The Sunday Mail
Business Editor’s Forum
Last week, the Deputy Minister of Finance and Economic Development, Dr Samuel Undenge, seemed oblivious of the recent Doing Business 2014 SADC Report when he was asked by the Member of Parliament for Mberengwa East, Honourable Makhosini Hlongwane, on why the Doing Business environment hasn’t improved despite the establishment of a One-Stop Shop Investment Centre in December 2010.
He, in fact, maintains that it should take a prospective investor not more than five days to process paperwork in Zimbabwe. If he looks at how Zimbabwe fares, relative to other jurisdictions in the region, he will be thoroughly shocked. And these indicators merely focus on the ease with which a local entrepreneur starts a business and connects to the relevant facilities. Well, the statistics fall short of indicting the responsible authorities as a slothful lot.
There is a deep-seated notion that has corrupted the psyche of local economic thinkers over the years and it is grounded in the belief that nothing can be achieved without spending stockpiles of money.
The prevailing belief is that Zimbabwe should spend its way out of the current economic challenges.
Doomsday critics have already prophesied that Zim-Asset, the economic blueprint that is supposed to guide economic development through to 2018, is fated to fail because policymakers do not have the financial wherewithal to support it.
But this cannot be true.
The recent Doing Business 2014 SADC Report, a co-work of the World Bank and its subsidiary, the International Finance Corporation, clearly shows that there are procedural and administrative impediments that are stifling local investments to a degree that should be worrying for an economy that has lofty developmental aspirations.
What makes the recent report key is that it considers “how easy or difficult it is for a local entrepreneur to open and run a small-to-medium size business when complying with relevant regulations”.
In particular, the measure mainly focused on 11 areas that are considered as fundamental in the lifecycle of a business: starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting investors, paying taxes, trading across borders, enforcing contracts, resolving insolvency and employing workers.
Overall, the study indicated that of all the 15 countries assessed in the Southern African Development Community, an aspiring local entrepreneur faces more challenges than those faced in 11 other jurisdictions in the region — Madagascar, Tanzania, Mozambique, Lesotho, Swaziland, Namibia, Zambia, the Seychelles, Botswana, South Africa and Mauritius.
Only Malawi, Angola and the Democratic Republic of Congo are worse off than Zimbabwe.
A much more intimate look into some of the variables that are considered in simplifying the Doing Business environment seems to reveal that local officials are an inefficient lot.
For example, while the number of procedures in starting a business (nine) are broadly in line with those in the region, it is the time taken to process the documents that is disconcerting.
The responsible authorities in Zimbabwe take more than 90 days (or three months) — the worst in the region — while the most efficient economy, Madagascar, just takes about six days.
But even if one manages to clear this hurdle, operationalising the business is equally challenging, as there is a further time-consuming process involved in setting up a decent warehouse for operations.
Ideally, the processes involved would entail submitting all relevant documents and obtaining all necessary clearances, licences, permits and certificates. After submitting all required notifications and receiving all necessary inspections, obtaining utility connections for water, sewerage and a land telephone line becomes necessary.
Achieving this feat takes more than 496 days (more than a year) in Zimbabwe — again the worst in SADC.
This compares to the regional best performer, South Africa, where domestic investors only have to wait for 78 days to complete all the necessary processes.
In view of all these material facts, it takes a budding local businessman a staggering 586 days to set up shop.
Even after such an energy-sapping process, the challenges of complying with the demands of the local taxman, the Zimbabwe Revenue Authority, are formidable.
For an ideal Doing Business environment, tax rates and procedure have to be simple.
“In economies where it is more difficult and costly to pay taxes, larger shares of economic activity end up in the informal sector — where businesses pay no taxes at all,” suggests the report.
It is hard to imagine that Zimbabwe is a country that is desperately trying to convince the small-to-medium scale sector to join the mainstream economy, for the local businessman has to make more than 79 payments per year to Zimra.
In South Africa — the best regional performer — only seven payments suffice.
It is even worse for those that intend to either export or import, for the costs are prohibitive, to say the least.
In all these two aspects, Zimbabwe is the worst in SADC.
Exporting a container of goods takes more than 53 days at a purse-bursting cost of US$3 766 per container, while importing takes more 71 days at a cost of US$5 660 per container.
Considering that it takes 10 days to either import or export for an ordinary business in Mauritius at a cost of US$675 per container, it becomes clear that something has to be done to improve the local business environment.
It doesn’t cost a fortune to simplify all these procedures and to become efficient in delivering set goals.
Government, the Ministry of Industry and Commerce in particular, should shift from mere sloganeering about the results-based management system, which is a key component of Zim-Asset, and set measurable goals meant to reform the business environment.
If it is so difficult for local entrepreneurs to regularise their operations by complying with local legislation, what about the foreign investors?
All these are hygiene issues that can be easily attended to without unnecessarily resorting to the refrain of referring to our economic status.
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