Doing Business in Africa: Namibia

Doing Business in Africa: Namibia

In this AFKInsider series, we explore the regulatory conditions that an entrepreneur is likely to face when setting up a business in sub-Saharan Africa. AFKI presents Doing Business in Africa: Namibia.

Situated on the South western coast of Africa, this former German colony and former protectorate of South Africa is one of the least densely populated countries in Africa and the world.

South Africa won control of the territory from Germany as a result of World War I and ruled with little resistance until 1966. Then the South-West Africa People’s Organization, SWAPO, began an armed campaign against South Africa that continued until peace and independence was achieved in 1990.

Before independence, Namibia was ruled by a tiny white farmer elite, mostly settlers from South Africa, who dominated all aspects of national life in addition to owning 75 percent of Namibian land.  Namibia’s struggle for independence was similar to the anti-apartheid struggle in the rest of Southern Africa — but with some key differences.

First, unlike Zimbabwe, Namibia never officially broke away from either Britain or South Africa, choosing to remain a colonial dependency of South Africa until close to the end of the 20th century. Second, Namibia’s border with Angola made it strategic for South Africa, whose military could intervene there during Angola’s civil war. As a result, Namibia played host to a vigorous guerilla war as South African forces confronted both Angolan and Cuban troops in Angola as well their SWAPO allies in Namibia.

Like the rest of the regional bush wars during this era, conflict came to an end with the end of the Cold War and negotiations began with Pretoria – which was just about to release Nelson Mandela from prison. Independence and freedom from apartheid followed shortly thereafter. Thus, Namibia is in a sense South Africa in a microcosm, with all the possibilities and problems that entails.

Ease of Doing Business

So how does all this influence business conditions? According to the World Bank, Namibia currently ranks 69th 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. 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 Namibia, the Bank finds that Namibia ranks 124th out of 183 in ease of starting a business, making Namibia one of the more difficult places on Earth to start a legal commercial enterprise. To start a business in Namibia one has to complete 10 bureaucratic procedures that take a total of 66 days at a total cost of about $797, with no minimum capital requirement imposed by the government for the start-up.

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 Namibia in a number of other areas. To obtain a construction permit, for instance, Namibia is ranked 36th out of 183 as it takes the completion of 12 procedures, which takes on average 139 days at a cost of nearly $4,870. While relatively steep, Namibia’s score here nonetheless makes it one of easier countries in the world in which to obtain a construction permit.