance for investment (percent) 3.99 11.75 14.38 2.63 6.33 20.00 — 4.01 2.33 14.97

Informal finance for investment (percent) 5.59 3.59 2.17 5.07 8.77 0.00 — 5.63 5.72 4.76

Supplier credit financing (percent) 10.71 14.33 15.63 8.72 21.86 15.00 16.03 10.65 10.05 14.60

Value of collateral needed for a loan (percent of the loan amount) 97.74 152.34 158.88 55.55 44.71 — — 97.59 116.92 —

Loans requiring collateral (percent) 93.45 84.00 79.41 100.00 100.00 — — 93.12 100.00 80.55



INFRASTRUCTURE Angola Region Income Small Medium Large Exporter Nonexporter Domestic Foreign

Delay in obtaining an electrical connection (days) 51.82 28.02 17.43 45.04 108.39 — — 52.14 56.47 33.60

Number of electrical outages (days) 87.27 13.14 4.85 85.69 86.36 162.00 — 87.59 89.28 75.23

Value lost due to electrical outages (percent of sales) 3.63 7.73 2.98 3.73 2.87 4.80 — 3.66 3.72 3.13

Delay in obtaining a mainline telephone connection (days) 39.46 32.99 27.18 41.02 34.37 — — 39.60 40.25 37.26

Cargo lost in transit (percent of value) n/a 1.41 1.38 n/a n/a n/a n/a n/a n/a n/a

Firms using the Web in interaction with clients/suppliers (percent) 9.38 18.53 26.47 10.01 3.20 33.33 19.03 9.28 8.95 11.85


INNOVATION Angola Region Income Small Medium Large Exporter Nonexporter Domestic Foreign

ISO certification ownership (percent) 5.05 14.03 18.18 3.69 9.63 33.33 20.65 4.89 2.99 17.01

New production technology (percent) 48.00 45.75 36.93 47.98 47.67 50.00 n/a 48.00 49.23 34.13


JOBS Angola Region Income Small Medium Large Exporter Nonexporter Domestic Foreign

Firms offering formal training (percent) 19.40 33.23 30.90 14.64 34.08 83.33 n/a 19.40 16.67 50.01

Permanent skilled workers receiving training (percent) 10.20 18.13 14.70 6.46 25.64 40.83 n/a 10.20 8.39 30.39


TAX ADMINISTRATION Angola Region Income Small Medium Large Exporter Nonexporter Domestic Foreign

Average time firms spent in meetings with tax officials (days) 4.64 3.06 1.82 4.41 5.37 6.50 2.02 4.69 4.70 4.39


TRADE Angola Region Income Small Medium Large Exporter Nonexporter Domestic Foreign

Average time to clear direct exports through customs (days) 16.49 4.31 3.94 — — n/a — — — —

Longest time to clear direct exports through customs (days) 24.65 13.32 6.78 — — n/a — — — —

Average time to claim imports from customs (days) 24.73 10.45 6.68 22.40 28.28 — n/a 24.73 24.91 —

Longest time to claim imports from customs (days) 34.57 16.05 13.60 27.87 48.36 — n/a 34.57 34.01 —




2006 Investment Climate Profile Angola


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BUREAUCRACY Benin Region Income Small Medium Large Exporter Nonexporter Domestic Foreign

Senior management time spent in dealing with requirements of government regulation (percent) 6.46 5.69 5.34 5.52 6.79 14.07 10.52 5.57 6.18 7.85



CORRUPTION Benin Region Income Small Medium Large Exporter Nonexporter Domestic Foreign





COURTS Benin Region Income Small Medium Large Exporter Nonexporter Domestic Foreign

Confidence level in the judiciary system (percent) 34.72 63.28 61.57 35.77 31.58 33.33 29.41 34.87 34.38 36.36


CRIME Benin Region Income Small Medium Large Exporter Nonexporter Domestic Foreign

Security costs (percent of sales) 0.82 1.27 1.38 0.96 0.50 0.36 0.38 0.90 0.87 0.58



INFORMALITY Benin Region Income Small Medium Large Exporter Nonexporter Domestic Foreign


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■ Benin Africa Low income


193

2.2:

Inve

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ate

Prof

iles


FINANCE Benin Region Income Small Medium Large Exporter Nonexporter Domestic Foreign

Internal finance for investment (percent) 77.14 77.30 79.17 86.77 60.88 38.44 52.06 83.05 79.36 66.83

Bank finance for investment (percent) 13.65 11.58 10.22 5.59 25.94 48.75 33.26 8.83 11.42 24.00

Informal finance for investment (percent) 2.67 3.64 4.42 3.56 0.76 0.00 0.48 3.27 3.14 0.50


Value of collateral needed for a loan (percent of the loan amount) 118.68 152.32 148.24 139.71 78.64 125.58 116.69 121.09 126.74 107.76

Loans requiring collateral (percent) 90.57 84.00 87.57 83.33 93.75 100.00 95.00 86.67 88.57 94.44



INFRASTRUCTURE Benin Region Income Small Medium Large Exporter Nonexporter Domestic Foreign

Delay in obtaining an electrical connection (days) 55.62 28.22 33.91 48.20 71.09 80.20 70.45 51.63 57.03 47.25



Delay in obtaining a mainline telephone connection (days) 130.97 31.55 35.01 133.64 131.19 114.27 111.45 134.96 136.22 105.65




INNOVATION Benin Region Income Small Medium Large Exporter Nonexporter Domestic Foreign




JOBS Benin Region Income Small Medium Large Exporter Nonexporter Domestic Foreign




TAX ADMINISTRATION Benin Region Income Small Medium Large Exporter Nonexporter Domestic Foreign



TRADE Benin Region Income Small Medium Large Exporter Nonexporter Domestic Foreign

Average time to clear direct exports through customs (days) 6.31 4.33 4.84 — 4.75 8.33 5.70 7.73 7.39 4.93

Longest time to clear direct exports through customs (days) 9.40 13.39 22.25 — 9.25 8.80 7.39 12.91 11.88 6.15






2004 Investment Climate Profile Benin


194

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BUREAUCRACY Botswana Region Income Small Medium Large Exporter Nonexporter Domestic Foreign




CORRUPTION Botswana Region Income Small Medium Large Exporter Nonexporter Domestic Foreign





COURTS Botswana Region Income Small Medium Large Exporter Nonexporter Domestic Foreign



CRIME Botswana Region Income Small Medium Large Exporter Nonexporter Domestic Foreign




INFORMALITY Botswana Region Income Small Medium Large Exporter Nonexporter Domestic Foreign


Botswana 2006 Investment Climate Profile


0

10

20

30

40

50

Access to finance


Macro-economicinstability

Tax rates Access to land

Crime, theft &

disorder


Corruption Skills & education

of availableworkers


Trans-portation

Perc

enta

ge o

f fir

ms

iden

tifyi

ng p

robl

em a

s“m

ajor

” or

“ve

ry s

ever

e” o

bsta

cle

■ Botswana Africa Middle income


195

2.2:

Inve

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Clim

ate

Prof

iles


FINANCE Botswana Region Income Small Medium Large Exporter Nonexporter Domestic Foreign





Value of collateral needed for a loan (percent of the loan amount) 106.35 154.41 165.06 111.14 112.08 81.69 — 104.72 90.09 129.38




INFRASTRUCTURE Botswana Region Income Small Medium Large Exporter Nonexporter Domestic Foreign

Delay in obtaining an electrical connection (days) 12.81 29.28 20.80 10.07 12.56 29.41 — 13.09 15.15 7.70







INNOVATION Botswana Region Income Small Medium Large Exporter Nonexporter Domestic Foreign


New production technology (percent) 58.21 45.64 37.36 56.27 57.61 64.02 56.51 58.56 61.96 54.34


JOBS Botswana Region Income Small Medium Large Exporter Nonexporter Domestic Foreign


Permanent skilled workers receiving training (percent) 21.92 17.76 13.98 20.40 24.48 21.47 23.20 21.66 20.44 23.46


TAX ADMINISTRATION Botswana Region Income Small Medium Large Exporter Nonexporter Domestic Foreign



TRADE Botswana Region Income Small Medium Large Exporter Nonexporter Domestic Foreign

Average time to clear direct exports through customs (days) 1.27 4.41 4.09 1.37 1.00 1.62 1.23 1.38 1.47 1.18

Longest time to clear direct exports through customs (days) 2.74 13.52 6.96 1.67 2.94 4.39 2.45 3.57 3.26 2.48






2006 Investment Climate Profile Botswana


196

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Clim

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Prof

iles


BUREAUCRACY Burkina Faso Region Income Small Medium Large Exporter Nonexporter Domestic Foreign




CORRUPTION Burkina Faso Region Income Small Medium Large Exporter Nonexporter Domestic Foreign

Unofficial payments for typical firm to get things done (percent of sales) 5.73 2.25 2.89 5.69 5.18 — 5.50 5.75 5.83 4.30




COURTS Burkina Faso Region Income Small Medium Large Exporter Nonexporter Domestic Foreign



CRIME Burkina Faso Region Income Small Medium Large Exporter Nonexporter Domestic Foreign

Security costs (percent of sales) 1.99 1.27 1.37 2.22 1.43 — 1.18 2.06 2.04 1.49

Losses due to theft, robbery, vandalism, and arson against the firm (percent of sales) 2.40 0.67 0.63 2.72 — — — 2.66 2.45 —


INFORMALITY Burkina Faso Region Income Small Medium Large Exporter Nonexporter Domestic Foreign


Burkina Faso 2006 Investment Climate Profile


0

10

20

30

40

50

60

70

80

Access to finance


Tax rates Electricity Corruption Trans-portation


Tax adminis-tration



resolution


Perc

enta

ge o

f fir

ms

iden

tifyi

ng p

robl

em a

s“m

ajor

” or

“ve

ry s

ever

e” o

bsta

cle

■ Burkina Faso Africa Low income


197

2.2:

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Clim

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Prof

iles


FINANCE Burkina Faso Region Income Small Medium Large Exporter Nonexporter Domestic Foreign





Value of collateral needed for a loan (percent of the loan amount) 124.28 152.18 148.05 120.80 143.00 112.00 150.00 119.52 125.87 —




INFRASTRUCTURE Burkina Faso Region Income Small Medium Large Exporter Nonexporter Domestic Foreign

Delay in obtaining an electrical connection (days) 29.91 28.84 34.75 33.06 24.80 — — 31.95 30.84 —

Number of electrical outages (days) 9.61 12.94 16.89 8.35 12.44 — 9.63 9.61 9.08 15.20

Value lost due to electrical outages (percent of sales) 1.67 7.60 9.12 1.52 2.25 — 3.17 1.57 1.69 1.42

Delay in obtaining a mainline telephone connection (days) 49.52 33.12 37.86 52.47 53.13 — 23.20 55.50 54.09 29.40




INNOVATION Burkina Faso Region Income Small Medium Large Exporter Nonexporter Domestic Foreign




JOBS Burkina Faso Region Income Small Medium Large Exporter Nonexporter Domestic Foreign




TAX ADMINISTRATION Burkina Faso Region Income Small Medium Large Exporter Nonexporter Domestic Foreign



TRADE Burkina Faso Region Income Small Medium Large Exporter Nonexporter Domestic Foreign

Average time to clear direct exports through customs (days) 3.13 4.36 4.90 — 3.50 3.20 2.77 — 3.45 —

Longest time to clear direct exports through customs (days) 6.67 13.38 22.10 — 6.25 7.20 6.38 — 7.36 —






2006 Investment Climate Profile Burkina Faso


198

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Prof

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BUREAUCRACY Burundi Region Income Small Medium Large Exporter Nonexporter Domestic Foreign

Senior management time spent in dealing with requirements of government regulation (percent) 5.70 5.69 5.34 5.42 7.75 2.96 — 5.66 5.78 5.29

