environment,preparing the continent’s individuals withthe skills needed to contribute efficiently to the produc-tivity of their firms,and enabling African countries tomove up the value chain by producing more sophisticatedor higher value-added products.Second,a critical constraint to businesses in Africaremains access to
.This is more acute in lower-income countries,for small firms and for locally ownedfirms,and constrains both men and women entrepre-neurs.Worryingly,expanding firms report that finance isparticularly constraining and that making more financeavailable would significantly raise employment growth.Across countries,resource-rich countries view access tofinance as more of a problem,illustrating some of thedifficulties of diversifying activities in those countries.Efforts to expand access to finance on the continent hasbeen facilitated and improved recently,but more mustbe done.Finance is still elusive to most firms in Africa,especially small and rural firms.With the expansion of new technology (such as mobile phones) there is greatpotential for technology to help overcome location andcost barriers to expand access to financial servicesthroughout the continent.Nevertheless,improvementsin the regulatory environment (such as better collateral-ization,transparency,and auditing) represent a necessarystep for unleashing the potential impact of finance onfirm competitiveness in Africa.Third,
remains one of the top constraintsto businesses in Africa.Indirect costs can represent asubstantial drag on productivity enhancements in Africaand can account for as much as 30 percent of overallcosts.This can easily erode any labor efficiency gainAfrican firms might enjoy.Both subjective and objectiveindicators clearly show that energy and transportationare among the main bottlenecks to productivity growthand competitiveness in Africa.Firms lose as much as 8percent of sales to power outages,and transportationdelays can account for as much as 3 percent of lost sales.Infrastructure costs do not impact all countries and allfirms equally.Geography and firm characteristics canhelp some enterprises cope with such problems moreeasily than others.Coastal countries face less of a burdenof transportation,and large firms can more easily affordto buy a generator.Nevertheless,this infrastructure costcan represent as much as 4 percent of sales and themajority of African firms,small and medium,do not
O v e r v i e w
Box 3: World Bank Group: Doing Business
The World Bank’s Doing Business Indicators are based on asurvey of local experts in law and accounting who interactwith a large number of firms. The indicators presented meas-ure business regulation and the protection of property rightsas well as their effect on businesses, especially small andmedium-sized domestic firms. Constancy of firm descriptionacross countries allows for a straightforward comparisonand ranking by country for the various indicators. Ease of usemakes this a useful tool for policy analysis. The data entailsin-depth research and exchange with experts on 10 sets oflaws, regulations, and institutions covering specific aspectsof firm entry, operation, and exit. The most recent data cover175 economies. Forty-five countries in Africa are represent-ed, reflecting the responses of 900 lawyers, accountants,and regulatory experts. Data are collected annually, andeach year expanded collection (covering more economiesand indicators) is planned. For more information, visitwww.doingbusiness.org.
Box 4: The AfDB: Knowledge to improve theinvestment climate and competitiveness
The AfDB Private Sector Country Profiles
The African Development Bank (AfDB) prepared four PrivateSector Country Profiles—for Algeria, Egypt, Mali, and SouthAfrica— in 2006, as part of its efforts to support an enablingenvironment for private-sector development in the continent.These profiles provide an in-depth analysis of the privatesector; the political, economic, and legal environment, oppor- tunities, and constraints; and a strategy for the future.
The AfDB Country Governance Profiles
The AfDB Group’s governance policy and its implementationguidelines provide the basis for addressing governanceissues facing Regional Member Countries. Also, good gover-nance remains a key criterion in the performance-basedallocation of African Development Fund resources, with moreresources going to countries with high governance ratings.The AfDB prepares Country Governance Profiles for a num-ber of countries annually. These profiles provide detailedassessments of major governance issues in the concernedcountries. They analyze the governance situation in the polit-ical, social, economic, and corporate governance areas.They also review existing policies, institutional frameworks,and related capacity issues. Finally, these profiles highlightgovernance challenges and propose measures and recom-mendations to move the governance agenda forward. TheAfDB Group’s support for good governance and anticorrup- tion programs is through projects in public-sector manage-ment, industrial import facilitation, export promotion, andinstitutional support.
African Economic Outlook
African Economic Outlook
is an annual publication jointlyproduced by the AfDB and the OECD Development Centresince 2001/02. It reviews recent economic developments inAfrica by adopting a comparative approach and a commonanalytical framework. It provides forecasts for key macro-economic variables. The 2006/07 AEO covers 31 countrieswith the theme “Access to Drinking Water and Sanitation.”