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Home Business

Eswatini slips in Ease of Doing Business 2020

Sifiso Sibandze by Sifiso Sibandze
April 26, 2020
in Business, Businesses
10 min read
0
Eswatini slips in Ease of Doing Business 2020

Minister of Commerce, Industry and Trade Manqoba Khumalo

Mbabane: After assuming office, Minister of Commerce, Industry and Trade Manqoba Khumalo came up with a wishful list of goals he wanted to achieve in the short-term with the intention to jumpstart Eswatini’s ailing economy.

On top of his list of short-term goals was that Eswatini should be ranked among the Top 10 countries in Africa in the World Bank Ease of Doing Business. The improvement of the Ease of Doing Business was also listed as priority Number 1 in the Kingdom of Eswatini Strategic Road Map: 2019-2022. However, the World Bank’s observations show that Khumalo’s wish has been a far-flung reality at least for 2020, as Eswatini failed to make it into the list of Top 20 improvers in Doing Business 2020.

The Top 20 countries are those which improved the most on Ease of Doing Business score.These economies are: Azerbaijan,Bahrain, Bangladesh, China,Djibouti, India,Jordan,Kenya, Kosovo, Kuwait, TheKyrgyz Republic, Myanmar,Nigeria, Pakistan, Qatar, Saudi Arabia, Tajikistan, Togo, Uzbekistan and Zimbabwe were selected based on the number of reforms and on how much their Ease of Doing Business score improved.

First, Doing Business selects the economies that implemented reforms making it easier to do business in three or more of the 10 areas included in this year’s aggregate ease of doing business score.

Against this backdrop, the world bank clearly stated that the Top 20 improversdoes notreflect the best performing/ranked economies, which will be disclosed at the time of Doing Business 2020 launch. “This top 20 improvers list does not reflect fully an economy’s attractiveness for businesses, and is purely based on the improvements across 10 different regulatory areas,” the World Bank reported in its website.

The rank of Eswatini deteriorated to 117 in 2018 from 112 in 2017. While it performed fairly well in areas such as trading across borders and paying taxes, poor performance was noted in in terms of the successful enforcements of contracts, getting electricity and starting a business. Ease of Doing Business in Eswatini averaged 116.09 from 2008 until 2018, reaching an all-time high of 124 in 2011 and a record low of 108 in 2015.

In the Strategic Roadmap, government acknowledged that improving Eswatini’s business environment is crucial to facilitate the private sector led recovery envisaged. This entailed improvements in access to markets and resources for individuals and improvements in all indicators under the Ease of Doing Business Index. Reductions in Eswatini’s Corporate Income Tax along with an enabling institutional environment will attract FDI

The facilitation of export driven growth and increase SME participation in the economy was is another planned activity aimed at improving the country’s ranking and the development of an integrated land use strategy and expediting rollout of Special Economic Zones.

Furthermore, government also planned to improve effectiveness of investment promotion agencies and re-launch Investor Roadmap programme, as well as implementing “E-Government” to centralise data and systems into a single solution.

Despite the fact that Eswatini did not make it into the Top 20, observably, it almost made the cut into the list when looking at the number of the improvements implemented. According to World Bank, Eswatini made four reforms which are dealing with construction permits, getting electricity,registering property, and starting business.

Commenting on the release of the list of best improvers, Minister Khumalo told Independent News that despite that Eswatini didn’t made it into the list, he was optimistic that the country’s overall performance will improve this year, from the 117 to a better position. “When considering that we have managed to improve in four areas just like some other countries included in the list suggests that we were in line with our goal of improving our overall ranking. I am therefore optimistic that our ranking will be far better than the one we were placed at in 2019,” Khumalo said. The minister said he is waiting in anticipation for a better outcome.

The areas in which Eswatini has improved in:

  1. Dealing with Construction Permits

On April 23, 2019, Eswatini made building regulations available online on their website: https://www.mbabane.org.sz/technical-services. The website was updated to include the Building Act, 1968 and the Standard Building Regulations, 1969. This reform has improved the transparency of information by making the legislation related to the construction industry easily available to the public. 

Summary of Reform: Eswatini increased the transparency of dealing with construction permits by publishing regulations related to construction online, free of charge. 

  • Getting Electricity

In 2018, the electricity utility in Mbabane, Eswatini Electricity Corporation (EEC), increased its stock of transformers needed to make a new commercial connection for a subscribed capacity of 140kVA or more. Previously, the utility had to import transformers from China every time that a client requested a connection. Currently, EEC has a stock of transformers, allowing it to reduce the time needed to perform commercial connections to the medium voltage network. 