Consistency/predictability of officials’ interpre-tations of regulations affecting the firm 64.19 51.68 49.33 63.26 73.90 38.60 — 64.61 64.52 62.32


CORRUPTION Burundi Region Income Small Medium Large Exporter Nonexporter Domestic Foreign

Unofficial payments for typical firm to get things done (percent of sales) 4.40 2.18 2.82 3.93 6.71 7.56 — 4.36 4.46 4.10

Firms expected to give gifts in meetings with tax inspectors (percent) 22.63 18.39 20.16 19.82 28.70 76.05 — 22.59 20.03 38.71

Value of gift expected to secure government contract (percent of contract) 4.36 3.10 4.22 4.08 5.19 10.07 — 4.34 4.35 4.41


COURTS Burundi Region Income Small Medium Large Exporter Nonexporter Domestic Foreign



CRIME Burundi Region Income Small Medium Large Exporter Nonexporter Domestic Foreign

Security costs (percent of sales) 2.29 1.26 1.37 2.42 2.05 0.44 — 2.25 2.37 1.79

Losses due to theft, robbery, vandalism, and arson against the firm (percent of sales) 3.47 0.67 0.63 4.02 0.70 — — 3.57 3.60 2.91


INFORMALITY Burundi Region Income Small Medium Large Exporter Nonexporter Domestic Foreign

Sales amount reported by a typical firm for tax purposes (percent) 86.66 68.67 86.22 89.86 81.96 — 87.09 87.66 81.05

Burundi 2006 Investment Climate Profile


0

10

20

30

40

50

60

70

80

Electricity Access to finance


Macro-eco-nomic

Instability



Tax adminis-tration

Trans-portation

Customs & trade

regulations

Corruption

Perc

enta

ge o

f fir

ms

iden

tifyi

ng p

robl

em a

s“m

ajor

” or

“ve

ry s

ever

e” o

bsta

cle

■ Burundi Africa Low income


199

2.2:

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Clim

ate

Prof

iles


FINANCE Burundi Region Income Small Medium Large Exporter Nonexporter Domestic Foreign

Internal finance for investment (percent) 62.90 77.68 79.84 64.65 53.20 — — 62.51 62.17 67.45

Bank finance for investment (percent) 15.01 11.51 10.08 12.90 23.77 — — 14.85 12.62 29.82

Informal finance for investment (percent) 18.81 3.22 3.76 19.69 17.11 — — 19.29 21.41 2.73

Supplier credit financing (percent) 8.81 14.36 13.89 8.24 9.39 23.19 — 8.60 8.04 13.09


Loans requiring collateral (percent) 97.35 83.51 86.88 96.08 100.00 100.00 — 97.27 96.97 100.00

Annual financial statement reviewed by external auditor (percent) 14.88 54.78 47.14 12.26 27.51 25.84 — 14.32 14.89 14.78


INFRASTRUCTURE Burundi Region Income Small Medium Large Exporter Nonexporter Domestic Foreign


Number of electrical outages (days) 137.03 13.00 17.14 137.95 132.15 137.81 — 137.70 140.79 103.56

Value lost due to electrical outages (percent of sales) 8.96 7.50 9.06 9.18 8.04 7.84 — 8.91 8.56 12.38

Delay in obtaining a mainline telephone connection (days) 34.35 33.11 38.06 32.87 38.66 n/a — 35.41 37.55 14.20


Firms using the Web in interaction with clients/suppliers (percent) 11.55 18.42 14.77 9.27 24.01 12.76 — 11.13 10.40 17.96


INNOVATION Burundi Region Income Small Medium Large Exporter Nonexporter Domestic Foreign

ISO certification ownership (percent) 7.07 13.93 12.26 4.83 16.86 22.05 — 6.58 6.38 10.88

New production technology (percent) 22.02 46.17 50.71 20.05 28.12 21.91 — 21.46 21.55 23.71


JOBS Burundi Region Income Small Medium Large Exporter Nonexporter Domestic Foreign

Firms offering formal training (percent) 22.10 32.83 35.08 20.54 21.44 43.83 — 21.53 25.81 8.98

Permanent skilled workers receiving training (percent) 10.18 18.05 21.46 11.70 7.50 2.19 — 10.23 12.29 2.69


TAX ADMINISTRATION Burundi Region Income Small Medium Large Exporter Nonexporter Domestic Foreign

Average time firms spent in meetings with tax officials (days) 2.11 3.09 3.69 2.05 2.42 2.14 — 2.10 2.05 2.53


TRADE Burundi Region Income Small Medium Large Exporter Nonexporter Domestic Foreign

Average time to clear direct exports through customs (days) — 4.35 4.88 — — n/a — n/a — —

Longest time to clear direct exports through customs (days) — 13.37 22.05 — — n/a — n/a — —

Average time to claim imports from customs (days) 9.45 10.68 13.91 10.12 9.87 — — 9.64 10.68 7.75

Longest time to claim imports from customs (days) 20.87 16.33 18.42 20.95 21.00 — — 21.44 20.45 21.45

Firms that export directly (percent) 1.57 11.73 7.88 0.72 5.30 7.26 — 0.00 0.93 5.17



2006 Investment Climate Profile Burundi


200

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Prof

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BUREAUCRACY Cameroon Region Income Small Medium Large Exporter Nonexporter Domestic Foreign




CORRUPTION Cameroon Region Income Small Medium Large Exporter Nonexporter Domestic Foreign





COURTS Cameroon Region Income Small Medium Large Exporter Nonexporter Domestic Foreign



CRIME Cameroon Region Income Small Medium Large Exporter Nonexporter Domestic Foreign




INFORMALITY Cameroon Region Income Small Medium Large Exporter Nonexporter Domestic Foreign


Cameroon 2006 Investment Climate Profile


0

20

40

60

80

100

Tax adminis-tration

Tax rates Access to finance


Electricity Anti-competitiveor informalpractices

Corruption Customs & trade

regulations

Trans-portation



resolution

Perc

enta

ge o

f fir

ms

iden

tifyi

ng p

robl

em a

s“m

ajor

” or

“ve

ry s

ever

e” o

bsta

cle

■ Cameroon Africa Middle income


201

2.2:

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Clim

ate

Prof

iles


FINANCE Cameroon Region Income Small Medium Large Exporter Nonexporter Domestic Foreign









INFRASTRUCTURE Cameroon Region Income Small Medium Large Exporter Nonexporter Domestic Foreign

Delay in obtaining an electrical connection (days) 58.00 28.75 20.04 — 78.14 — — 59.18 62.64 —



Delay in obtaining a mainline telephone connection (days) 73.11 32.91 27.19 — 75.56 51.00 68.44 77.78 78.18 65.14




INNOVATION Cameroon Region Income Small Medium Large Exporter Nonexporter Domestic Foreign




JOBS Cameroon Region Income Small Medium Large Exporter Nonexporter Domestic Foreign




TAX ADMINISTRATION Cameroon Region Income Small Medium Large Exporter Nonexporter Domestic Foreign



TRADE Cameroon Region Income Small Medium Large Exporter Nonexporter Domestic Foreign








2006 Investment Climate Profile Cameroon


202

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Prof

iles


BUREAUCRACY Cape Verde Region Income Small Medium Large Exporter Nonexporter Domestic Foreign

Senior management time spent in dealing with requirements of government regulation (percent) 12.17 5.68 6.43 9.19 19.54 — — 12.29 12.13 12.56

Consistency/predictability of officials’ interpre-tations of regulations affecting the firm 59.38 52.00 56.80 58.82 62.96 — — 58.95 59.77 55.56


CORRUPTION Cape Verde Region Income Small Medium Large Exporter Nonexporter Domestic Foreign

Unofficial payments for typical firm to get things done (percent of sales) 0.02 2.25 0.88 0.00 0.06 — — 0.03 0.03 —

Firms expected to give gifts in meetings with tax inspectors (percent) 13.79 18.53 13.14 7.69 20.00 — — 14.29 15.38 —

Value of gift expected to secure government contract (percent of contract) 0.51 3.15 1.01 0.74 0.04 — — 0.51 0.56 0.00


COURTS Cape Verde Region Income Small Medium Large Exporter Nonexporter Domestic Foreign



CRIME Cape Verde Region Income Small Medium Large Exporter Nonexporter Domestic Foreign

Security costs (percent of sales) 1.11 1.27 1.02 1.97 0.53 — — 1.14 1.18 —

Losses due to theft, robbery, vandalism, and arson against the firm (percent of sales) 2.22 0.67 0.75 2.37 2.23 — n/a 2.22 1.80 —


INFORMALITY Cape Verde Region Income Small Medium Large Exporter Nonexporter Domestic Foreign

Sales amount reported by a typical firm for tax purposes (percent) 92.90 63.06 72.52 91.58 95.56 — — 92.82 92.28 100.00

Cape Verde 2006 Investment Climate Profile


0

10

20

30

40

50

60

70

80



Tax rates Anti-competitiveor informalpractices

Customs & trade

regulations

Tax adminis-tration

Crime, theft &

disorder

Trans-portation

Labor regulations


Perc

enta

ge o

f fir

ms

iden

tifyi

ng p

robl

em a

s“m

ajor

” or

“ve

ry s

ever

e” o

bsta

cle

■ Cape Verde Africa Middle income


203

2.2:

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Clim

ate

Prof

iles


FINANCE Cape Verde Region Income Small Medium Large Exporter Nonexporter Domestic Foreign

Internal finance for investment (percent) 66.41 77.31 74.22 71.67 55.26 — n/a 66.41 67.31 56.67

Bank finance for investment (percent) 21.06 11.59 13.80 17.55 27.37 — n/a 21.06 21.00 21.67

Informal finance for investment (percent) 3.17 3.64 2.36 4.41 0.00 — n/a 3.17 1.92 16.67

Supplier credit financing (percent) 5.72 14.22 15.22 2.57 14.40 — — 5.78 6.33 0.00

Value of collateral needed for a loan (percent of the loan amount) 118.24 152.17 158.43 72.86 155.56 — n/a 118.24 119.38 —

Loans requiring collateral (percent) 85.71 84.05 79.54 87.50 83.33 — n/a 85.71 85.00 —

Annual financial statement reviewed by external auditor (percent) 42.86 53.79 68.68 35.71 62.96 — — 42.27 42.70 44.44


INFRASTRUCTURE Cape Verde Region Income Small Medium Large Exporter Nonexporter Domestic Foreign

Delay in obtaining an electrical connection (days) — 28.84 20.28 — — n/a n/a — — n/a

Number of electrical outages (days) 13.14 12.92 4.93 14.35 12.22 — — 12.88 11.61 —

Value lost due to electrical outages (percent of sales) 6.87 7.59 3.04 6.05 8.28 — — 7.01 6.87 —

Delay in obtaining a mainline telephone connection (days) 8.89 33.18 27.78 — 10.33 — n/a 8.89 8.89 n/a


Firms using the Web in interaction with clients/suppliers (percent) 10.20 18.24 24.99 2.86 29.63 — — 10.31 10.11 11.11


INNOVATION Cape Verde Region Income Small Medium Large Exporter Nonexporter Domestic Foreign

ISO certification ownership (percent) 12.24 13.77 17.04 12.86 11.11 — — 12.37 12.36 11.11

New production technology (percent) 34.02 45.88 38.32 35.71 26.92 — — 34.38 34.09 33.33


JOBS Cape Verde Region Income Small Medium Large Exporter Nonexporter Domestic Foreign

Firms offering formal training (percent) 39.80 32.68 29.78 37.14 48.15 — — 39.18 38.20 55.56

Permanent skilled workers receiving training (percent) 9.47 17.99 14.50 7.09 13.34 — — 9.67 8.43 —


TAX ADMINISTRATION Cape Verde Region Income Small Medium Large Exporter Nonexporter Domestic Foreign

Average time firms spent in meetings with tax officials (days) 0.73 3.07 1.95 0.69 0.81 — — 0.73 0.71 0.89


