World news story

'Regulatory reform and the ease of doing business matters for long term growth and prosperity'

Head of DFID Ghana, Jim McAlpine's op-ed on better regulatory reform.


Ghana has so much going for it. In September, at this quarter’s awards ceremony for the UK’s ENGINE programme, I had the honour of meeting our 108 competition winners whose business ideas had been selected to receive support. I was able to congratulate these young entrepreneurs on gaining access to intensive technical and financial backing to make their business plans a reality. The talent and entrepreneurial spirit of Ghana’s young women and men was there for all to see.

Now it is time for these young people to deliver for themselves and for Ghana. But they face many challenges in doing so. Ghana’s ranking for starting a business has fallen from 97th in the world in 2015 to 102nd in 2016 the World Bank’s ‘Doing Business’ rankings. With the exception of construction permits, every other key indicator in the Doing Business survey has stayed the same or worsened. This is bad news for Ghana because a country’s business environment matters, not just for the entrepreneurs, but also for the people who have jobs in their businesses, and the families that depend on these incomes. It is also bad news for economic growth and poverty reduction, for all Ghanaians today and for future generations.

The business environment is an important part of the broader investment climate and refers to the quality and efficiency of business laws and regulations, which together with the rule of law, political stability, issues around corruption, land tenure, the macro-economic framework and infrastructure constitutes the investment climate.

Taken together, these factors help to determine the cost and risk involved in doing business in a country and can affect the opportunities that firms have to expand. They often represent severe constraints to both domestic small and medium-size enterprises, and foreign direct investors. For UK companies looking to invest in finance, insurance, energy (both conventional and renewable), real estate, hospitals, and agriculture, issues around the investment climate make them think twice, particularly if there are other markets in the region that they assess to be easier.

Underneath this gloomy news, there is no doubt that Ghana is making progress in rethinking approaches to the business environment. On Tuesday for example, the World Bank, funded by the UK’s Department for International Development, presented research on how government, donors and the private sector can learn from the experiences of Ghana’s two previous Private Sector Development Strategies. This renewed sense of the need to come to together to effect a Public Private Dialogue that really delivers across sectors must work within the framework of the 40 year Long Term Development Plan for Ghana currently being finalised by the National Development Planning Commission (NDPC). The Plan will guide the medium term planning process and provides an important framework for action that can guide this dialogue.

Ghana’s peers in Sub-Saharan Africa are reforming faster and going further. For example, Kenya has improved its Doing Business ranking from 129 to 108 in the last year alone. Ghana faces competition from other countries that have cottoned on to the importance of institutional reforms and cutting red tape, initiatives that allow businesses to thrive, create jobs and pay taxes.

Many countries are redoubling their efforts in reforms and in some cases are cutting substantially the regulatory burden and thereby easing the cost of compliance. In some jurisdictions businesses can be registered in a day. In Sub-Saharan Africa the best performers for starting a business are Burundi and Liberia, where it takes four days and four and a half days respectively. In Ghana it takes on average 14 days to register a business, and the cost of starting a business rose by 70% in 2012 alone. This means Ghana has competition for investment, and needs to do more to attract it.

On 22nd and 23rd September, the UK’s Department For International Development (DFID) hosts a Better Regulation Forum in Accra, bringing together over seventy participants from the public sector, the business community, policy think tanks and civil society to look at best practices and new approaches to reducing the regulatory burdens. Guest speakers are coming from countries including Bangladesh, Rwanda, Ethiopia, Uganda and Kenya to share their experiences of reform and the tools they have used. It is not that other countries always do it better, and all of these countries have their own challenges - but there is much to be learned from discussing with other practitioners and experts the kinds of approaches and ideas that might help the cause of business environment reform in Ghana.

The Better Regulation Forum is organised by the Business Enabling Environment Programme (BEEP), a £10 million business environment reform initiative by the Government of Ghana and DFID. BEEP facilitates policy dialogue between government agencies and the firms that have to comply and implement regulation, and supports government to enact reforms that make it easier and cheaper for agencies to regulate and firms to comply.

Ghana can do much more to reform the business environment and to lead from the front. To take the example of the ENGINE programme again, it is not just about improving the prospects for hundreds entrepreneurs. Ghana needs to empower the tens of thousands of technology literate young women and men, who want to set up and operate the very businesses Ghana will need if all Ghanaians are to reach their potential. The UK is committed to partnering with Ghana on this journey.

Published 22 September 2016