Summary of Reform: Eswatini made getting electricity faster by increasing the availability of materials for external connections works. 

3. Registering Property

(a) On December 31, 2018, the Government of Eswatini published Legal Notice No. 245 of 2018, which came into force on January 1, 2019. The Notice amended the Tariff of Stamp Duties in the Stamp Duties Act 1970 (The Act 37 of 1970). The stamp duty for property transfers is now calculated as follows: if the value or consideration of the property exceeds E1 000 000.00, the fees are E105 for every SZL 10, 000 or part thereof of the value or consideration. Before the amendment, the fees were E85 per E10000 if the property value was above E70001. As a result, the cost of the stamp duty has increased.

(b) On February 2019, the Surveyor General’s Department updated its website (http://www.gov.sz/index.php/departments-sp-623334762/surveyor-general) to publish the official fee schedule to obtain different types of cadastral maps and plans. At the same time, the service pledge to deliver updated cadastral plans and maps within a specific deadline was also published on the website.

(c) On May 2018, the Deeds Department of the Ministry of Natural Resources and Energy updated its website (http://www.gov.sz/index.php/ministries-departments/ministry-of-natural-resources/deeds) to publish official statistics on land court cases for 2018.

Summary of Reform: Eswatini improved the quality of its land administration system by publishing the fee schedule, official service standards and court statistics on land disputes for the previous calendar year. Eswatini also made property registration more expensive by increasing the stamp duty for property transfers.

  • Starting a Business

Starting in the second half of 2018, online services for business registration became fully effective and widely used. Most entrepreneurs conducted name reservation online, which is issued immediately and free of charge. In addition, most entrepreneurs prepared their company memoranda and articles of association online, also free of charge, without retaining the services of a lawyer. 

Summary of Reform: Eswatini made starting a business easier by introducing free online services for name reservation and business registration.

Eswatini

What some of the Top 20 improvers have achieved;