TRADE Cape Verde Region Income Small Medium Large Exporter Nonexporter Domestic Foreign

Average time to clear direct exports through customs (days) — 4.35 4.00 n/a — n/a — — n/a —

Longest time to clear direct exports through customs (days) — 13.35 6.87 n/a — n/a — — n/a —

Average time to claim imports from customs (days) 10.58 10.67 7.21 11.22 10.36 — — 10.70 11.15 —

Longest time to claim imports from customs (days) 18.70 16.35 14.25 22.67 16.23 — — 19.09 20.05 —

Firms that export directly (percent) 3.06 11.48 18.71 0.00 11.11 — — 2.06 0.00 33.33



2006 Investment Climate Profile Cape Verde


204

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Clim

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Prof

iles


BUREAUCRACY Congo, Dem.Rep. Region Income Small Medium Large Exporter Nonexporter Domestic Foreign




CORRUPTION Congo, Dem.Rep. Region Income Small Medium Large Exporter Nonexporter Domestic Foreign





COURTS Congo, Dem.Rep. Region Income Small Medium Large Exporter Nonexporter Domestic Foreign



CRIME Congo, Dem.Rep. Region Income Small Medium Large Exporter Nonexporter Domestic Foreign




INFORMALITY Congo, Dem.Rep. Region Income Small Medium Large Exporter Nonexporter Domestic Foreign


Congo, Dem. Rep. 2006 Investment Climate Profile


0

10

20

30

40

50

60

70

80





Tax adminis-tration

Trans-portation


Crime, theft &

disorder

Corruption

Perc

enta

ge o

f fir

ms

iden

tifyi

ng p

robl

em a

s“m

ajor

” or

“ve

ry s

ever

e” o

bsta

cle

■ Congo, Dem. Rep. Africa Low income


205

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Prof

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FINANCE Congo, Dem.Rep. Region Income Small Medium Large Exporter Nonexporter Domestic Foreign





Value of collateral needed for a loan (percent of the loan amount) 129.08 152.36 148.27 113.28 151.63 — — 129.65 106.63 156.85




INFRASTRUCTURE Congo, Dem.Rep. Region Income Small Medium Large Exporter Nonexporter Domestic Foreign

Delay in obtaining an electrical connection (days) 14.00 29.13 35.45 13.20 — — — 13.69 13.85 —

Number of electrical outages (days) 177.97 12.77 16.94 168.10 224.65 #### 125.06 179.61 174.11 198.67


Delay in obtaining a mainline telephone connection (days) 29.23 33.19 38.08 30.37 29.05 — — 31.80 30.17 —




INNOVATION Congo, Dem.Rep. Region Income Small Medium Large Exporter Nonexporter Domestic Foreign




JOBS Congo, Dem.Rep. Region Income Small Medium Large Exporter Nonexporter Domestic Foreign




TAX ADMINISTRATION Congo, Dem.Rep. Region Income Small Medium Large Exporter Nonexporter Domestic Foreign



TRADE Congo, Dem.Rep. Region Income Small Medium Large Exporter Nonexporter Domestic Foreign

Average time to clear direct exports through customs (days) 3.60 4.36 4.91 — 3.75 — 3.60 n/a 3.25 4.06

Longest time to clear direct exports through customs (days) 6.74 13.41 22.29 — 6.68 — 6.74 n/a 6.29 7.33

Average time to claim imports from customs (days) 11.43 10.64 13.84 — 12.65 11.99 3.97 13.25 — 12.06





2006 Investment Climate Profile Congo, Dem. Rep.


206

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Prof

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BUREAUCRACY Egypt Region Income Small Medium Large Exporter Nonexporter Domestic Foreign


Consistency/predictability of officials’ interpre-tations of regulations affecting the firm n/a 52.03 56.85 n/a n/a n/a n/a n/a n/a n/a


CORRUPTION Egypt Region Income Small Medium Large Exporter Nonexporter Domestic Foreign





COURTS Egypt Region Income Small Medium Large Exporter Nonexporter Domestic Foreign



CRIME Egypt Region Income Small Medium Large Exporter Nonexporter Domestic Foreign


Losses due to theft, robbery, vandalism, and arson against the firm (percent of sales) n/a 0.67 0.75 n/a n/a n/a n/a n/a n/a n/a


INFORMALITY Egypt Region Income Small Medium Large Exporter Nonexporter Domestic Foreign


Egypt 2004 Investment Climate Profile


0

20

40

60

80

100



policy uncertainty

Tax adminis-tration



Skills & education

of availableworkers

Customs & trade

regulations

Labor regulations


resolution

Perc

enta

ge o

f fir

ms

iden

tifyi

ng p

robl

em a

s“m

ajor

” or

“ve

ry s

ever

e” o

bsta

cle

■ Egypt Africa Middle income


207

2.2:

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Clim

ate

Prof

iles


FINANCE Egypt Region Income Small Medium Large Exporter Nonexporter Domestic Foreign









INFRASTRUCTURE Egypt Region Income Small Medium Large Exporter Nonexporter Domestic Foreign

Delay in obtaining an electrical connection (days) 80.11 28.49 18.50 85.20 80.00 76.00 140.00 62.27 82.14 —







INNOVATION Egypt Region Income Small Medium Large Exporter Nonexporter Domestic Foreign




JOBS Egypt Region Income Small Medium Large Exporter Nonexporter Domestic Foreign




TAX ADMINISTRATION Egypt Region Income Small Medium Large Exporter Nonexporter Domestic Foreign



TRADE Egypt Region Income Small Medium Large Exporter Nonexporter Domestic Foreign








2004 Investment Climate Profile Egypt


208

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Prof

iles


BUREAUCRACY Eritrea Region Income Small Medium Large Exporter Nonexporter Domestic Foreign




CORRUPTION Eritrea Region Income Small Medium Large Exporter Nonexporter Domestic Foreign



Value of gift expected to secure government contract (percent of contract) n/a 3.14 4.22 n/a n/a n/a n/a n/a n/a n/a


COURTS Eritrea Region Income Small Medium Large Exporter Nonexporter Domestic Foreign



CRIME Eritrea Region Income Small Medium Large Exporter Nonexporter Domestic Foreign


Losses due to theft, robbery, vandalism, and arson against the firm (percent of sales) n/a 0.67 0.63 n/a n/a n/a n/a n/a n/a n/a


INFORMALITY Eritrea Region Income Small Medium Large Exporter Nonexporter Domestic Foreign


Eritrea 2002 Investment Climate Profile


0

20

40

60

80

100


Access to finance


Skills & education

of availableworkers

Electricity Access to land


policy uncertainty

Tax rates Trans-portation

Tax adminis-tration

Telecom-munications

Perc

enta

ge o

f fir

ms

iden

tifyi

ng p

robl

em a

s“m

ajor

” or

“ve

ry s

ever

e” o

bsta

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■ Eritrea Africa Low income


209

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Prof

iles


FINANCE Eritrea Region Income Small Medium Large Exporter Nonexporter Domestic Foreign





Value of collateral needed for a loan (percent of the loan amount) 168.06 151.96 147.64 152.60 179.49 — — 170.88 170.46 —

Loans requiring collateral (percent) 85.71 84.05 87.64 83.33 91.30 66.67 — 84.85 87.88 —



INFRASTRUCTURE Eritrea Region Income Small Medium Large Exporter Nonexporter Domestic Foreign

Delay in obtaining an electrical connection (days) 65.42 28.55 34.29 44.00 103.00 19.20 — 63.81 67.39 —



Delay in obtaining a mainline telephone connection (days) 256.31 32.20 36.15 278.33 322.08 58.80 — 278.14 230.79 —




INNOVATION Eritrea Region Income Small Medium Large Exporter Nonexporter Domestic Foreign




JOBS Eritrea Region Income Small Medium Large Exporter Nonexporter Domestic Foreign


Permanent skilled workers receiving training (percent) — 18.04 21.40 — n/a — — — — n/a


TAX ADMINISTRATION Eritrea Region Income Small Medium Large Exporter Nonexporter Domestic Foreign

Average time firms spent in meetings with tax officials (days) n/a 3.06 3.62 n/a n/a n/a n/a n/a n/a n/a


TRADE Eritrea Region Income Small Medium Large Exporter Nonexporter Domestic Foreign

Average time to clear direct exports through customs (days) 3.18 4.36 4.90 — 3.83 — 3.40 — 3.50 —

Longest time to clear direct exports through customs (days) 3.90 13.38 22.09 — 2.20 — 4.22 — 4.22 —

Average time to claim imports from customs (days) 8.89 10.69 13.93 10.11 8.03 10.15 7.00 9.32 9.28 —

Longest time to claim imports from customs (days) 16.40 16.38 18.52 16.75 13.50 23.31 12.30 17.35 17.24 —




2002 Investment Climate Profile Eritrea


210

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iles


BUREAUCRACY Ethiopia Region Income Small Medium Large Exporter Nonexporter Domestic Foreign




CORRUPTION Ethiopia Region Income Small Medium Large Exporter Nonexporter Domestic Foreign

Unofficial payments for typical firm to get things done (percent of sales) n/a 2.25 2.89 n/a n/a n/a n/a n/a n/a n/a




COURTS Ethiopia Region Income Small Medium Large Exporter Nonexporter Domestic Foreign



CRIME Ethiopia Region Income Small Medium Large Exporter Nonexporter Domestic Foreign




INFORMALITY Ethiopia Region Income Small Medium Large Exporter Nonexporter Domestic Foreign

Sales amount reported by a typical firm for tax purposes (percent) n/a 63.09 58.03 n/a n/a n/a n/a n/a n/a n/a

Ethiopia 2002 Investment Climate Profile


0

10

20

30

40

50

60

70

80


Access to land

Access to finance


Electricity Economic &regulatory

policy uncertainty


regulations



Perc

enta

ge o

f fir

ms

iden

tifyi

ng p

robl

em a

s“m

ajor

” or

“ve

ry s

ever

e” o

bsta

cle

■ Ethiopia Africa Low income


211

2.2:

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stm

ent

Clim

ate

Prof

iles


FINANCE Ethiopia Region Income Small Medium Large Exporter Nonexporter Domestic Foreign









INFRASTRUCTURE Ethiopia Region Income Small Medium Large Exporter Nonexporter Domestic Foreign


Number of electrical outages (days) n/a 12.25 15.95 n/a n/a n/a n/a n/a n/a n/a






INNOVATION Ethiopia Region Income Small Medium Large Exporter Nonexporter Domestic Foreign




JOBS Ethiopia Region Income Small Medium Large Exporter Nonexporter Domestic Foreign




TAX ADMINISTRATION Ethiopia Region Income Small Medium Large Exporter Nonexporter Domestic Foreign



TRADE Ethiopia Region Income Small Medium Large Exporter Nonexporter Domestic Foreign








2002 Investment Climate Profile Ethiopia


212

2.2:

Inve

stm

ent

Clim

ate

Prof

iles


BUREAUCRACY Gambia Region Income Small Medium Large Exporter Nonexporter Domestic Foreign




CORRUPTION Gambia Region Income Small Medium Large Exporter Nonexporter Domestic Foreign


Firms expected to give gifts in meetings with tax inspectors (percent) 13.68 18.57 20.35 18.22 2.94 — 0.00 14.32 12.27 16.88



COURTS Gambia Region Income Small Medium Large Exporter Nonexporter Domestic Foreign



CRIME Gambia Region Income Small Medium Large Exporter Nonexporter Domestic Foreign




INFORMALITY Gambia Region Income Small Medium Large Exporter Nonexporter Domestic Foreign


Gambia 2006 Investment Climate Profile


0

10

20

30

40

50

60

70

80







Tax adminis-tration

Customs & trade

regulations

Crime, theft &

disorder

Perc

enta

ge o

f fir

ms

iden

tifyi

ng p

robl

em a

s“m

ajor

” or

“ve

ry s

ever

e” o

bsta

cle

■ Gambia Africa Low income


213

2.2:

