The economic downturn has brought to light some stark market failures, but it is also eroding support for principles that have underpinned an extraordinary period of business expansion. As a result, a longstanding trend of improving business conditions is being brought to a halt, according to the Economist Intelligence Unit's Business Environment Rankings model.
According to the model, more than half of the 82 countries covered are expected to have a worse overall business environment in 2009-13 than in 2004-08. The biggest loser is the UK, while the country that shows the strongest progress is Egypt.
The average business environment score for Sub-Saharan Africa in 2009-13 remains virtually unchanged compared with 2004-08. Expected improvements in Angola and Kenya offset a deterioration in the region's two largest economies, Nigeria and South Africa. The average quality of the region's investment environment continues to be poor. However, despite the problems of operating in the region, for those companies that can master the complicated political environment and the difficult regulatory climate rates of return are potentially high. This is especially the case in the oil producers, Angola and Nigeria.
Of the four Sub-Sharan African countries covered by the EIU's model, South Africa has by far the most attractive business environment. However, the quality of its business environment deteriorates in 2009-13 and its global ranking slips by six places from 45th in 2004-08 to 51st in 2009-13, owing to a worsening macroeconomic environment, lower capital inflows and weakening market opportunities. The return of another African National Congress government in April 2009 implies policy continuity. Policymakers will continue to improvise in response to events, thereby contributing to investors' wariness about South Africa. As in many other countries, the present crisis will necessitate a rethink of some infrastructure development plans.