Doing Business in Africa: Botswana

Doing Business in Africa: Botswana

Located in the center of southern Africa, landlocked, sparsely settled and mostly desert Botswana is by all accounts an amazing success story. Since independence from Britain in 1966, the country has featured a strong, democratic political system with a strong emphasis on the rule of law and human rights.

Each election Botswana has had to date has been documented to be free and fair and its political system is widely considered to be the least corrupt and most open on the continent.

In turn, this remarkable post-colonial history has created a society that is one of the most prosperous on the continent. Unlike all its neighbors, Botswana’s stability and complete lack of civil or foreign armed conflict has meant its government and people have, since independence, focused exclusively on social development and poverty reduction, in the process building a prosperous society that is one of the richest and freest in all of Africa.

Botswana is thus a country without the usual litany of significant problems typical of most countries on the continent.

Ease of Doing Business

Given this, what are business conditions like in Botswana? According to the World Bank, Botswana currently ranks 52nd out of 183 countries on its Ease of Doing Business Index – a measure created by the bank to gauge the degree to which commercial enterprises encounter regulatory hurdles, legal threats to property, and the time and money spent on things such as registering a business, ensuring right of title to property, and acquiring licenses.

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By way of comparison, the United States ranks 4th on ease of doing business, right after Singapore, Hong Kong, and New Zealand.

What does this ranking mean? Take, for instance, the bank’s measure of how easy it is to start a business, which is depicted in Figure 1 below. From the figure one can see that the bank defines business-creation costs as consisting of the time and money outlays involved in the series of legal steps necessary for the entrepreneur must take in order to legally establish an in-country firm. Using this framework, the bank then tasks researchers to go through this process in order to establish in-country averages.

When this metric is applied to Botswana, the bank finds that Botswana ranks 90th out of 183 in ease of starting a business, making Botswana a fairly moderately easy place to start a legal commercial enterprise. To start a business in Botswana, one has to complete ten bureaucratic procedures that take a total of 61 days at a total cost of about $137, with no minimum capital requirement.

Figure 1:

How the World Bank Measures Ease of Starting a Business

         Fig 1 Ease of Business Graphic WB

Using similar metrics for other aspects of business operations, the bank has ranked Botswana in a number of other areas. To obtain a construction permit, for instance, Botswana ranks 127th out of 183 as it takes the completion of 24 procedures, which takes on average 167 days at a cost of $16,276, or about 2.6 times per capita income.  Clearly, this is a significant problem and a major obstacle to business creation and expansion in this southern African country.

Continuing in its assessment, the World Bank has determined that in order to obtain and register property, Botswana fortunately ranks much better at 44th out of, again, 183 countries measured. To register property in Botswana, the bank finds, it takes the completion of five bureaucratic procedures that takes, on average, 16 days and costs five percent of the property’s financial value in fees and other costs to complete.

Botswana does equally well when it comes to obtaining credit, where it ranks 46th out of 183 – making the country one of the easier places in the world to obtain credit. Here, as depicted in Figure 2, the bank examines the legal rights of creditors and borrowers in secured transactions and bankruptcy law as well as the strength of credit information bureaus and exchanges.