Inve

stm

ent

Clim

ate

Prof

iles


FINANCE Gambia Region Income Small Medium Large Exporter Nonexporter Domestic Foreign









INFRASTRUCTURE Gambia Region Income Small Medium Large Exporter Nonexporter Domestic Foreign








INNOVATION Gambia Region Income Small Medium Large Exporter Nonexporter Domestic Foreign


New production technology (percent) 65.36 45.77 50.02 57.49 67.42 — — 65.55 67.86 —


JOBS Gambia Region Income Small Medium Large Exporter Nonexporter Domestic Foreign

Firms offering formal training (percent) 26.08 32.74 34.88 22.92 18.39 — — 23.60 22.19 —

Permanent skilled workers receiving training (percent) 23.59 18.03 21.39 — — — — 20.64 8.08 —


TAX ADMINISTRATION Gambia Region Income Small Medium Large Exporter Nonexporter Domestic Foreign



TRADE Gambia Region Income Small Medium Large Exporter Nonexporter Domestic Foreign

Average time to clear direct exports through customs (days) 4.97 4.35 4.88 — — — 5.37 — 5.22 —

Longest time to clear direct exports through customs (days) 9.49 13.37 22.09 — — — 9.67 — 9.84 —

Average time to claim imports from customs (days) 3.05 10.70 13.90 — 2.76 — — 3.08 2.95 —

Longest time to claim imports from customs (days) 6.66 16.42 18.57 — 5.32 — — 6.60 7.19 —




2006 Investment Climate Profile Gambia


214

2.2:

Inve

stm

ent

Clim

ate

Prof

iles


BUREAUCRACY Guinea-Bissau Region Income Small Medium Large Exporter Nonexporter Domestic Foreign

Senior management time spent in dealing with requirements of government regulation (percent) 2.87 5.72 5.39 2.65 4.00 — 7.18 2.71 2.85 3.04

Consistency/predictability of officials’ interpre-tations of regulations affecting the firm 11.91 52.46 50.52 12.86 7.15 — 0.00 12.34 13.23 0.00


CORRUPTION Guinea-Bissau Region Income Small Medium Large Exporter Nonexporter Domestic Foreign

Unofficial payments for typical firm to get things done (percent of sales) 2.82 2.24 2.89 2.80 3.17 — — 2.82 2.64 4.32

Firms expected to give gifts in meetings with tax inspectors (percent) 22.24 18.48 20.23 25.38 4.03 — — 22.91 23.23 11.75

Value of gift expected to secure government contract (percent of contract) 2.82 3.14 4.24 2.63 4.27 n/a — 2.84 2.90 2.11


COURTS Guinea-Bissau Region Income Small Medium Large Exporter Nonexporter Domestic Foreign



CRIME Guinea-Bissau Region Income Small Medium Large Exporter Nonexporter Domestic Foreign

Security costs (percent of sales) 1.56 1.27 1.38 1.58 1.47 — — 1.53 1.63 0.82

Losses due to theft, robbery, vandalism, and arson against the firm (percent of sales) 3.01 0.66 0.62 3.14 — n/a — 3.04 3.03 2.85


INFORMALITY Guinea-Bissau Region Income Small Medium Large Exporter Nonexporter Domestic Foreign

Sales amount reported by a typical firm for tax purposes (percent) 67.06 63.05 57.89 64.28 85.93 — 90.86 66.14 67.86 60.29

Guinea-Bissau 2006 Investment Climate Profile


0

10

20

30

40

50

60

70

80




Tax rates Corruption Tax adminis-tration


Crime, theft &

disorder

Telecom-munications

Customs & trade

regulations

Perc

enta

ge o

f fir

ms

iden

tifyi

ng p

robl

em a

s“m

ajor

” or

“ve

ry s

ever

e” o

bsta

cle

■ Guinea-Bissau Africa Low income


215

2.2:

Inve

stm

ent

Clim

ate

Prof

iles


FINANCE Guinea-Bissau Region Income Small Medium Large Exporter Nonexporter Domestic Foreign




Supplier credit financing (percent) 8.74 14.27 13.78 7.57 18.09 — 23.71 8.23 8.81 7.99

Value of collateral needed for a loan (percent of the loan amount) — 152.17 148.03 — — n/a — — — —

Loans requiring collateral (percent) 84.20 84.06 87.62 — — n/a — — — —

Annual financial statement reviewed by external auditor (percent) 7.84 54.25 46.50 5.52 25.20 — 61.43 6.02 6.86 17.44


INFRASTRUCTURE Guinea-Bissau Region Income Small Medium Large Exporter Nonexporter Domestic Foreign

Delay in obtaining an electrical connection (days) 20.54 28.96 35.11 21.81 19.25 — — 20.08 20.87 —

Number of electrical outages (days) 110.24 13.02 17.06 99.27 139.49 — — 107.68 115.10 43.84

Value lost due to electrical outages (percent of sales) 4.99 7.61 9.15 4.77 6.29 — — 5.03 4.84 6.79

Delay in obtaining a mainline telephone connection (days) 27.59 33.18 38.01 31.71 25.63 — — 27.70 28.74 —


Firms using the Web in interaction with clients/suppliers (percent) 8.81 18.35 14.74 5.02 30.57 — 54.30 7.27 8.41 12.74


INNOVATION Guinea-Bissau Region Income Small Medium Large Exporter Nonexporter Domestic Foreign

ISO certification ownership (percent) 8.36 13.81 12.11 8.59 7.80 — 15.72 8.11 7.54 16.90

New production technology (percent) 19.06 46.02 50.43 17.11 25.79 n/a — 17.57 16.80 40.00


JOBS Guinea-Bissau Region Income Small Medium Large Exporter Nonexporter Domestic Foreign

Firms offering formal training (percent) 12.43 32.82 35.04 7.56 29.21 n/a — 10.61 11.61 20.00

Permanent skilled workers receiving training (percent) 5.51 18.03 21.39 3.78 11.48 n/a — 3.60 5.90 2.00


TAX ADMINISTRATION Guinea-Bissau Region Income Small Medium Large Exporter Nonexporter Domestic Foreign

Average time firms spent in meetings with tax officials (days) 3.94 3.06 3.63 3.86 3.32 — — 3.98 3.87 4.65


TRADE Guinea-Bissau Region Income Small Medium Large Exporter Nonexporter Domestic Foreign

Average time to clear direct exports through customs (days) 5.58 4.35 4.87 — — n/a 5.79 — 6.23 —

Longest time to clear direct exports through customs (days) 11.36 13.36 22.04 — — n/a 11.94 — 10.44 —

Average time to claim imports from customs (days) 10.95 10.67 13.83 — — n/a — — — —

Longest time to claim imports from customs (days) 23.36 16.37 18.46 — — n/a — — — —

Firms that export directly (percent) 3.69 11.55 7.70 1.72 18.16 — 100.00 0.45 3.25 8.05



2006 Investment Climate Profile Guinea-Bissau


216

2.2:

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ate

Prof

iles


BUREAUCRACY Guinea-Conakry Region Income Small Medium Large Exporter Nonexporter Domestic Foreign




CORRUPTION Guinea-Conakry Region Income Small Medium Large Exporter Nonexporter Domestic Foreign





COURTS Guinea-Conakry Region Income Small Medium Large Exporter Nonexporter Domestic Foreign



CRIME Guinea-Conakry Region Income Small Medium Large Exporter Nonexporter Domestic Foreign




INFORMALITY Guinea-Conakry Region Income Small Medium Large Exporter Nonexporter Domestic Foreign


Guinea-Conakry 2006 Investment Climate Profile


0

20

40

60

80

100

Electricity Macro-economicinstability

Access to finance


Trans-portation

Corruption Tax rates Crime, theft &

disorder

Tax adminis-tration

Telecom-munications


Perc

enta

ge o

f fir

ms

iden

tifyi

ng p

robl

em a

s“m

ajor

” or

“ve

ry s

ever

e” o

bsta

cle

■ Guinea-Conakry Africa Low income


217

2.2:

Inve

stm

ent

Clim

ate

Prof

iles


FINANCE Guinea-Conakry Region Income Small Medium Large Exporter Nonexporter Domestic Foreign





Value of collateral needed for a loan (percent of the loan amount) — 152.11 147.94 — — — n/a — — —

Loans requiring collateral (percent) 52.62 84.15 87.81 — 48.08 — — 56.77 82.27 27.17



INFRASTRUCTURE Guinea-Conakry Region Income Small Medium Large Exporter Nonexporter Domestic Foreign

Delay in obtaining an electrical connection (days) 16.14 29.04 35.26 17.47 — — — 16.31 15.88 17.74



Delay in obtaining a mainline telephone connection (days) 36.74 33.12 37.90 35.73 n/a — n/a 36.74 34.90 —




INNOVATION Guinea-Conakry Region Income Small Medium Large Exporter Nonexporter Domestic Foreign




JOBS Guinea-Conakry Region Income Small Medium Large Exporter Nonexporter Domestic Foreign


Permanent skilled workers receiving training (percent) 32.52 17.94 21.24 28.54 — 35.26 — 35.94 32.69 31.87


TAX ADMINISTRATION Guinea-Conakry Region Income Small Medium Large Exporter Nonexporter Domestic Foreign



TRADE Guinea-Conakry Region Income Small Medium Large Exporter Nonexporter Domestic Foreign

Average time to clear direct exports through customs (days) 4.33 4.35 4.89 4.19 — — 4.58 — 4.08 —

Longest time to clear direct exports through customs (days) 8.29 13.39 22.21 7.95 — — 9.15 — 7.58 —

Average time to claim imports from customs (days) 10.48 10.67 13.86 12.68 — — — 12.64 6.66 14.64

Longest time to claim imports from customs (days) 20.97 16.36 18.45 25.31 — — — 25.73 13.11 29.51




2006 Investment Climate Profile Guinea-Conakry


218

2.2:

Inve

stm

ent

Clim

ate

Prof

iles


BUREAUCRACY Kenya Region Income Small Medium Large Exporter Nonexporter Domestic Foreign




CORRUPTION Kenya Region Income Small Medium Large Exporter Nonexporter Domestic Foreign





COURTS Kenya Region Income Small Medium Large Exporter Nonexporter Domestic Foreign



CRIME Kenya Region Income Small Medium Large Exporter Nonexporter Domestic Foreign




INFORMALITY Kenya Region Income Small Medium Large Exporter Nonexporter Domestic Foreign


Kenya 2003 Investment Climate Profile


0

10

20

30

40

50

60

70

80

Access to finance


Corruption Crime, theft &

disorder



policy uncertainty


Tax adminis-tration

Electricity Telecom-munications

Perc

enta

ge o

f fir

ms

iden

tifyi

ng p

robl

em a

s“m

ajor

” or

“ve

ry s

ever

e” o

bsta

cle

■ Kenya Africa Low income


219

2.2:

Inve

stm

ent

Clim

ate

Prof

iles


FINANCE Kenya Region Income Small Medium Large Exporter Nonexporter Domestic Foreign









INFRASTRUCTURE Kenya Region Income Small Medium Large Exporter Nonexporter Domestic Foreign








INNOVATION Kenya Region Income Small Medium Large Exporter Nonexporter Domestic Foreign

ISO certification ownership (percent) n/a 13.75 12.05 n/a n/a n/a n/a n/a n/a n/a



JOBS Kenya Region Income Small Medium Large Exporter Nonexporter Domestic Foreign




TAX ADMINISTRATION Kenya Region Income Small Medium Large Exporter Nonexporter Domestic Foreign



TRADE Kenya Region Income Small Medium Large Exporter Nonexporter Domestic Foreign








2003 Investment Climate Profile Kenya


220

2.2:

Inve

stm

ent

Clim

ate

Prof

iles


BUREAUCRACY Lesotho Region Income Small Medium Large Exporter Nonexporter Domestic Foreign




