2. Professional Services in Eastern and Southern Africa
Filling
information gaps
Collect and analyze data
on:
- Professionals
- Prices/ wages
- Trade flows
- Trade barriers
- Regulatory measures
- Education
requirements
- Immigration rules
Addressing
knowledge gaps
- Provide impact on
performance indicators
- Provide information on
regulatory impact
assessments
- Propose guidance on
trade and regulatory
reforms, including good
practice
- Facilitate networking
and information
exchanges, especially
South-South exchanges
Addressing
political economy
constraints
- Translate knowledge
into policy choices
- Identify interests and
preferences of various
actors
- Facilitate direct
engagement of
stakeholders
- Provide platform for
national and regional
dialogues
Challenge: integrating professional markets while achieving regulatory objectives efficiently
3. Filling information gaps
• Business surveys - Users and providers of professional services
in COMESA (more than 2200 firms)
• Self-assessment and diagnostics:
• Regulatory frameworks - Regulatory surveys sent to
professional associations
• Trade policies – Surveys sent to Ministries of Trade and
Ministries of EAC in East Africa
4. Providers’ survey sample, by sector and firm size
Micro (1-4
employees)
Small
(5-19)
Medium
(20-99)
Large
(100+) Total % sample % available
universe
Accounting 91 150 52 3 296 25% 18%
Architecture 102 115 40 13 270 23% 16%
Engineering 78 141 78 21 318 27% 64%
Legal 92 167 34 5 298 25% 2%
Total 363 573 204 42 1,182 100% 100%
% sample 31% 48% 17% 4% 100%
% available
universe 10% 69% 15% 6% 100%
5. Users’ survey sample, by industry and firm size
Micro
(1-4
employees)
Small
(5-19)
Medium
(20-99)
Large
(100+)
Total
%
sample
%
available
universe
AgriBusiness 40 68 44 11 163 15% 26%
Construction 18 62 50 13 143 13% 6%
Manufacturing 33 77 47 15 172 16% 10%
Mining 4 13 17 4 38 3% 1%
Services 147 262 137 38 584 53% 57%
Total 242 482 295 81 1100 100% 100%
% sample 22% 44% 27% 7% 100%
% available
universe
21% 58% 15% 5% 100%
6. Availability of professionals varies across
countries and sectors
Differences in endowments suggest that potential for regional services trade is significant
0
20
40
60
80
100
120
Number of professionals per 100,000 inhabitants
Lawyers
Accountants
7. How much do professionals earn?
Mean Min. Median Max.
Market exchange rate:
Manager 1,096 52 800 11,864
Senior 727 43 516 6,356
Junior 415 36 286 4,449
Purchasing power parity:
Manager 1,595 76 1,295 11,268
Senior 1,063 64 815 6,521
Junior 608 46 439 4,345
-
500
1,000
1,500
Average monthly salary of senior professionals
Market exchange rate
Purchasing power parity
(USD)
8. Professional services contribute to export
diversification in Africa
23%
17%
11% 11%
Legal (298) Accounting (296) Architecture (268) Engineering (317)
Proportion of exporting firms
(source: World Bank survey, 2012 ; sample size in parentheses)
Average across
sectors: 16%
10. Top export destinations of African professional
services firms – strong regional dimension
47%
16%
13%
10%
8%
5%
1%
Sub-Saharan Africa
Europe
MENA
North/South America
Russia/India/China
Other Asia
Australia/N.Zealand
Main export destinations, by region
15%
12%
11%
10%
8%
4%
4%
4%
4%
3%
3%
3%
3%
15%
South Africa
Uganda
Rwanda
Kenya
Tanzania
Zimbabwe
Zambia
Botswana
Mozambique
Namibia
Malawi
Congo, DR
Seychelles
Rest of SSA
Main export destinations in Sub-Saharan Africa
11. Exporting vs non-exporting professional firms
Non-exporters Exporters Whole sample
Years operating 10.9 13.6 11.3
Number of employees 13.9 19.7 14.8
Some foreign ownership 22% 34% 24%
Main client – multinationals/large
firms*
26% 39% 28%
Main clients – micro/small firms* 40% 25% 37%
Firms with foreign employee(s) 11% 23% 13%
Average salary partners/managers
(USD)
1,049 1,330 1,096
Average salary senior professionals
(USD)
703 841 727
Average salary junior professionals
(USD)
401 483 415
Average labor productivity 16,398 17,804 16,621
* percentages taken
across the total answers
provided by respondents
for a question asking
them to select up to
three main types of client
12. Foreign ownership and employment of foreign
professionals
0%
20%
40%
60%
80%
100%
Foreign ownership, by country
No foreign ownership 1-24% 25-49% over 50%
0%
10%
20%
30%
40%
50%
60%
Proportion of firms with foreign employee(s)
13. Liberalizing services trade would facilitate
access…
• Not permitted since commercial presence
required to perform most accounting and
auditing activities
Mode 1
(cross-border delivery)
• Foreign ownership restrictions: ownership by
non-locally licensed professionals not allowed
• Restrictions on activities that can be performed
by foreign accounting professionals
Mode 3
(commercial presence)
• Discretionary limits (labor market tests & econ.
