Unlocking Business Success: Insights from the World Bank’s Enterprise Survey in Lesotho

In today’s dynamic global economy, understanding the intricacies of the business environment in countries across the world is paramount for fostering growth and prosperity. The Enterprise Surveys (ES) conducted by the World Bank, serve as a crucial tool in this endeavour, delving into multifaceted aspects ranging from infrastructure and trade to corruption and management practices. AfricaScope assisted the World Bank in the conducting of the survey in Lesotho in 2023. This included validation of the sampling frame, recruitment of field work teams to interview business management and assisting in the collection and validation of data. AfricaScope also conducted the ES studies in Botswana and has been contracted to conduct ES studies in Angola, Eswatini and Namibia.

Insights into Firm Characteristics and Performance

The ES sheds light on the characteristics of private firms, including their age, with a focus on how older firms may face distinct challenges compared to their younger counterparts. Furthermore, the survey examines the workforce composition, firm performance metrics, and the impact of physical infrastructure on operations. For instance, reliable access to electricity and water is vital for uninterrupted production.

A total of 65% of firms in Lesotho have experienced electrical outages which equates to approximately two outages, which is significantly less than the number of outages experienced in sub-saharan Africa or lower middle income countries globally. In contrast, businesses in Lesotho, which is a water rich country in southern Africa, struggles to obtain water connections, which is significantly poorer than that of other sub-saharan African or lower income countries globally.

Navigating International Trade and Access to Finance

Efficient customs procedures and access to finance play pivotal roles in facilitating international trade and fueling business growth. The ES provides insights into the intensity of foreign trade, the usage of financial services, and the sources of firms’ financing. Notably, internal funds emerge as the most common source, underscoring the importance of well-developed financial markets. Seventy five percent of Lesotho’s finances for purchasing of fixed assets comes from internal sources with only 12% being financed by banks. This is similar to the situation found in sub-Saharan Africa and other lower middle income countries in the world.

Embracing Sound Management Practices and Tackling Informality

Sound management practices are instrumental in enhancing firms’ productivity and overall performance. The ES’s composite management practices index offers a comprehensive assessment, emphasizing the significance of proactive strategies and target setting. Lesotho when compared to sub-Saharan Africa and low income countries is better off by 5 percentage points. Moreover, addressing informality remains a key challenge, with some firms opting to remain unregistered to evade regulatory burdens. The situation is that the 79% of businesses are registered when starting operations and 55% of firms indicate that they compete with informal businesses in Lesotho. Both these statistics are very similar to the situation found in sub-Saharan Africa and lower income countries.

Navigating Regulatory Challenges and Combatting Corruption

Navigating regulatory hurdles and combating corruption are essential for fostering a conducive business environment. Delays in obtaining licenses and encountering bureaucratic inefficiencies can impede entrepreneurial endeavours. Lesotho when compared to other sub-Saharan Africa and lower income countries is significantly better off when it comes to the amount of time that senior management have to deal with government regulations. This is further reflected in the fact that businesses in Lesotho did not have to meet with tax officials as regularly as in other sub-Saharan Africa and lower middle income countries. Corruption is another factor that poses significant administrative and financial burdens on firms, necessitating concerted efforts to mitigate its adverse effects. Looking at the top 10 constraints to doing business in Lesotho, corruption is ranked 10th while access to finance is the most significant factor and ranked in the first position.

Charting a Path Forward

The insights gleaned from the Enterprise Surveys serve as a compass for policymakers and business leaders alike, guiding efforts to streamline regulations, enhance infrastructure, and foster a culture of transparency and accountability. By addressing the multifaceted challenges identified in the ES, nations can unlock the full potential of their private sectors, driving sustainable economic growth and shared prosperity. In essence, the Enterprise Surveys offer a comprehensive snapshot of the business landscape, empowering stakeholders to make informed decisions and chart a path toward a more vibrant and inclusive economy.

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