CORRUPTION Lesotho Region Income Small Medium Large Exporter Nonexporter Domestic Foreign





COURTS Lesotho Region Income Small Medium Large Exporter Nonexporter Domestic Foreign



CRIME Lesotho Region Income Small Medium Large Exporter Nonexporter Domestic Foreign


Losses due to theft, robbery, vandalism, and arson against the firm (percent of sales) 0.14 0.67 0.75 — — 0.14 0.08 0.18 0.17 0.12


INFORMALITY Lesotho Region Income Small Medium Large Exporter Nonexporter Domestic Foreign


Lesotho 2003 Investment Climate Profile


0

10

20

30

40

50

60

Access to finance


Crime, theft &

disorder

Tax adminis-tration


Corruption Electricity Economic &regulatory

policy uncertainty

Skills & education

of availableworkers

Access to land

Perc

enta

ge o

f fir

ms

iden

tifyi

ng p

robl

em a

s“m

ajor

” or

“ve

ry s

ever

e” o

bsta

cle

■ Lesotho Africa Middle income


221

2.2:

Inve

stm

ent

Clim

ate

Prof

iles


FINANCE Lesotho Region Income Small Medium Large Exporter Nonexporter Domestic Foreign





Value of collateral needed for a loan (percent of the loan amount) 117.14 152.10 158.23 — — — — 140.00 133.33 —

Loans requiring collateral (percent) — 84.15 79.77 n/a n/a — — n/a — n/a



INFRASTRUCTURE Lesotho Region Income Small Medium Large Exporter Nonexporter Domestic Foreign

Delay in obtaining an electrical connection (days) 43.26 28.77 20.04 — — 45.56 54.88 40.25 25.25 61.90



Delay in obtaining a mainline telephone connection (days) 55.52 32.86 27.05 14.00 — 73.75 105.50 25.42 25.75 89.33




INNOVATION Lesotho Region Income Small Medium Large Exporter Nonexporter Domestic Foreign




JOBS Lesotho Region Income Small Medium Large Exporter Nonexporter Domestic Foreign




TAX ADMINISTRATION Lesotho Region Income Small Medium Large Exporter Nonexporter Domestic Foreign



TRADE Lesotho Region Income Small Medium Large Exporter Nonexporter Domestic Foreign

Average time to clear direct exports through customs (days) 2.32 4.37 4.04 — n/a 2.70 1.81 — 3.10 2.11

Longest time to clear direct exports through customs (days) 4.00 13.44 6.91 — — 4.70 3.96 — 2.56 5.24






2003 Investment Climate Profile Lesotho


222

2.2:

Inve

stm

ent

Clim

ate

Prof

iles


BUREAUCRACY Madagascar Region Income Small Medium Large Exporter Nonexporter Domestic Foreign




CORRUPTION Madagascar Region Income Small Medium Large Exporter Nonexporter Domestic Foreign





COURTS Madagascar Region Income Small Medium Large Exporter Nonexporter Domestic Foreign



CRIME Madagascar Region Income Small Medium Large Exporter Nonexporter Domestic Foreign




INFORMALITY Madagascar Region Income Small Medium Large Exporter Nonexporter Domestic Foreign


Madagascar 2005 Investment Climate Profile


0

10

20

30

40

50

60

70

80

Access to finance



Corruption Anti-competitiveor informalpractices



policy uncertainty


disorder


resolution

Perc

enta

ge o

f fir

ms

iden

tifyi

ng p

robl

em a

s“m

ajor

” or

“ve

ry s

ever

e” o

bsta

cle

■ Madagascar Africa Low income


223

2.2:

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ent

Clim

ate

Prof

iles


FINANCE Madagascar Region Income Small Medium Large Exporter Nonexporter Domestic Foreign









INFRASTRUCTURE Madagascar Region Income Small Medium Large Exporter Nonexporter Domestic Foreign








INNOVATION Madagascar Region Income Small Medium Large Exporter Nonexporter Domestic Foreign




JOBS Madagascar Region Income Small Medium Large Exporter Nonexporter Domestic Foreign




TAX ADMINISTRATION Madagascar Region Income Small Medium Large Exporter Nonexporter Domestic Foreign



TRADE Madagascar Region Income Small Medium Large Exporter Nonexporter Domestic Foreign


Longest time to clear direct exports through customs (days) 6.74 13.53 22.94 8.33 7.00 6.33 6.95 — 7.95 6.34






2005 Investment Climate Profile Madagascar


224

2.2:

Inve

stm

ent

Clim

ate

Prof

iles


BUREAUCRACY Malawi Region Income Small Medium Large Exporter Nonexporter Domestic Foreign




CORRUPTION Malawi Region Income Small Medium Large Exporter Nonexporter Domestic Foreign





COURTS Malawi Region Income Small Medium Large Exporter Nonexporter Domestic Foreign



CRIME Malawi Region Income Small Medium Large Exporter Nonexporter Domestic Foreign




INFORMALITY Malawi Region Income Small Medium Large Exporter Nonexporter Domestic Foreign


Malawi 2005 Investment Climate Profile


0

10

20

30

40

50

60

70

80


Access to finance


Electricity Tax rates Skills & education

of availableworkers

Crime, theft &

disorder

Corruption Tax adminis-tration

Trans-portation


Perc

enta

ge o

f fir

ms

iden

tifyi

ng p

robl

em a

s“m

ajor

” or

“ve

ry s

ever

e” o

bsta

cle

■ Malawi Africa Low income


225

2.2:

Inve

stm

ent

Clim

ate

Prof

iles


FINANCE Malawi Region Income Small Medium Large Exporter Nonexporter Domestic Foreign





Value of collateral needed for a loan (percent of the loan amount) 90.25 152.42 148.43 — 85.28 97.50 83.75 92.61 92.07 84.29

Loans requiring collateral (percent) 73.91 84.13 87.80 — 79.17 70.00 75.00 73.53 76.47 66.67



INFRASTRUCTURE Malawi Region Income Small Medium Large Exporter Nonexporter Domestic Foreign

Delay in obtaining an electrical connection (days) 84.42 28.33 33.96 — 101.13 66.29 92.13 82.76 100.63 44.54







INNOVATION Malawi Region Income Small Medium Large Exporter Nonexporter Domestic Foreign




JOBS Malawi Region Income Small Medium Large Exporter Nonexporter Domestic Foreign




TAX ADMINISTRATION Malawi Region Income Small Medium Large Exporter Nonexporter Domestic Foreign



TRADE Malawi Region Income Small Medium Large Exporter Nonexporter Domestic Foreign

Average time to clear direct exports through customs (days) 3.46 4.36 4.93 n/a 4.07 3.05 3.28 4.11 3.50 3.41

Longest time to clear direct exports through customs (days) 7.77 13.42 22.34 n/a 6.87 8.45 7.60 8.78 6.94 8.65

Average time to claim imports from customs (days) 5.35 10.78 14.16 — 5.78 5.02 5.59 5.30 5.24 5.59

Longest time to claim imports from customs (days) 15.75 16.40 18.60 — 12.61 19.52 17.65 15.23 14.84 17.62




2005 Investment Climate Profile Malawi


226

2.2:

Inve

stm

ent

Clim

ate

Prof

iles


BUREAUCRACY Mali Region Income Small Medium Large Exporter Nonexporter Domestic Foreign




CORRUPTION Mali Region Income Small Medium Large Exporter Nonexporter Domestic Foreign





COURTS Mali Region Income Small Medium Large Exporter Nonexporter Domestic Foreign



CRIME Mali Region Income Small Medium Large Exporter Nonexporter Domestic Foreign




INFORMALITY Mali Region Income Small Medium Large Exporter Nonexporter Domestic Foreign


Mali 2003 Investment Climate Profile


0

10

20

30

40

50

60

70

80

Access to finance



Access to land



disorder


policy uncertainty

Skills & education

of availableworkers

Perc

enta

ge o

f fir

ms

iden

tifyi

ng p

robl

em a

s“m

ajor

” or

“ve

ry s

ever

e” o

bsta

cle

■ Mali Africa Low income


227

2.2:

Inve

stm

ent

Clim

ate

Prof

iles


FINANCE Mali Region Income Small Medium Large Exporter Nonexporter Domestic Foreign






Loans requiring collateral (percent) n/a 84.06 87.62 n/a n/a n/a n/a n/a n/a n/a



INFRASTRUCTURE Mali Region Income Small Medium Large Exporter Nonexporter Domestic Foreign








INNOVATION Mali Region Income Small Medium Large Exporter Nonexporter Domestic Foreign




JOBS Mali Region Income Small Medium Large Exporter Nonexporter Domestic Foreign




TAX ADMINISTRATION Mali Region Income Small Medium Large Exporter Nonexporter Domestic Foreign



TRADE Mali Region Income Small Medium Large Exporter Nonexporter Domestic Foreign

Average time to clear direct exports through customs (days) 5.77 4.32 4.82 4.00 4.00 10.00 4.27 — 5.00 7.13







2003 Investment Climate Profile Mali


228

2.2:

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stm

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Clim

ate

Prof

iles


BUREAUCRACY Mauritania Region Income Small Medium Large Exporter Nonexporter Domestic Foreign




CORRUPTION Mauritania Region Income Small Medium Large Exporter Nonexporter Domestic Foreign





COURTS Mauritania Region Income Small Medium Large Exporter Nonexporter Domestic Foreign



CRIME Mauritania Region Income Small Medium Large Exporter Nonexporter Domestic Foreign


Losses due to theft, robbery, vandalism, and arson against the firm (percent of sales) 5.56 0.67 0.64 5.49 — n/a n/a 5.56 5.56 —


INFORMALITY Mauritania Region Income Small Medium Large Exporter Nonexporter Domestic Foreign


Mauritania 2006 Investment Climate Profile


0

10

20

30

40

50

60

70

80

Access to finance



Electricity Tax adminis-tration

Customs & trade

regulations

Skills & education

of availableworkers

Access to land

Corruption Trans-portation

Perc

enta

ge o

f fir

ms

iden

tifyi

ng p

robl

em a

s“m

ajor

” or

“ve

ry s

ever

e” o

bsta

cle

■ Mauritania Africa Low income


229

2.2:

Inve

stm

ent

Clim

ate

Prof

iles


FINANCE Mauritania Region Income Small Medium Large Exporter Nonexporter Domestic Foreign






Loans requiring collateral (percent) 95.32 83.97 87.51 96.13 92.14 — 100.00 94.52 94.52 100.00



INFRASTRUCTURE Mauritania Region Income Small Medium Large Exporter Nonexporter Domestic Foreign








INNOVATION Mauritania Region Income Small Medium Large Exporter Nonexporter Domestic Foreign




JOBS Mauritania Region Income Small Medium Large Exporter Nonexporter Domestic Foreign




TAX ADMINISTRATION Mauritania Region Income Small Medium Large Exporter Nonexporter Domestic Foreign

Average time firms spent in meetings with tax officials (days) 1.94 3.08 3.66 1.99 1.77 — 1.67 1.96 1.89 2.35


TRADE Mauritania Region Income Small Medium Large Exporter Nonexporter Domestic Foreign

Average time to clear direct exports through customs (days) 3.86 4.35 4.89 — 4.19 — 4.02 — 2.07 —

Longest time to clear direct exports through customs (days) 8.04 13.38 22.13 — 8.71 — 7.43 — 6.33 —

Average time to claim imports from customs (days) 5.96 10.72 13.99 5.78 6.64 — — 6.31 6.54 3.70

Longest time to claim imports from customs (days) 12.39 16.42 18.61 11.88 14.69 — — 12.30 13.81 5.92




2006 Investment Climate Profile Mauritania


230

2.2:

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Clim

ate

Prof

iles


BUREAUCRACY Mauritius Region Income Small Medium Large Exporter Nonexporter Domestic Foreign




CORRUPTION Mauritius Region Income Small Medium Large Exporter Nonexporter Domestic Foreign





