Starting a business in Zim …counting the cost

It takes three months, nine different procedures and a sizeable chunk of a company’s gross national income to get a business up and running in this country, according to a recent report from the World Bank.

The Doing Business 2011 report looks at 183 economies from Afghanistan to Zimbabwe and ranks their regulations governing business activity. The regulations include how easy it is to start a business, get construction permits, register property, get credit, protect investors, pay taxes, enforce contracts and close a business.

Zimbabwe ranked 157 out of 183 economies, placing it behind South Africa, Namibia, Botswana, Swaziland and Lesotho. In the sub-section of starting a business it ranked slightly higher at 143, placing it ahead of Angola and Swaziland.

Jumping through hoops

The nine different hoops that business owners are required to jump through include registration with four different authorities, namely: the Chief Registrar of companies, the tax authorities, National Social Security Authority and the Manpower Development Fund; the collection and application of licensing forms and the advertisement for a trade and business license in a local newspaper. These procedures take between one and 35 days to complete, and five out of the nine incur charges.

The study calculated that it cost 182.77 percent of a company’s gross national income per capita to start a business. Remarkably, this figure has drastically reduced since 2007 when it stood at more than 600 percent! There has been no change in the number of procedures necessary to start a business in the last five years, and only a small reduction in the time it takes to process the various applications and registrations.

Economies like Zimbabwe with higher entry costs have a larger informal sector and a smaller number of registered firms. Although the study shows a significant reduction in costs associated with starting a business, it does not take into consideration any additional amounts paid in bribes.

The rampant corruption in the country makes it very difficult to estimate how much entrepreneurs are paying to grease the palms of officials. In spite of this, it is encouraging to note a downward trend in official costs and to recognise that many economies have improved their ranking in stages and as part of a larger regulatory reform programme.

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