WB report says it is still difficult to start business in Tanzania‏
By Dickson Ng`hily
5th November 2009
Although Tanzanian has managed to attract more Foreign Direct Investments (FDIs) overtime, a World Bank report says it is still difficult to start a business in the country.
The 2010 co-publication of the bank and the International Finance Corporation (IFC) under the Doing Business Projects released recently reveals this.
The report investigated a set of regulations that affects 10 stages of a business life that include ease of doing business, starting a business, dealing with construction permits, employing workers, registering properties, getting credit, protecting investors, paying taxes, trading across borders, enforcing contracts and closing a business.
The study which covered a total of 183 countries globally, shows that in ease of doing business category Tanzania is ranked number 131, while under the category of starting business, it falls to number 120. The study says the entrepreneur has to go through 12 procedures before registering a firm.
According to the study, some of the processes during the registration period are straightforward and affordable, yet others are burdensome sometimes forcing entrepreneurs to bribe officials to speed up the process or may decide to run their business informally.
The survey indicates that the data on starting business are based on a research investigation on the procedures that a standard small to mediumsize company needs to complete to start operations.
They include obtaining necessary permits and licenses and completing all required inscriptions, verifications and notifications with authorities to enable the company to formally operate. The data further reveal that Tanzania is ranked 178th in construction permits under which 22 procedures have to be followed.
The data records all the procedures required to build a warehouse such as submitting project documents, obtaining all necessary licenses and permits, completing notifications and receiving inspections as well as procedures for obtaining utilities such as power, telephone, water and sewerage.
As for employing workers, Tanzania ranked 131 while on registering a property, it is ranked 145th. On this nine procedures are to be followed.
The 2010 Doing Business Report records the full sequence of procedures necessary for a business to purchase property from another and to transfer the same to the buyers name.
Land and building property are transferred in entirety. The transaction is considered complete when the buyer uses the property as collateral for a bank loan.
The research also reveals that it requires nine procedures, takes 73 days, and costs 4.42 per cent of the property value to register a business in Tanzania. As a result, Tanzania's rank as far as registering property is concerned is 145th.
The countrys rank as far as access to credit is concerned is 87th, while its global position as protecting investors is 93rd. The leader in this latter category is New Zealand followed by South Africa, Botswana, Mozambique, Malawi, Kenya and Uganda.
According to the report, taxes are essential and without them there can be no money to provide public amenities, infrastructure and services which are crucial for a properly functioning economy.
But particularly for SMEs, they may opt out and operate in the informal sector. One way to enhance tax compliance is to ease and simplify the process of paying taxes for such businesses. So Tanzania's global rank in paying taxes is 119th says the report.
The ranking of Tanzania in trading across borders is 108, while the cost of exportation and importation of a container is USD 1262 and USD 1475 respectively.
There are five documents related to exporting, while seven documents are related to importation. On average, it will take 24 days when exporting whereas it costs 31 days when dealing with an imported material.
In enforcing contracts, the survey reveals that globally, Tanzania is ranked 31, with 38 procedures to follow and consumes 462 days, whereas it cost 14.3 per cent of the claim.
Tanzania is ranked 113th overall for closing a business while in reforms the country has made it harder to obtain construction permits, adding additional procedures and costs.
On the contrary the Rwandan government is a global leader as far as business reforms are concerned. The Doing Business Project was launched eight years ago and covered five indicator sets in 133 economies.
The current report covers 10 indicators sets in 183 economies. The project has benefited from feedback from governments, academics, practitioners and reviewers.
SOURCE: THE GUARDIAN