COURTS Mauritius Region Income Small Medium Large Exporter Nonexporter Domestic Foreign



CRIME Mauritius Region Income Small Medium Large Exporter Nonexporter Domestic Foreign




INFORMALITY Mauritius Region Income Small Medium Large Exporter Nonexporter Domestic Foreign


Mauritius 2005 Investment Climate Profile


0

20

20

30

40

50

60

Access to finance



Skills & education

of availableworkers



Corruption Labor regulations

Tax rates Crime, theft &

disorder


policy uncertainty

Perc

enta

ge o

f fir

ms

iden

tifyi

ng p

robl

em a

s“m

ajor

” or

“ve

ry s

ever

e” o

bsta

cle

■ Mauritius Africa Middle income


231

2.2:

Inve

stm

ent

Clim

ate

Prof

iles


FINANCE Mauritius Region Income Small Medium Large Exporter Nonexporter Domestic Foreign









INFRASTRUCTURE Mauritius Region Income Small Medium Large Exporter Nonexporter Domestic Foreign








INNOVATION Mauritius Region Income Small Medium Large Exporter Nonexporter Domestic Foreign




JOBS Mauritius Region Income Small Medium Large Exporter Nonexporter Domestic Foreign




TAX ADMINISTRATION Mauritius Region Income Small Medium Large Exporter Nonexporter Domestic Foreign



TRADE Mauritius Region Income Small Medium Large Exporter Nonexporter Domestic Foreign








2005 Investment Climate Profile Mauritius


232

2.2:

Inve

stm

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Clim

ate

Prof

iles


BUREAUCRACY Morocco Region Income Small Medium Large Exporter Nonexporter Domestic Foreign




CORRUPTION Morocco Region Income Small Medium Large Exporter Nonexporter Domestic Foreign

Unofficial payments for typical firm to get things done (percent of sales) n/a 2.25 0.88 n/a n/a n/a n/a n/a n/a n/a




COURTS Morocco Region Income Small Medium Large Exporter Nonexporter Domestic Foreign



CRIME Morocco Region Income Small Medium Large Exporter Nonexporter Domestic Foreign




INFORMALITY Morocco Region Income Small Medium Large Exporter Nonexporter Domestic Foreign


Morocco 2004 Investment Climate Profile


0

20

40

60

80

100

Access to finance




Tax adminis-tration


resolution


Skills & education

of availableworkers


Corruption

Perc

enta

ge o

f fir

ms

iden

tifyi

ng p

robl

em a

s“m

ajor

” or

“ve

ry s

ever

e” o

bsta

cle

■ Morocco Africa Middle income


233

2.2:

Inve

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Clim

ate

Prof

iles


FINANCE Morocco Region Income Small Medium Large Exporter Nonexporter Domestic Foreign









INFRASTRUCTURE Morocco Region Income Small Medium Large Exporter Nonexporter Domestic Foreign








INNOVATION Morocco Region Income Small Medium Large Exporter Nonexporter Domestic Foreign




JOBS Morocco Region Income Small Medium Large Exporter Nonexporter Domestic Foreign




TAX ADMINSTRATION Morocco Region Income Small Medium Large Exporter Nonexporter Domestic Foreign



TRADE Morocco Region Income Small Medium Large Exporter Nonexporter Domestic Foreign








2004 Investment Climate Profile Morocco


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BUREAUCRACY Namibia Region Income Small Medium Large Exporter Nonexporter Domestic Foreign




CORRUPTION Namibia Region Income Small Medium Large Exporter Nonexporter Domestic Foreign





COURTS Namibia Region Income Small Medium Large Exporter Nonexporter Domestic Foreign



CRIME Namibia Region Income Small Medium Large Exporter Nonexporter Domestic Foreign




INFORMALITY Namibia Region Income Small Medium Large Exporter Nonexporter Domestic Foreign


Namibia 2006 Investment Climate Profile


0

10

20

30

40

50

60

70

80

Crime, theft &

disorder

Skills & education

of availableworkers





Access to land

Electricity Trans-portation

Perc

enta

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f fir

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iden

tifyi

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robl

em a

s“m

ajor

” or

“ve

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ever

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bsta

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■ Namibia Africa Middle income


235

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FINANCE Namibia Region Income Small Medium Large Exporter Nonexporter Domestic Foreign









INFRASTRUCTURE Namibia Region Income Small Medium Large Exporter Nonexporter Domestic Foreign








INNOVATION Namibia Region Income Small Medium Large Exporter Nonexporter Domestic Foreign




JOBS Namibia Region Income Small Medium Large Exporter Nonexporter Domestic Foreign




TAX ADMINISTRATION Namibia Region Income Small Medium Large Exporter Nonexporter Domestic Foreign



TRADE Namibia Region Income Small Medium Large Exporter Nonexporter Domestic Foreign








2006 Investment Climate Profile Namibia


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BUREAUCRACY Niger Region Income Small Medium Large Exporter Nonexporter Domestic Foreign


Consistency/predictability of officials’ interpre-tations of regulations affecting the firm 52.03 52.03 49.91 57.14 42.86 — 52.38 51.96 58.76 26.92


CORRUPTION Niger Region Income Small Medium Large Exporter Nonexporter Domestic Foreign


Firms expected to give gifts in meetings with tax inspectors (percent) 17.05 18.53 20.28 15.52 20.00 n/a 21.05 15.94 14.49 26.32

Value of gift expected to secure government contract (percent of contract) 12.70 3.12 4.19 13.55 9.62 n/a 9.39 13.28 12.36 14.40


COURTS Niger Region Income Small Medium Large Exporter Nonexporter Domestic Foreign



CRIME Niger Region Income Small Medium Large Exporter Nonexporter Domestic Foreign

Security costs (percent of sales) 0.60 1.27 1.38 0.58 0.71 — 0.15 0.74 0.75 0.29



INFORMALITY Niger Region Income Small Medium Large Exporter Nonexporter Domestic Foreign

Sales amount reported by a typical firm for tax purposes (percent) 88.83 62.98 57.83 87.14 91.72 — 87.37 89.14 88.37 90.68

Niger 2005 Investment Climate Profile


0

10

20

30

40

50

60

70

80


Access to finance



Corruption Macro-economicinstability

Trans-portation

Customs & trade

regulations


resolution

Telecom-munications

Perc

enta

ge o

f fir

ms

iden

tifyi

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robl

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s“m

ajor

” or

“ve

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■ Niger Africa Low income


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FINANCE Niger Region Income Small Medium Large Exporter Nonexporter Domestic Foreign

Internal finance for investment (percent) 86.99 77.23 79.05 95.52 70.14 — 78.89 88.89 90.13 75.19

Bank finance for investment (percent) 9.66 11.61 10.29 3.13 24.69 — 17.42 7.84 7.41 18.14

Informal finance for investment (percent) 0.05 3.65 4.43 0.07 0.00 — 0.00 0.06 0.00 0.24

Supplier credit financing (percent) 5.59 14.25 13.75 5.88 1.80 — 15.00 3.69 3.92 11.94

Value of collateral needed for a loan (percent of the loan amount) 102.89 152.46 148.50 107.04 96.53 n/a 110.00 100.69 108.28 74.17

Loans requiring collateral (percent) 83.05 84.07 87.69 79.41 88.00 n/a 75.00 85.11 87.50 63.64

Annual financial statement reviewed by external auditor (percent) 56.80 53.75 45.80 51.16 65.71 — 66.67 54.81 50.51 80.77


INFRASTRUCTURE Niger Region Income Small Medium Large Exporter Nonexporter Domestic Foreign

Delay in obtaining an electrical connection (days) 16.50 28.86 34.83 17.67 13.00 n/a — 12.57 19.40 —



Delay in obtaining a mainline telephone connection (days) 38.52 33.12 37.88 37.50 40.36 n/a 22.83 42.28 34.71 51.57


Firms using the Web in interaction with clients/suppliers (percent) 18.40 18.25 14.62 15.12 28.57 — 14.29 19.23 18.18 19.23


INNOVATION Niger Region Income Small Medium Large Exporter Nonexporter Domestic Foreign

ISO certification ownership (percent) 4.76 13.77 12.08 0.00 13.04 — 0.00 5.45 3.92 8.33

New production technology (percent) 21.05 45.99 50.37 15.15 33.33 — 25.00 20.41 22.22 16.67


JOBS Niger Region Income Small Medium Large Exporter Nonexporter Domestic Foreign

Firms offering formal training (percent) 34.40 32.70 34.84 22.09 57.14 — 42.86 32.69 30.30 50.00

Permanent skilled workers receiving training (percent) 17.42 17.81 20.99 11.98 28.25 — 19.21 17.04 14.32 29.42


TAX ADMINISTRATION Niger Region Income Small Medium Large Exporter Nonexporter Domestic Foreign

Average time firms spent in meetings with tax officials (days) 3.34 3.06 3.63 2.92 4.62 — 3.89 3.24 3.21 3.91


TRADE Niger Region Income Small Medium Large Exporter Nonexporter Domestic Foreign

Average time to clear direct exports through customs (days) 4.00 4.33 4.82 4.21 — — 4.50 — 2.94 6.57

Longest time to clear direct exports through customs (days) 19.40 13.30 22.01 18.11 28.00 — 22.52 — 21.00 15.29

Average time to claim imports from customs (days) 5.04 10.78 14.15 4.75 5.67 — 3.84 5.35 4.51 7.28

Longest time to claim imports from customs (days) 11.84 16.47 18.75 11.77 12.04 — 7.94 12.79 10.64 16.67

Firms that export directly (percent) 20.80 11.43 7.54 22.09 17.14 — 100.00 4.81 19.19 26.92



2005 Investment Climate Profile Niger


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BUREAUCRACY Rwanda Region Income Small Medium Large Exporter Nonexporter Domestic Foreign




CORRUPTION Rwanda Region Income Small Medium Large Exporter Nonexporter Domestic Foreign





COURTS Rwanda Region Income Small Medium Large Exporter Nonexporter Domestic Foreign



CRIME Rwanda Region Income Small Medium Large Exporter Nonexporter Domestic Foreign




INFORMALITY Rwanda Region Income Small Medium Large Exporter Nonexporter Domestic Foreign


Rwanda 2006 Investment Climate Profile


0

20

20

30

40

50

60

70

80

Electricity Tax rates Access to finance


Trans-portation

Tax adminis-tration

Access to land


Customs & trade

regulations

Telecom-munications


Perc

enta

ge o

f fir

ms

iden

tifyi

ng p

robl

em a

s“m

ajor

” or

“ve

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ever

e” o

bsta

cle

■ Rwanda Africa Low income


239

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FINANCE Rwanda Region Income Small Medium Large Exporter Nonexporter Domestic Foreign









INFRASTRUCTURE Rwanda Region Income Small Medium Large Exporter Nonexporter Domestic Foreign

Delay in obtaining an electrical connection (days) 16.93 28.90 34.92 16.90 — n/a n/a 16.93 18.04 —



Delay in obtaining a mainline telephone connection (days) 59.44 32.87 37.46 72.13 — n/a — 60.78 28.09 —




INNOVATION Rwanda Region Income Small Medium Large Exporter Nonexporter Domestic Foreign




JOBS Rwanda Region Income Small Medium Large Exporter Nonexporter Domestic Foreign


Permanent skilled workers receiving training (percent) 39.40 17.85 21.07 — 48.99 36.83 — 48.88 36.92 43.95


TAX ADMINISTRATION Rwanda Region Income Small Medium Large Exporter Nonexporter Domestic Foreign



TRADE Rwanda Region Income Small Medium Large Exporter Nonexporter Domestic Foreign

Average time to clear direct exports through customs (days) 6.56 4.31 4.80 — 6.88 6.58 7.28 — 9.13 3.82

Longest time to clear direct exports through customs (days) 8.11 13.45 22.53 — 8.52 7.89 8.96 — 10.58 5.48

