The 2024 CPIA Africa report emphasizes the importance of policies and institutions in fostering private sector development across the continent. With economic growth lagging behind the average from 2000 to 2015, there is limited fiscal space for public spending, making private sector expansion crucial. The report highlights that effective regulation and facilitation should be prioritized over financial support.
Complementing the CPIA insights are the newly introduced Business Ready (B-READY) indicators. These provide a quantitative evaluation of the business environment focusing on policy and outcomes. The first pillar assesses the regulatory framework quality supporting business formation and growth, while the second evaluates public service quality, both central to institutional capacity as analyzed by CPIA.
Although there is some overlap between B-READY and CPIA structural policies, their methods diverge to ensure complementarity. B-READY focuses on identifying specific policies supporting business activities without combining data into an overall score. This approach aims to highlight bottlenecks rather than rank countries.
The CPIA reflects expert opinions from within the World Bank through an internal review process, allowing consideration of country context when evaluating policy effectiveness. In contrast, B-READY offers clarity and granularity in its assessments. Together, these tools can provide comprehensive insights into necessary policy improvements for enhancing business climates while considering country-specific factors.
In Sub-Saharan Africa, private sector development remains challenging. However, regional comparisons of B-READY figures may exaggerate regulatory constraints due to selected countries in the initial data round. Globally, Cluster B of CPIA indicators related to business performance aligns with IDA-eligible countries' averages. Yet, Sub-Saharan African countries scored slightly below this average.
The discrepancy mainly arises from financial services indicators within Cluster B and is mirrored in B-READY's financial services data gap between SSA countries and all IDA-eligible nations. This difference is expected to diminish as more countries are included in future B-READY phases.
Despite potentially misleading regional averages, B-READY aligns well with many CPIA findings on business environments. Among 19 jointly covered countries, a strong correlation exists between B-READY averages and CPIA Cluster B scores (coefficient of 0.71). Notably, this correlation is highest for Pillar 2 of B-READY concerning public service quality and transparency.
The detailed policy choices underpinning business environment measures in CPIA are well-reflected by B-READY indicators. For instance, specific measurements like "issuance of guidance on merger control" provide insight into policies considered during the CPIA review process.
Overall, combining CPIA with B-READY offers a comprehensive view of institutions and policies supporting private sector growth while allowing for country-specific context and detailed policy guidance for reforms.