CLAIM: “I call upon investors to come and take advantage of many opportunities which Zimbabwe has to offer, including the conducive business operating environment prevailing across all sectors of the economy.” @edmnangagwa 13/04/23
SOURCE: Twitter
VERDICT: False
In a tweet quoting the President, Emmerson Mnangagwa, Information Permanent Secretary Nick Mangwana, said that Zimbabwe has many opportunities, including ‘the conducive business operating environment prevailing across all sectors of the economy’.
Does Zimbabwe have a conducive business operating environment? What is a conducive business environment and how is it determined? FactCheckZW went looking for the answers and it’s complicated!
A conducive business environment largely depends on good governance, rule of law, political will, infrastructure of the country and rules and regulations.
The Ease of doing business (DB) index ranks countries against each other based on how the regulatory environment is conducive to business operations and how it protects property rights. Higher rankings (low numerical value) indicate better, usually simpler, regulations for businesses and stronger protections for property rights. Lower ranking (higher numerical value) indicate less simpler regulations for businesses and less protections for property rights.
Economies are ranked on their ease-of-doing-business performance, from 1-190. Economies with simpler and friendlier regulations for businesses are those ranked 1 – 20. The rankings are determined by sorting the aggregate scores on 11 topics namely: 1.Starting a business 2.Dealing with Construction permits 3.Getting electricity 4.Registering Property 5.Getting credit 6.Protecting minority investors 7.Paying taxes 8.Trading across borders 9.Enforcing contracts 10.Resolving insolvency.
The eleventh, Labour market regulation, measures regulation on employing workers and contracting with the government, which was not always included in the ease of doing business score and ranking.
Before ED
The first Doing Business report was published in 2003 and covered five indicator sets and 133 economies. The final study, published in 2020, covered 11 indicator sets and 190 economies.
According to the World Bank’s Doing Business Indicators, Zimbabwe had slipped from a ranking of 157 out of 185 countries in 2011 to 173 in 2012. Impediments to investment included limited resources and high cost of capital, dilapidated infrastructure, obsolete technologies, power and water shortages.
The 173 ranking in 2012, was Zimbabwe’s worst ranking on doing business.
From ED
When President Mnangagwa took over the presidency in 2017, Zimbabwe ranked 159.
By 2018, it was 155.
It then improved from 155 in 2018 to 140 in 2019 on the Doing Business index. This was as a result of making regulatory reforms making it easier to do business in the indicators such as Starting a business, Dealing with Construction permits, Registering property, Getting credit and Resolving insolvency.
Zimbabwe remained at 140 in 2020. This was the last DB report published as the World Bank then moved from Doing Business to Business Enabling Environment.
The reforms made in 2020 were:
- Starting a Business: Zimbabwe made starting a business easier by improving online name search and by reducing the Harare Municipality business licensing fee.
- Dealing with Construction Permits: Zimbabwe made dealing with construction permits faster by streamlining plan approvals.
- Registering Property: Zimbabwe made property registration easier by reducing the time to transfer property and increased transparency by publishing official statistics on land disputes for the previous calendar year.
- Getting Credit: Zimbabwe strengthened access to credit by giving secured creditors absolute priority during insolvency proceedings.
- Resolving Insolvency: Zimbabwe made resolving insolvency easier by introducing a new reorganization procedure, allowing creditors to vote on the reorganization plan, and granting debtors the possibility of obtaining post-commencement finance.
During this period, there were no changes making it more difficult to do business. The 140 ranking remains Zimbabwe’s best ever.
The ranking from 159 in 2017 to 140 in 2020 has been a result of thirteen positive reforms between 2017 and 2020 compared to only two reforms between 2013 and 2016. During this period (2017 – 2020), Zimbabwe had made two changes that made it more difficult to do business, in two indicators:
2017 – Trading across Borders: Zimbabwe made trading across borders more difficult by introducing a mandatory pre-shipment inspection for imported products;
2018 – Getting Credit: Zimbabwe improved access to credit information by launching a new credit registry. However, credit scoring was discontinued, reducing access to credit information.
In comparison, in just 2008 Zimbabwe had made three negative changes affecting the ease of doing business.
From DB to BEE
In September 2021, the World Bank announced in a statement that after data irregularities on Doing Business 2018 and 2020 were reported internally in June 2020, World Bank management had paused the next Doing Business report and initiated a series of reviews and audits of the report and its methodology.
In addition, because the internal reports raised ethical matters, including the conduct of former Board officials as well as current and/or former Bank staff, management reported the allegations to the Bank’s appropriate internal accountability mechanismsIn 2022 the World Bank adopted a new ranking system for the ease-of-doing-business in countries, what they call “a new approach for assessing the business and investment climate”. The World Bank named it the Business Enabling Environment which replaces the Doing Business report.
The first BEE report is yet to be published.
Conclusion
While it is false to say that Zimbabwe has a conducive business operating environment prevailing across all sectors of the economy, the country’s ranking has certainly improved since President Mnangagwa took over, to its best ranking ever at 140 in 2020. However, despite this improvement, Zimbabwe’s business environment remains unconducive with only getting credit and protecting minority investors ranking under 100, at 67 and 97, respectively. The worst performing indicators were starting a business and getting electricity, both at 167; and enforcing contracts at 169.
