What Works in Business Environment Reform in Sub-Saharan Africa and South Asia Feburary 2017

DFID Country Offices currently fund around a dozen BER programmes in Sub-Saharan Africa and South Asia, with a total budget of approximately £42m per year. They are split between those implemented by the International Finance Corporation (and other parts of the World Bank), those implemented by consultancies and those directly managed by DFID. The first part of this report provides a snapshot of current programming, including recently concluded projects and those that are still in the design phase — a total of 20 programmes in 15 countries.

The second part crystallises the most important lessons learned by these programmes, drawing on 19 interviews with Country Offices and implementing agencies, as well as independent evaluations and DFID’s own monitoring documentation. The focus is on identifying practical strategies that have been used successfully to combat common challenges. Since 13 of the 15 countries covered are fragile and conflict-affected states, most of the lessons identified will be particularly relevant to these contexts.

This Evidence and Learning Note provides lessons on what works in Business Environment Reform design and programming. It identifies the prerequisites for starting a Business Environment Reform programme, suggests approaches for designing programmes to suit varying levels of political commitment and provides a range of strategies to sustain reform through political transitions.

These lessons have been distilled into four key messages:

  1. Political economy analysis which reflects a realistic assessment of the country context is the most important pre-condition to determining whether to start a BER programme, regardless of country or region.

Political economy analysis is perceived to be one of DFID’s strengths, and an important reason that it has a comparative advantage in business environment reform. This analysis is needed at both the strategic and operational level. Reform is a long-term process, and frequently not an emotive political priority for government, so many programmes have found ways to emphasise their technocratic nature, in both design and communication. Working with a wide range of partners in government — in different ministries and at less senior levels in the civil service — has insulated programmes against changes in personnel and has enabled programmes to find champions that are motivated to reform.

  1. Gender should be emphasised early in the design process to avoid bolt-on modifications after substantial design work has been done.

DFID’s promotion of gender sensitivity is badly needed in this area. Despite the clear dominance of men in positions of power both in the private sector and in reform processes such as public–private dialogue, the ways in which the rules of the game disadvantage women often remain invisible. Diagnostics must go beyond a review of discrimination on paper and investigate how the practical experience of men and women differ. An enterprise survey is one good means of doing this, whilst simultaneously providing insight on which constraints have the most practical impact on local firms.

  1. Choice of implementing agency is as important as the choice of partner and innovation in approach is increasingly common in DFID’s Business Environment Reform programmes.

Different political contexts require different implementing approaches and partners. DFID has many years’ experience of programming through the International Finance Corporation, and has learned to push for more local presence, a greater focus on the political economy of reform, and stronger gender analysis. Through its consultancy-implemented programmes, DFID is exploring innovative methodologies that address core lessons that have been highlighted repeatedly in previous evaluations. The market systems approach pioneered in Nigeria and Zimbabwe builds from a foundation of sustainability by enabling a reform ecosystem that is not powered by donor funding. The adaptive methodology applied in Democratic Republic of Congo and Nepal focuses on the political economy of reform, embracing risky experimentation to unlock more ambitious results. These experiments are still in their infancy, but both have delivered results that would not have been possible using traditional methods.

  1. Many critical design decisions are made early in the programming cycle, and Country Offices have to balance a series of trade-offs.

The programmes reviewed here illustrate that business environment reform is a slow and lengthy process that requires persistence. DFID is learning that short programmes are limited in ambition and that the extension process is often disruptive. The organisation is rightly moving towards longer programmes that use mid-term evaluations as an opportunity to suspend those that perform poorly. However, the most important achievements are clustered in the final years of a programme, and it is important during the design phase to avoid setting over-ambitious targets for the mid-point.