Average time to claim imports from customs (days) 10.41 10.68 13.95 — 10.91 9.72 — 9.64 11.67 7.33

Longest time to claim imports from customs (days) 27.34 16.16 18.10 — 25.21 19.71 — 29.48 28.95 23.43




2006 Investment Climate Profile Rwanda


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BUREAUCRACY Senegal Region Income Small Medium Large Exporter Nonexporter Domestic Foreign




CORRUPTION Senegal Region Income Small Medium Large Exporter Nonexporter Domestic Foreign





COURTS Senegal Region Income Small Medium Large Exporter Nonexporter Domestic Foreign



CRIME Senegal Region Income Small Medium Large Exporter Nonexporter Domestic Foreign




INFORMALITY Senegal Region Income Small Medium Large Exporter Nonexporter Domestic Foreign


Senegal 2003 Investment Climate Profile


0

10

20

30

40

50

60

70

80

Access to finance



Tax adminis-tration


regulations

Trans-portation


policy uncertainty

Electricity Access to land

Perc

enta

ge o

f fir

ms

iden

tifyi

ng p

robl

em a

s“m

ajor

” or

“ve

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ever

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■ Senegal Africa Low income


241

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FINANCE Senegal Region Income Small Medium Large Exporter Nonexporter Domestic Foreign






Loans requiring collateral (percent) n/a 84.06 87.62 n/a n/a n/a n/a n/a n/a n/a



INFRASTRUCTURE Senegal Region Income Small Medium Large Exporter Nonexporter Domestic Foreign








INNOVATION Senegal Region Income Small Medium Large Exporter Nonexporter Domestic Foreign




JOBS Senegal Region Income Small Medium Large Exporter Nonexporter Domestic Foreign




TAX ADMINISTRATION Senegal Region Income Small Medium Large Exporter Nonexporter Domestic Foreign



TRADE Senegal Region Income Small Medium Large Exporter Nonexporter Domestic Foreign








2003 Investment Climate Profile Senegal


242

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BUREAUCRACY South Africa Region Income Small Medium Large Exporter Nonexporter Domestic Foreign




CORRUPTION South Africa Region Income Small Medium Large Exporter Nonexporter Domestic Foreign





COURTS South Africa Region Income Small Medium Large Exporter Nonexporter Domestic Foreign



CRIME South Africa Region Income Small Medium Large Exporter Nonexporter Domestic Foreign




INFORMALITY South Africa Region Income Small Medium Large Exporter Nonexporter Domestic Foreign


South Africa 2003 Investment Climate Profile


0

10

20

30

40

50

60

Skills & education

of availableworkers


Labor regulations

Crime, theft &

disorder

Access to finance



policy uncertainty

Customs & trade

regulations


Perc

enta

ge o

f fir

ms

iden

tifyi

ng p

robl

em a

s“m

ajor

” or

“ve

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ever

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bsta

cle

■ South Africa Africa Middle income


243

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FINANCE South Africa Region Income Small Medium Large Exporter Nonexporter Domestic Foreign









INFRASTRUCTURE South Africa Region Income Small Medium Large Exporter Nonexporter Domestic Foreign








INNOVATION South Africa Region Income Small Medium Large Exporter Nonexporter Domestic Foreign




JOBS South Africa Region Income Small Medium Large Exporter Nonexporter Domestic Foreign




TAX ADMINISTRATION South Africa Region Income Small Medium Large Exporter Nonexporter Domestic Foreign



TRADE South Africa Region Income Small Medium Large Exporter Nonexporter Domestic Foreign








2003 Investment Climate Profile South Africa


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BUREAUCRACY Swaziland Region Income Small Medium Large Exporter Nonexporter Domestic Foreign




CORRUPTION Swaziland Region Income Small Medium Large Exporter Nonexporter Domestic Foreign





COURTS Swaziland Region Income Small Medium Large Exporter Nonexporter Domestic Foreign



CRIME Swaziland Region Income Small Medium Large Exporter Nonexporter Domestic Foreign




INFORMALITY Swaziland Region Income Small Medium Large Exporter Nonexporter Domestic Foreign


Swaziland 2006 Investment Climate Profile


0

10

20

30

40

50


Crime, theft &

disorder

Access to finance


Tax rates Corruption Businesslicensing &operatingpermits

Tax adminis-tration

Customs & trade

regulations


Trans-portation

Perc

enta

ge o

f fir

ms

iden

tifyi

ng p

robl

em a

s“m

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” or

“ve

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ever

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■ Swaziland Africa Middle income


245

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FINANCE Swaziland Region Income Small Medium Large Exporter Nonexporter Domestic Foreign









INFRASTRUCTURE Swaziland Region Income Small Medium Large Exporter Nonexporter Domestic Foreign

Delay in obtaining an electrical connection (days) 16.86 28.92 20.32 17.39 16.79 — 6.50 20.19 20.93 8.63







INNOVATION Swaziland Region Income Small Medium Large Exporter Nonexporter Domestic Foreign




JOBS Swaziland Region Income Small Medium Large Exporter Nonexporter Domestic Foreign




TAX ADMINISTRATION Swaziland Region Income Small Medium Large Exporter Nonexporter Domestic Foreign



TRADE Swaziland Region Income Small Medium Large Exporter Nonexporter Domestic Foreign

Average time to clear direct exports through customs (days) 2.06 4.39 4.06 2.50 — 1.91 2.03 — 2.07 2.06


Average time to claim imports from customs (days) 1.88 10.74 7.34 — 2.05 1.90 1.89 1.85 1.94 1.81

Longest time to claim imports from customs (days) 4.10 16.50 14.52 — 5.82 3.77 4.29 3.85 4.35 3.88




2006 Investment Climate Profile Swaziland


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BUREAUCRACY Tanzania Region Income Small Medium Large Exporter Nonexporter Domestic Foreign




CORRUPTION Tanzania Region Income Small Medium Large Exporter Nonexporter Domestic Foreign





COURTS Tanzania Region Income Small Medium Large Exporter Nonexporter Domestic Foreign



CRIME Tanzania Region Income Small Medium Large Exporter Nonexporter Domestic Foreign




INFORMALITY Tanzania Region Income Small Medium Large Exporter Nonexporter Domestic Foreign


Tanzania 2006 Investment Climate Profile


0

20

40

60

80

100





Skills & education

of availableworkers

Corruption Tax adminis-tration


Access to land

Perc

enta

ge o

f fir

ms

iden

tifyi

ng p

robl

em a

s“m

ajor

” or

“ve

ry s

ever

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bsta

cle

■ Tanzania Africa Low income


247

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FINANCE Tanzania Region Income Small Medium Large Exporter Nonexporter Domestic Foreign









INFRASTRUCTURE Tanzania Region Income Small Medium Large Exporter Nonexporter Domestic Foreign

Delay in obtaining an electrical connection (days) 29.36 28.44 37.32 34.06 20.93 32.77 — 29.64 30.81 21.28



Delay in obtaining a mainline telephone connection (days) 22.33 36.25 48.94 21.26 25.00 17.50 — 22.40 23.03 19.22




INNOVATION Tanzania Region Income Small Medium Large Exporter Nonexporter Domestic Foreign




JOBS Tanzania Region Income Small Medium Large Exporter Nonexporter Domestic Foreign




TAX ADMINISTRATION Tanzania Region Income Small Medium Large Exporter Nonexporter Domestic Foreign



TRADE Tanzania Region Income Small Medium Large Exporter Nonexporter Domestic Foreign








2006 Investment Climate Profile Tanzania


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BUREAUCRACY Uganda Region Income Small Medium Large Exporter Nonexporter Domestic Foreign




CORRUPTION Uganda Region Income Small Medium Large Exporter Nonexporter Domestic Foreign





COURTS Uganda Region Income Small Medium Large Exporter Nonexporter Domestic Foreign



CRIME Uganda Region Income Small Medium Large Exporter Nonexporter Domestic Foreign




INFORMALITY Uganda Region Income Small Medium Large Exporter Nonexporter Domestic Foreign


Uganda 2006 Investment Climate Profile


0

20

40

60

80

100

Electricity Tax rates Access to finance



Tax adminis-tration

Corruption Macro-economicinstability

Trans-portation

Access to land


Perc

enta

ge o

f fir

ms

iden

tifyi

ng p

robl

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s“m

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” or

“ve

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■ Uganda Africa Low income


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FINANCE Uganda Region Income Small Medium Large Exporter Nonexporter Domestic Foreign









INFRASTRUCTURE Uganda Region Income Small Medium Large Exporter Nonexporter Domestic Foreign

Delay in obtaining an electrical connection (days) 30.63 28.76 36.01 28.92 33.50 — 31.82 30.54 31.69 27.86







INNOVATION Uganda Region Income Small Medium Large Exporter Nonexporter Domestic Foreign




JOBS Uganda Region Income Small Medium Large Exporter Nonexporter Domestic Foreign




TAX ADMINISTRATION Uganda Region Income Small Medium Large Exporter Nonexporter Domestic Foreign



TRADE Uganda Region Income Small Medium Large Exporter Nonexporter Domestic Foreign








2006 Investment Climate Profile Uganda


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BUREAUCRACY Zambia Region Income Small Medium Large Exporter Nonexporter Domestic Foreign




CORRUPTION Zambia Region Income Small Medium Large Exporter Nonexporter Domestic Foreign





COURTS Zambia Region Income Small Medium Large Exporter Nonexporter Domestic Foreign



CRIME Zambia Region Income Small Medium Large Exporter Nonexporter Domestic Foreign




INFORMALITY Zambia Region Income Small Medium Large Exporter Nonexporter Domestic Foreign


Zambia 2002 Investment Climate Profile


0

20

40

60

80

100

Access to finance




policy uncertainty

Crime, theft &

disorder

Corruption Electricity Legal system/ conflict

resolution

Skills & education

of availableworkers

Telecom-munications

Perc

enta

ge o

f fir

ms

iden

tifyi

ng p

robl

em a

s“m

ajor

” or

“ve

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■ Zambia Africa Low income


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FINANCE Zambia Region Income Small Medium Large Exporter Nonexporter Domestic Foreign





Value of collateral needed for a loan (percent of the loan amount) 311.34 149.26 142.92 — 247.33 298.35 207.76 353.79 284.24 385.57




INFRASTRUCTURE Zambia Region Income Small Medium Large Exporter Nonexporter Domestic Foreign

Delay in obtaining an electrical connection (days) 142.41 27.96 33.32 — 168.46 117.79 114.33 149.74 128.25 173.89



Delay in obtaining a mainline telephone connection (days) 54.79 32.96 37.57 — — 38.40 95.00 36.23 49.07 70.80




INNOVATION Zambia Region Income Small Medium Large Exporter Nonexporter Domestic Foreign




JOBS Zambia Region Income Small Medium Large Exporter Nonexporter Domestic Foreign




TAX ADMINISTRATION Zambia Region Income Small Medium Large Exporter Nonexporter Domestic Foreign



TRADE Zambia Region Income Small Medium Large Exporter Nonexporter Domestic Foreign








2002 Investment Climate Profile Zambia


Reyes Aterido

Reyes Aterido is a Development Economist and Engineerspecializing in labor and investment climate issues. Sincejoining the World Bank as a consultant on 2003, she hasworked on private sector development issues in theDevelopment Economics Research Group, the AfricaPrivate Sector and Infrastructure Group, the Latin AmericaPrivate Sector Cluster, the Social Protection Team, andthe Investment Climate Unit. She conducts research andeconometric analysis on investment climate–relatedissues and their impact on firm performance. In addition,she participates in Bank operations to enhance country-specific competitiveness. Her previous work includes fiveyears in the private sector. She received her Master’sDegree in Applied Economics from the University ofWisconsin-Madison and a Bachelor’s Degree inAgricultural Engineering (a six-year program) from theUniversidad Politécnica of Madrid, Spain.

