Business Start-Ups in Botswana Face Above Average Red Tape Says Report

by Robert Lee, Tax-News.com, London

02 June 2005

Even though business start-up procedures for Botswana are comparable to those in other sub-Saharan African countries, the duration is much longer for Botswana.

The 2004 Bank of Botswana annual report states that last year it took 11 steps to establish a business in Botswana over 108 days on average, at a cost of 11% of per capita income.

However, the cost of starting up a business in Botswana is dwarfed by the regional average of 224% of per capita income, being quite close to the OECD average of 8%, stated the report.

It further stated that not only is Botswana uncompetitive against the best (Australia), in terms of the number of procedures and the time it takes to complete them, it is also rivalled by Mauritius, Namibia, South Africa and Zimbabwe.

However research showed that in terms of Rigidity of Employment Index (REI), which measures the flexibility with which labour laws meet the needs of the market, the country reflected a good amount of flexibility.

On a scale of 0 - 100, the latter indicating more rigid regulations, the country scored 20.

REI indicates how difficult it is to hire a new worker and how rigid the regulations are on increasing or reducing the number of working hours and how costly and difficult it is to dismiss a redundant worker.

In particular, there are no restrictions on hiring workers while the regulation of working hours is very flexible, it stated. In terms of the difficulty of firing a worker, Botswana scored 40.

Botswana's REI is not only lower than the REI for neighbouring countries, it is well under half of the average for sub-Saharan Africa (SSA) and 1.7 times lower than the OECD average of 34.

However, with 19 weeks worth of wages payable on termination of employment, it is cheaper to fire a worker in Botswana than in many SSA countries.

Concerning protecting investors, Botswana scored five out of seven. The degree to which investors are protected is measured by the disclosure index, which looks at seven ways through which ownership and financial information is disclosed.

With higher values indicating more disclosure, Botswana's score of five is more than twice the SSA average and nearly the same as the OECD average.

In general, the BoB said Botswana lags behind in technological innovation, showing inadequate preparedness to use and benefit from ICT, and added that trade competitiveness has proven relatively weak due to inadequate availability of productive inputs.

Recommended