needs tests) for foreign-licensed accountants
Mode 4
(presence of natural
persons)
Typical explicit barriers to trade in accounting services
15. …but must be complemented by reform to improve the efficiency of
domestic regulation to enhance competition
Entry Regulation
University degree
and practical
training required
Bar exam
requirement and
Continuing
education
obligation
Compulsory
membership in the
professional bar
Scope of exclusive
rights: 9 out of 10
Conduct Regulation
Price regulation :
Binding minimum
and maximum
prices
Advertising is
prohibited
Restrictions on
type of
corporation
Absence of quality
control
instruments
Typical regulation of legal services
•An agenda for regional cooperation
16. Restrictions that hurt professional services
providers in Africa
0%
5%
10%
15%
20%
25%
Qualification
requirements and
licensing
procedures
Restriction on
foreign ownership
Administrative
procedures to start
a business
Regulations for
foreign suppliers
Regulations related
to competition
Regulations related
to public
procurement
Proportion of professional services firms citing each category
of foreign regulation as the most constraining
Non-exporters
Exporters
27. How much do Regulations Matter?
• Domestic regulations that matter:
– Price and fee regulation or advertising prohibition critically reduce the
export probability of domestic firms: 10% increase in perception of a
constraint being severe decrease the odds ratio of the probability to
export by 0.3%
– Administrative requirements for starting up
• Foreign regulations that are critical: non-transparent public procurement
processes in foreign markets and limits on foreign investments have a
strong negative impact on a firm’s decision to export
- Limits on investment
- Transparency in public procurement: 10% increase in perception of a
constraint being severe decrease the odds ratio of the probability to
export by 0.4%
- Administrative requirements for starting up
28. How much do Regulations Matter?(contd.)
• Cross border regulations do not seem to hinder
participation in exports –
– confirms the findings of business surveys which
show that a large proportion of African firms prefer
exports of professional services via mode 1,
– broadly in agreement with findings which show that
technological advances have made it possible to
trade certain services unobstructed by regulatory
impediments
• Remaining puzzle: regulations restricting
multidisciplinary activities do not hinder
participation in exports?
29. Information on trade and regulatory
experiences, RIAs, good practices
• EU Single Market experience
• Mobility for engineers in Europe: EU engineerING card
• Recognition of professional qualifications in the EU: Federation of
European Accountants
• OECD principles on key market-oriented and trade-and-investment-
friendly regulation: joint World Bank – OECD work on regulatory patterns
• APEC-OECD Integrated Checklist on Regulatory Reform
• ASEAN Mutual Recognition Arrangement frameworks on accountancy and
engineering services
• West Africa experience
• Formal/informal networking and information exchanges between
national, regional and international stakeholders
• Pan African Federation of Accountants Conference: trade issues discussed
by professional associations
30. National reform and regional cooperation could
better integrate the market for professional services
National level reforms could include:
• Relaxing entry requirements, e.g. by narrowing the scope of exclusive
tasks
• Eliminating restrictions on competition, e.g. price regulation; advertising
prohibitions
• Reduce costs of access to & improve quality of education
And at the regional level:
• Removing trade barriers, e.g. allowing commercial presence, movement
of natural persons
• Increased regulatory cooperation, e.g. mutual recognition of
professional qualifications; development of appropriate regional
standards
• Creation of regional education and training hubs
31. Addressing political economy constraints
• Workshop on Legal Services Liberalization and Reform in Eastern and
Southern Africa:
• Champions of the legal profession and representatives of bar
associations in Africa
• What are the economic opportunities generated by reform and
regional integration and the cost of maintaining the status quo?
• Proposal on instrument to facilitate the movement of legal
professionals on the continent, including the development of a
regional license, to be adopted by countries wishing to reform the
legal sector
• Support to implement the Mutual Recognition Agreements (MRAs) in
accounting and architectural services in East Africa
• Detailed benchmarking of academic and professional qualifications
• Technical assistance activities
32. Next Steps: Regional and Sectoral Expansion
• Professional Services Knowledge Platform
• Extend to Central and Western Africa
• Support the Accelerated Economic Integration Initiative –
Malawi, Mauritius, Mozambique, Seychelles and Zambia
• Platform to support Coordinated Infrastructure and Transport and
Logistics Policy Reform
• Trade Facilitation and Border Performance
• Regulatory Reforms
33. Thank you!
Antoine Coste acoste@worldbank.org
Nora Dihel ndihel@worldbank.org
Arti Grover agrover1@worldbank.org
Reports and policy notes available at
http://www.worldbank.org/afr/trade
Editor's Notes
commercial presence
Explicit trade barriers remain present, more so in certain sectors (e.g. legal): - outright prohibition (e.g. nationality requirement) -> e.g. only nationals can practice law in Ethiopia (also banking, insurance, etc.) - restrictions (e.g. labor market test for mode 4, limited number of licenses available for foreigners, joint venture requirement for mode 3) -> e.g. provision of accounting services through mode 1 not allowed in Kenya; foreigners cannot own more than 50% of an accounting firm in Tanzania, ownership by non-locally licensed professionals is not allowed - restrictions on certain modes / types of services (e.g. domestic law, public procurement) -> e.g. August 2012, Bar Association of Seychelles protested draft amendment to “Legal Practitioners Act” because (i) would make it harder for foreign lawyers to practice their law in Seychelles, seen as important for offshore industry (ii) would make it easier for foreigners to practice Seychelles business law, arguing that removing 2-year local pupilage requirement would allow unqualified practitioners to enter domestic market and bring down professional standards (bill withdrawn from parliament)Even when allowed, length of procedures to get licenses can act as disguised barrier when excessive (e.g. >1 year).Main fear is to be flooded by foreign professionals stealing local professional’s jobs, but not necessarily only dynamic at play: e.g. Zambian law firm not necessarily willing to enter foreign markets per se but more interested being able to better support clients who have a regional focus, would hire local firm to get needed local knowledge.Policy level: been addressed by GATS-type negotiations of services commitments for different modes in several RECs but (i) limited progress and implementation issues (ii) not enough to facilitate movement of professionals/services and integration of regional markets… other dimensions matter