Elena Bardasi

Elena Bardasi is a Senior Economist in the Gender Unit in the Poverty Reduction and Economic Management network at the World Bank. Since she joined the Bank in 2003, she has been working on labor markets andpoverty, with a special focus on gender issues in the sub-Saharan Africa region. She has been writing and publishing on issues related to informal labor markets,time use, female employment, wage differentials, andoccupational segregation. Before joining the World Bank,she was Chief Research Officer at the Institute for Socialand Economic Research, University of Essex, UK. Sheobtained her PhD in Economics at the EuropeanUniversity Institute (Florence, Italy).

C. Mark Blackden

C. Mark Blackden is Lead Specialist and GenderCoordinator in the Africa Region of the World Bank. Hehas 26 years of wide-ranging operational experience inAfrica, focusing on public-sector management, participa-tory development, training, and gender and development.He has managed the region’s gender program since1996. He is the principal author of the 1998 poverty sta-tus report “Gender, Growth and Poverty Reduction,” andco-editor with Quentin Wodon of Gender, Time Use, andPoverty (2006). He is a contributing author with AmandaEllis and Clare Manuel of Gender and Economic Growthin Uganda: Unleashing the Power of Women (2006). Hehas recently contributed to budget support operations inUganda and Niger, and led the 1995 Cameroon PovertyAssessment. He obtained an MSc in InternationalRelations from Georgetown University (United States).

Jennifer Blanke

Jennifer Blanke is Senior Economist and AssociatePrincipal of the Global Competitiveness Network at theWorld Economic Forum. Since joining the team in 2002,she has written and lectured extensively on issues relatedto national competitiveness, serving as lead editor on anumber of regional and topical competitiveness reports.Previously, she was Senior Programme Manager respon-sible for developing the business, management, and technology section of the World Economic Forum’sAnnual Meeting in Davos from 1998 to 2002. Before joining the Forum, Dr Blanke worked for a number ofyears as a management consultant for Eurogroup, MazarsGroup in Paris, France, where she specialized in bankingand financial market organization. Blanke obtained aMaster of International Affairs from Columbia Universityand an MA and a PhD in International Economics fromthe Graduate Institute of International Studies (Geneva).

Bernard Z. Dasah

Bernard Z. Dasah is President and Chief Executive Officerof Bendas Consultants, a Canadian consulting company.His 24 years of consultancy has enabled him to undertakenumerous projects and to cultivate a long list of clients,including the Canadian International Development Agency(CIDA), the World Bank, the African Development Bank,the African Peer Review Mechanism, and the governmentsof Cameroon, Gambia, Ghana, Kenya, South Africa,Tanzania, Zambia, and Zimbabwe. Dasah holds a PhD(specializing in Economic Development and InformationEconomics) from McGill University, Canada; an MBA inInternational Business and an MA in Economics (Tradeand Economic Development) from the University ofOttawa (Canada); and a B’Com. (Hons.) from Queen’sUniversity, Canada. He has been a member of the Facultyof Management of the University of Ottawa for fouryears, where he lectured on a variety of courses includingInternational Business, Finance, and EconomicDevelopment. Dr Dasah has co-edited four books.

Thierry Geiger

Thierry Geiger is an Economist with the GlobalCompetitiveness Network at the World Economic Forum.His responsibilities include the construction and computa-tion of a range of indexes, as well as data analysis for various projects and studies. His main areas of expertiseare econometrics and international trade. Mr Geiger holdsa BA in Economics from the University of Geneva with aspecialization in monetary and financial economics, andan MA in Economics from the University of BritishColumbia, in Vancouver. Prior to joining the Forum, hecompleted several internships, notably at the World TradeOrganization, Caterpillar Inc., and leading banks. Duringhis studies, he was a Member of the Board of JuniorEntreprise Genève. He is also Co-founder of ProcabStudio S.A., an IT company based in Geneva.

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About the Authors


Juan Carlos Guzman

Juan Carlos Guzman is a Consultant for the Gender andDevelopment Unit at the World Bank. He has workedextensively on gender issues related to economics anddemographics. His most recent work has focused onremittances and international migration, the impact ofeducation programs on developing labor markets, andcompetitiveness in African economies. He contributed tothe World Development Report 2006 and the GlobalMonitoring Report 2007. Previously, he worked for theAmerican Institutes for Research, where he analyzedinternational assessment surveys. He received his PhD inPublic Affairs from Princeton University and a BA and MAin Economics from the University of Los Andes inColombia.

Mary Hallward-Driemeier

Mary Hallward-Driemeier is a Senior Economist in theDevelopment Research Group of the World Bank. Sincejoining the World Bank as a Young Professional in 1997,she has published articles on firm productivity, the impactof the investment climate on firm performance, anddeterminants of foreign direct investment. She was theDeputy Director for the World Development Report 2005:A Better Investment Climate for Everyone. She helpedestablish the World Bank’s Enterprise Surveys Program,now covering over 70,000 enterprises in 100 countries.She is also a founding member of the Microeconomics ofGrowth Network. She received her MSc in DevelopmentEconomics from Oxford University and her PhD inEconomics from MIT.

Giuseppe Iarossi

Giuseppe Iarossi is Senior Economist in the RegionalProgram for Enterprise Development of the Africa Financeand Private Sector Development Group. He joined theWorld Bank in 1994 as part of the Research Department,where he worked on determinants of long-term growthwith particular emphasis on ethnicity in Africa. Since 1997he has been a core team member of the InvestmentClimate team contributing to the development of theEnterprise Surveys Program throughout the Bank. He hasmanaged surveys in Africa, Latin America, South Asia,and East Asia and has written a number of assessmentsand research papers on firm productivity and the impactof the business environment on firm performance. Hisinterests include survey methodology and the impact ofsurvey design effects on data accuracy, and has recentlypublished a book entitled The Power of Survey Design.He holds a Master’s Degree in Economics from theUniversity of Maryland at College Park and a Master’sDegree in International Affairs from the Johns HopkinsUniversity, School of Advanced International Studies. Hereceived an MBA from the University of Siena and a CPAcertification from the University of Naples. He has taughtsurvey methodology at the School of AdvancedInternational Studies of the Johns Hopkins University.

Louis A. Kasekende

Louis A. Kasekende is Chief Economist of the AfricanDevelopment Bank (AfDB). As Chief Economist, he is theBank’s spokesperson on socioeconomic and developmentissues of importance for Africa. He supervises theDevelopment Research Department, the StatisticsDepartment, and the African Development Institute. Heholds a PhD in Econometrics and an MA in Economicsfrom University of Manchester, UK; as well as a BAEconomics Degree from Makerere University, Uganda.Prior to joining the AfDB, Louis Kasekende was DeputyGovernor, Bank of Uganda. He worked for 17 years in theBank of Uganda in several capacities, including asDirector of Research Department and Executive Directorwith responsibility for Research and Policy. From 2002 to2004, he was Executive Director, representing 22 Africancountries, on the Executive Board of the World Bank,USA. He has also served as a lecturer in Economics inMakerere University, Uganda, where he also supervisedMA dissertations in a wide range of areas.

Peter O. Ondiege

Peter O. Ondiege is Principal Research Economist in theNetworking and Research Partnerships Division of theDevelopment Research Department (EDRE) of the AfricanDevelopment Bank. He coordinates the network forEastern and Southern African Countries as well asInvestment Climate Assessment and AfricaCompetitiveness Reports jointly undertaken with theWorld Bank and World Economic Forum. He holdsM.Econs and PhD Degrees in Economics from theUniversity of Tsukuba, Japan. Between July 2004 andJuly 2006, he served as the Bank Group Annual ReportCoordinator. Prior to joining the Bank in 2004, he was anAssociate Professor at the University of Nairobi, Kenya;and held a position at the Ministry of Planning andNational Development, Kenya. He has widely published inthe field of urban and regional economics and small andmedium-sized enterprises (SMEs) development. He hasalso served as a consultant to a number of regional andinternational organizations and agencies. He has vastexperience in teaching at the postgraduate level and over 20 years of experience in the design, development,and management of social science research projects andpolicy analysis.

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Temitope W. Oshikoya

Temitope W. Oshikoya is Director, DevelopmentResearch in the Office of the Chief Economist at theAfrican Development Bank (AfDB). Since 1991, Oshikoyahas undertaken assignments in the research, planning,policy, and operational complexes of the AfDB. He hasbeen Country Operations Manager providing strategic,policy, and operational leadership to country teams in several countries in northern, eastern and southernAfrica. Prior to joining the AfDB, Oshikoya worked at theWorld Bank; the University of New Brunswick, Canada;and Ahmadu Bello University, Nigeria; and in the privateand public sectors in Nigeria. A Commonwealth Scholar,he has PhD and MA Degrees in Economics fromMcMaster University, Ontario, Canada. He obtained hisBSc (First Class Honors) Degree in Economics fromAhmadu Bello University, Zaria, Nigeria. He is a Fellow ofthe Chartered Institute of Bankers in England and Nigeria.He has served on the Boards of Directors of the EastAfrican Development Bank (Kampala) and the AfricanCapacity Building Foundation (Harare). He has served onthe editorial board of several professional journals, andhas published extensively on development issues. He pioneered the concept of the SANE economies asAfrica’s Growth Poles.

Giovanni Tanzillo

Giovanni Tanzillo is a consultant in the Growth andInvestment Climate Unit of the Development EconomicsResearch Group at the World Bank. Since joining theteam in 2000, he has been managing the cleaning andassessing of the quality of the enterprise data collected in the countries surveyed. He has been responsible forthe generation and the maintenance of a multicountrystandardized data set used by the team for internationalanalyses of firms’ performance indicators. He has participated in the implementation of investment climatesurveys in a number of countries and has done work onfirm productivity and the impact of the investment cli-mate on firm performance. He co-authored theInvestment Climate Assessment for Malawi. GiovanniTanzillo holds a Master in Economics and Finance fromthe University of Venice (Italy) and an MBA from theUniversity of Siena (Italy). He received a CPA certificationfrom the University of Naples (Italy).

Hamadoun I. Touré

Hamadoun I. Touré was elected Secretary-General of the International Telecommunication Union (ITU) at thePlenipotentiary Conference in Antalya, Turkey. He tookoffice on January 1, 2007. Dr Touré previously served asthe Director of ITU Telecommunication DevelopmentBureau (BDT) from 1998 to 2006. Dr Touré is committedto make ITU an innovative, forward-looking organizationadapted to meeting the challenges created by the new ICT environment, and to spearhead internationalcooperation aiming to implement the resolutions of theWorld Summit on the Information Society, especially forbridging the digital divide and ensuring security in cyber-space. Dr Touré holds a Master’s Degree in ElectricalEngineering from the Technical Institute of Electronicsand Telecommunications of Leningrad (LEIS, USSR) and aPhD from the University of Electronics, Telecommunica-tions and Informatics of Moscow (MTUCI, Russia).

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The publication of this year’s Africa Competitiveness Report 2007 comes out at a time when there

is optimism about Africa’s future. After years of economic stagnation, Africa is experiencing an

economic resurgence, growing faster than it has in decades. But—despite its improved economic

performance—questions remain about how sustainable this growth will be over the longer run.

Against this background, the Report looks at what needs to be achieved to place Africa on a

sustainable growth path going into the future.

This is the first report on the region’s business environment to leverage knowledge and expertise

within the African Development Bank, the World Bank, and the World Economic Forum. It thus

marks a new level of research cooperation and presents a unified vision of the policy challenges that

countries on the continent should address as a foundation for sustainable growth and prosperity.

The Report analyzes many aspects of Africa’s business environment and highlights the key issues

that hinder improvements in Africa’s competitiveness and job growth. Also included are detailed

competitiveness and investment climate profiles, providing a comprehensive summary of the drivers

of the competitiveness environment in each of the countries included in the Report. The Africa

Competitiveness Report 2007 is an invaluable tool for policymakers, business strategists, and other

key stakeholders, as well as essential reading for all those with an interest in the region.