Improving the Business Climate in Swaziland

Mauritius no. 2 in Africa on Ease of Starting a Business Start your business in 3 days
Session 2:
START A BUSINESS IN SWAZILAND: CHALLENGES AND SOLUTIONS

Heerun Ghurburrun
Tuesday 29 May 2012 Royal Swazi, Swaziland

Senior Expert ARCA Consortium

heerun@gmail.com

Mauritius Starting a Business Ranking

Improving the Business Climate in Swaziland - Session 2: Mauritius, Start your business in 3 days 29/05/2012

From 46 days to 6 days

According to World Banks Doing Business reports:

In 2007, before implementing the reforms for starting a business, it took 46 days to start a business in Mauritius Today, in 2012, it takes 6 days to start a business in Mauritius

For non-regulated activities, it can take even less than 3 days to start a business

For example, if you are a small consultancy company in marketing services, you can:

Incorporate your company and register you business activity in 1 day

Rent a fully furnished office with facilities on the 2nd day Start your business operations on the 3rd day
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Improving the Business Climate in Swaziland - Session 2: Mauritius, Start your business in 3 days 29/05/2012

Starting a Business

Two main phases in starting a business Phase 1

Company incorporation Creating and registering the legal entity for the business

Phase 2

Getting ready before start of business activities and operations Renting (or acquiring), furnishing & equipping office premises Recruitment of personnel Registration with various authorities (tax, customs, VAT, local authority, social security, etc) Obtention of any necessary operating licenses or permits depending on the business activity
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Improving the Business Climate in Swaziland - Session 2: Mauritius, Start your business in 3 days 29/05/2012

5 Steps to starting a business in Mauritius

2 steps to incoporate your company 3 steps to start your business operations

Improving the Business Climate in Swaziland - Session 2: Mauritius, Start your business in 3 days 29/05/2012

Starting a Business in Mauritius Legal Framework

Companies Act Business Registration Act Insolvency Act Limited Partnership Act Business Facilitation (Miscellaneous Provisions) Act

Improving the Business Climate in Swaziland - Session 2: Mauritius, Start your business in 3 days 29/05/2012

What was it before the reforms?

46 days to start a business in Mauritius in 2007

The obstacle race to start a business in Mauritius before 2006

Company name reservation

Mandatory to reserve proposed company name Send a request in writing to the Registrar of Companies to check availability of proposed company name At least 15 days before obtaining a reply and confirmation of company name reservation

Company Constitution

Need to prepare and submit the proposed companys constitution (rights, powers, duties and obligations of the company, the Board, the Directors, ) The Constitution must be prepared and vetted by an Attorney Can take 15 days to 1 month to get the constitution
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Improving the Business Climate in Swaziland - Session 2: Mauritius, Start your business in 3 days 29/05/2012

The obstacle race

cont

Application for Company Incorporation

Manual submission of application forms for the incorporation of a company Certificate of Incorporation delivered after 15 days

Registration with other Authorities

Manual registration with the necessary autorities individually, with the applicant moving physically from one institution to another Income Tax department Customs department VAT department Social security department Each insitution has its own specific identification number for the company
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Improving the Business Climate in Swaziland - Session 2: Mauritius, Start your business in 3 days 29/05/2012

The obstacle race

cont

Operating licences and permits

Application for a Trade Licence at the local authorities: no business can operate without the obtention of a Trade Licence Prior to the obtention of a Trade Licence, need to obtain:

Fire services clearance (Fire Services Dept) Health Sanitary clearance (Health Dept) Utilities clearances (electricty, water, telcoms) Traffic management clearance (in case of public parking) Environmental clearance (in case of impact on environment) Development and Building Permits (in case of modification to office premises)

A process which could take between 2 months to 2 years

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Improving the Business Climate in Swaziland - Session 2: Mauritius, Start your business in 3 days 29/05/2012

Impact on the Mauritian economy

Too complicated (long and costly) to incorporate a company and to start business activities Entrepreneurs and SMEs not encouraged and not motivated to set up formal and legally registered companies Informal economy quite high and signficant Jobs not declared Loss of revenue for government (tax collection) Adverse impact on the overall competitiveness of the economy
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Improving the Business Climate in Swaziland - Session 2: Mauritius, Start your business in 3 days 29/05/2012