  • Azerbaijan – madeit easier to do business in four areas measured by Doing Business: registering property, getting credit, protecting minority investors and enforcing contracts. Registering property was made faster following the formal mapping and registration of every privately-held land plot in Baku, improving records and speeding up real estate procedures. Minority investor protections were strengthened after liability was imposed on directors for unfair related-party transactions.When commercial disputes arise, parties can now file summons online and receive financial incentives for pursuing mediation.
  • Bahrain – implemented a comprehensive reform program, making it easier to do business in nine of the 10 areas included in the ease of doing business ranking (all but starting a business). As part of its Economic Vision 2030, Bahrain deployed new scanners at the King Fahd Causeway and established differentiated lanes for border crossing, introduced a new electronic system for property registration, adopted a new law on insolvency that gives the option of filing for reorganization and protections for secured creditors during an automatic stay in reorganization proceedings. Bahrain also introduced dedicated venues to resolve commercial disputes with electronic service of process.
  • Bangladesh – made it easier for entrepreneurs to start a business, obtain an electrical connection and access credit. Among other initiatives, Bangladesh lowered the name clearance fee for new company registration, abolished digital certification fees and reduced registration fee calculations based on share capital. In Dhaka, the electricity supplier cut the security deposit for a new connection by half and undertook major investments to expand its staffing and digitization of processes; licensing times by the Office of Electrical Adviser and Chief Electrical Inspector were also reduced. Bangladesh’s credit information bureau improved access to credit by expanding its coverage to include five years of records and data on loans of any amount.
  • China – implemented reforms in eight areas measured by Doing Business. In Beijing, obtaining the company seal is now fully integrated into the business registration one-stop shop. Authorities in Beijing and Shanghai simplified the process of obtaining a construction permit by exempting low-risk construction projects from certain reporting requirements. Customers can now apply online for new electricity connections, sign their supply contract electronically and learn about tariff changes at least one billing cycle in advance. Paying taxes became easier by implementing a preferential corporate income tax rate for small enterprises, reducing the value added tax rate for certain industries and enhancing the electronic filing and payment system. Exporting and importing is now easier thanks to advance cargo declaration, upgraded port infrastructure, optimized customs administration and the publishing of fee schedules. Meanwhile, the Supreme People’s Court (SPC) enhanced commercial litigation by limiting adjournments and publishing court performance measurement and progress reports. China strengthened minority investor protections by imposing liability on controlling shareholders for unfair transactions with interested parties and clarifying ownership and control structures. Lastly, the SPC enhanced priority rules for creditors who provide credit to insolvent businesses and increased access to information from the insolvency representative.
  • Djibouti passed important legislation this year amending its commercial code to strengthen access to credit. Authorities implemented a functional secured transactions system and a unified notice-based collateral registry. The amendments to the commercial code also strengthened minority investor protections and facilitated the commencement of proceedings as well as increased the effectiveness of court processes, reducing the time to resolve insolvency.
  • India made it easier to do business in four areas measured by Doing Business. Authorities in Mumbai and New Delhi made it easier to obtain construction permits by allowing the submission of labour inspector commencement and completion notifications through a single-window clearance system. Starting a business is less costly thanks to abolished filing fees for the SPIC company incorporation form, electronic memorandum of association and articles of association. Exporting and importing is also easier following the integration of several government agencies into an online system and the upgrading of port equipment and infrastructure. India’s achievements this year build on a sustained multi-year reform effort. Since 2003/04, India has implemented 48 reforms captured by Doing Business. The most improved business regulatory areas have been starting a business, dealing with construction permits and resolving insolvency.
  • Jordan– improved in Doing Business 2020 in the areas of getting credit, paying taxes and resolving insolvency. Access to credit was expanded after the credit bureau began offering credit scores to banks and other financial institutions. Jordan also strengthened access to credit by introducing a new secured transactions law that regulates functional equivalents to loans secured with movable property, such as financial leases and fiduciary transfer of title. Jordan made paying taxes easier by integrating labour taxes and other mandatory contributions into its electronic payment system. Jordan also adopted a new insolvency law that permits the continuation of the debtor’s essential contracts during insolvency proceedings and allows the debtor to reject overly-burdensome contracts.
  • Kenya – made regulatory changes concerning dealing with construction permits, getting electricity, getting credit, protecting minority investors, paying taxes and resolving insolvency. Kenya made dealing with construction permits more transparent by making building permit requirements publicly available online and by reducing fees. In Nairobi, the utility improved the reliability of its electricity grid by investing in substations, automatic air break switches and ring main units. Registering, modifying and cancelling security interests held in Kenya’s collateral registry can now be done online. Paying taxes is also more streamlined now that employer-paid social security contribution payments and returns are filed electronically. Meanwhile, legislation in 2018 strengthened minority investor protections by giving shareholders the final say on the election and dismissal of the external auditor. Kenya made resolving insolvency easier by improving the continuation of the debtor’s business during insolvency proceedings.
  • Kosovo – made it easier to do business in the areas of dealing with construction permits, getting electricity, protecting minority investors and enforcing contracts. To streamline its construction permitting process, the Municipality of Pristina eliminated the requirement to notify of the start of construction and receive a location inspection. Kosovo also improved the reliability of power supply by investing heavily in grid infrastructure and by implementing an automatic energy management system for outage monitoring and the restoration of service. Meanwhile, Kosovo passed a consolidated law on voluntary mediation that encompasses all aspects of mediation, including the enforceability of mediated settlement agreements. Kosovo also adopted a new Law on Business Organizations that gives shareholders broader access to company documents before filing a lawsuit.
  • Kuwait – continued to use its New Kuwait Vision 2035 roadmap as a guide for economic and regulatory reform. The full integration of the Kuwait Business Center platform with the public authority for civil information made it easier for entrepreneurs to obtain a commercial license when starting a business. The process for getting a new electricity connection was simplified following the digitization of the application process, combined connection works and meter installations and a new geographic information system that streamlines the review of connection requests. Registering property transfers is also faster thanks to an online system launched by the municipality of Kuwait City and a one-stop shop launched by the Ministry of Justice. Kuwait improved access to credit information by guaranteeing borrowers the legal right to inspect their credit data and offering credit scores as a value-added service to banks and financial institutions.In addition, Kuwait amended its company law to help shareholders be better informed and more involved by increasing the minimum notice period for general meetings. Lastly, Kuwait made trading across borders easier by improving its customs risk management system and implementing a new electronic clearance system.

*NB: The other bottom 10 improvers (TheKyrgyz Republic, Myanmar,Nigeria, Pakistan, Qatar, Saudi Arabia, Tajikistan, Togo, Uzbekistan and Zimbabwe) were leftout due to space constraint.

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