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Friction stifles economic growth

Municipal inefficiencies and the time-consuming process of dealing with construction permits has dropped Namibia four places in the World Bank’s 14th edition of the annual Doing Business report for 2016/17.
Namibia’s ease of doing business is in decline in both relative and absolute terms. Since 2009/10, six of the ten components of Namibia’s aggregate score have declined.
The components that have deteriorated the most are registering property, getting electricity and construction permits. Over the past years, the government has made property transfers more expensive for companies and, although the cost of getting electricity has declined in absolute terms, the connection costs have worsened relative to other countries.
However, one major improvement was seen in resolving insolvency after Namibia adopted a new company law that established clear procedures for liquidation in 2012. “Namibia also dropped four places in the ease of resolving insolvency. The cost of insolvency as a percentage of estate is 14.5% in Namibia, compared to the average cost for Sub-Saharan Africa of 18% and the average cost for high income countries of 9.1%.”
The 108th poll position out of 190 countries, ranks lower when it comes to easing cross border trade.
Export time from Namibia in terms of border compliance takes 120 hours, compared to the average for sub-Saharan Africa (SSA) of 101 hours and the average for high income countries of 12 hours.
Namibia performed poorly in the areas of starting a business (ranked 170th), registering a property (ranked 174th), getting electricity (ranked 124th) and trading across borders (ranked 127th).
“Namibia’s government has its work cut out in terms of creating a friendlier business environment, which would grow entrepreneurship and investment necessary for sustaining economic development.”
This report measures how easy or difficult it is for local entrepreneurs to open and run small-to-medium-size businesses when complying with relevant regulations.
Ease of starting a business, compared to last year improved. According to data collected by the Doing Business report, starting a business in Namibia requires ten procedures and takes 66 days, compared to one procedure and 0.5 days in New Zealand and seven procedures and 43 days in South Africa that is ranked 74th.
The focus on entrepreneurship is to diary and track changes in regulations affecting areas in the life cycle of a business: starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting minority investors, paying taxes, trading across borders, enforcing contracts, resolving insolvency and labour market regulation.
However, the report does not track variables such as macroeconomic policy, currency volatility (a very important factor in many emerging market countries) or crime rates, which are also important in investment decisions.
The report diaries progress made by countries and acts as a guide for policymakers who want to encourage entrepreneurship and direct investment by creating a friendlier business regulatory environment.
The report shows that SSA continues to perform poorly in the global context, with the exception of Mauritius which continues to punch above its weight and the healthy strides made by Rwanda and Kenya.
The Doing Business report calculates a distance to frontier score (DTF) ranging from 0 to 100, where 0 represents the lowest performance and 100 represents the frontier, that captures the gap between an economy’s performance and a measure of best practice across the entire sample of 41 indicators for the 10 DTF components.

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