Reenginering of the Starting a Business process

From 46 days to 3 days to start a business in Mauritius

A Paradigm Shift

Company name reservation No longer mandatory Setting up an online electronic Central Business Registration Database (CBRD) Existing companies names can be consulted online from your home Company Constitution No longer mandatory Companies may or may not have a constitution. If no constitution, then provisions of the Companies Act apply No requirement for minimum capital for company incorporation Allowance for setting up a one-person company For small private companies, no requirement to have a qualified secretary or auditor and no need to file annual audited accounts
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Improving the Business Climate in Swaziland - Session 2: Mauritius, Start your business in 3 days 29/05/2012

Bringing efficiency & performance for all

Application for company incorporation

Can be made online through an electronic system Introduction of a unique single Business Registration Number (BRN) BRN is allocated to the company at time of incorporation BRN is then electronically transferred to all other relevant authorities No need for the applicant to move from one institution to another (concept of moving data, not people )
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Registration with other authorities

Improving the Business Climate in Swaziland - Session 2: Mauritius, Start your business in 3 days 29/05/2012

Company Incorporation made easy

Register at Registrar of Companies (on line)

New company Individual

Single point of entry

Unique Business Registration Number

Local Government Mauritius Revenue Authority Board of Investment Small and Medium Enterprises and Handicraft Authority Ministry of Social Security

Central Business Registration Database (CBRD)

Data accessed by relevant public agencies

Moving Data Not People

Improving the Business Climate in Swaziland - Session 2: Mauritius, Start your business in 3 days 29/05/2012 15

Eliminate, Rationalise & Simplify

Trade licence issued by local authorities prior to start of business abolished Replaced by a simple fee to be paid within 15 days of start of business activities Classfication of all business activities under 4 categories only: commercial, services, industrial & sui generis Introduction of the concept of ex Post Control

Companies in non-regulated activities may start business immediately Inspections (fire, health, utilities) are carried out after start of business operations hence post control Companies are required to self-comply to guidelines published by the various authorities More severe legal penalties for non compliance
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Improving the Business Climate in Swaziland - Session 2: Mauritius, Start your business in 3 days 29/05/2012

Start business in 3 days

If the business activity:

Is not a regulated activity Has no adverse impact on the environment and does not warrant for an environmental clearance Does not involve land development Does not involve construction works Is carried out in an existing building meant for such activities Based on self-adherence to published guidelines

Then, START BUSINESS WITHIN 3 DAYS

Improving the Business Climate in Swaziland - Session 2: Mauritius, Start your business in 3 days 29/05/2012

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Significant Impact of the reform of Starting a Business in Mauritius

In less than 5 months after the implementation of this major reform, over 10 000 new companies were registered at the Registrar of Companies After analysis, it was understood that this significant increase was due to a large number of businesses operating in the informal economy having decided to get into the official mainstream economy Why: simpler, easier, faster, more cost-effective and access to more professional services for business expansion Increase in revenue collected by Government in 2008
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Improving the Business Climate in Swaziland - Session 2: Mauritius, Start your business in 3 days 29/05/2012

Lesson learned

From the Mauritius case study, the lesson learned is that:

For a reform in Starting a Business to be successful and make a significant impact, there cannot be halfbaked or shy measures; The reform should be bold, in-depth, innovative and foward-looking; Being the point of entry to initiate a business venture, this reform impacts people directly at all levels from small entrepreneurs to multinationals;

If this reform is successful, it shall bring confidence, trust and adherence to the other business climate reforms
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Improving the Business Climate in Swaziland - Session 2: Mauritius, Start your business in 3 days 29/05/2012

Ease of Starting Business WB DB 2012

DB 2012 Rwanda Mauritius Swaziland Sub-Saharan Africa OECD

Ease of Starting a Business Rank

15

161

123
(Regional avg)

Procedures (number)
Time (days) Cost
(% of income per capita)

2
3 4.7

5
6 3.6

12
56 29.2

8
37 81.2

5
12 4.7

Paid-in Min. Capital

(% of income per capita)

0.0

0.0

0.5

129.8

14.1

Improving the Business Climate in Swaziland - Session 2: Mauritius, Start your business in 3 days 29/05/2012

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Ease of Starting Business WB DB 2012 Regional Performance

Improving the Business Climate in Swaziland - Session 2: Mauritius, Start your business in 3 days 29/05/2012

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Improving the Business Climate in Swaziland

Mauritius no. 2 in Africa on Ease of Starting a Business Start your business in 3 days

THANK YOU
Heerun Ghurburrun
heerun@gmail.com