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A New Take on Interventionism in Sub-Saharan Africa

A report from the World Bank shows that certain countries in Sub-Saharan Africa can be great places to do business. As can be seen in the attached infographic, nine of the top twenty global economies which are making the most progress in terms of improvements to business regulations are situated in this region. Rwanda is currently a better place than France to do business despite the fact that France has a 61-times higher per-capita GDP, while Mauritius ranked 20th in the 2013 “Doing Business” index from the World Bank. However, the overall picture for the Sub-Saharan region still has room for improvement. While SSA countries may have nine places in the top twenty, they also make up nineteen of the bottom twenty-four in the ranking.

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Traders such as Ashay Mervyn who focus their business and investments in emerging markets are looking at the possibility of a new take on interventionism in certain SSA countries based on a suggestion from the Centre for Global Development think tank. The think tank suggested that countries in Sub-Saharan Africa that are well-managed but seeking to diversify foreign investment outside of the extractions sector may well benefit from the introduction of Service Performance Guarantees. Countries which are likely to see the benefits of this include Ghana, Ethiopia and Tanzania, each of which has a stable government and could therefore become more attractive to investors if that government became more accountable. However, SPGs would not be suitable for less stable countries such as South Sudan or Somalia, where poor and unstable governance could lead to SPGs building up huge liabilities where targets are missed. SPGs are also probably not as attractive a proposition to those countries in the region that already maintain a reputation for efficiency and friendliness in business.

In posts to follow, the Ashay Mervyn blog will explore accelerating growth and development within Sub-Saharan Africa and how targeted investment could help make that growth sustainable and explain exactly what SPGs are and how they work.