Thursday, October 22, 2020

Botswana records Improvement in Entrepreneurship Prowess

Data released by the World Bank shows that Botswana has the highest density in terms of the number of newly registered corporations per 1 000 working age (ages 15-64) in Southern Africa.

The World Bank collected information from 136 company registrars for its Entrepreneurship project which was completed in June 2015. The project which covered a period of ten years over the years 2004 to 2014 captured data on the number of newly registered firms per year seeking to answer questions on the trends of new firm creation, the relationship between entrepreneurship and the business environment and the effect of the financial crisis on entrepreneurial activity.

The report focused on private, formal sector companies with limited liability. Information on Botswana was collected from the Companies and Intellectual Property Authority (CIPA). 

Out of 136 countries, only three countries from the Southern African region are covered in the project, being Botswana, South Africa and Zambia. Botswana in comparison to South Africa and Zambia recorded a figure of 13.11 representing new business density which is in stark contrast to the 1.82 registered by South Africa and 1.33 recorded by Zambia. However in terms of actual numbers on the number of new limited liability companies South Africa registered the highest number at 59 731 whereas Zambia recorded the lowest at 10 199 putting Botswana in a closer position at 16 850. With specific regard to starting a business the World Bank ‘Doing Business’ Report, which also collects information from formal sector companies with limited liability ranked Botswana at number 143 out of 189 economies in 2016, an increase of about 6 percent from the 2015 rank at 135.

The report notes reforms undertaken in Botswana’s business environment in 2009 and 2010 with regard to starting a business in the country. According to the report, in 2009, Botswana reduced the time required for starting a business by computerising the business registry and in 2010 Botswana made starting a business easier by simplifying the process to obtain a business license and the process to register for taxes. The report does not mention additional reforms which the country undertook after 2010. 

In a 2011 research paper under the World Bank titled ‘the impact of business environment reforms on new firm registration’ Leora Klapper and Inessa Love studied how the ease of registering a business and the magnitude of registration affect new firm registration. The research was conducted in 92 countries using data on the number of new firm registrations. “We find that the costs, days and procedures required for starting a business are important predictors of new firm registration. However, we find that small reforms, in general less than a 40 percent reduction in costs, days, or procedures, do not have a significant effect on new firm creation. This suggests that “token” reforms, perhaps motivated by political or multilateral pressures to reform, do not have the intended effect on private sector activity,” cites the paper. The paper considered the parameters of a reform, such as reduction in costs and decline in number of days to undertake procedures, and assessed their sufficiency to induce a statistically significant number of newly registered firms. It concluded that it is not clear how such parameters impact on firm registration.     

Analyse Africa; a data analysis platform which aggregates macroeconomic data from 42 leading global sources into a single data platform corroborates the findings of the World Bank Entrepreneurship project, citing that that the number of new firms in Botswana has significantly increased, averaging a 9 percent increase per year between 2009 and 2014. Analyse Africa counts Botswana along with South Africa and Tunisia as countries which demonstrate, in comparison to other countries, a better weaved environment that fosters entrepreneurship. Be that as it may, Botswana is yet to realise value from the significant investment it has made in incentivising entrepreneurship. With the potential to induce further economic growth, entrepreneurship in Botswana has not provided a solid solution to the growing unemployment rate. However, it is hoped that such an encouraging environment will foster entrepreneurship and begin to produce gainful results.

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