Costing, Comparing and Competing: The World Bank’s Doing Business Survey and the Bench-Marking of Labour Regulation

• Jurisdiction: South Africa
• Published date: 15 August 2019
• Citation: 2009 Acta Juridica 204
• Pages: 204-234
• Author: Paul Benjamin
• Date: 15 August 2019

Costing, Comparing and Competing: The

World Bank’s Doing Business

Survey and the Bench-Marking of

Labour Regulation

PAULBENJAMIN* & JAN THERON†

University of Cape Town

I INTRODUCTION

The World Bank’s Doing Business (DB) Survey endeavours to benchmark

regulation on a variety of topics that may affect the costs of doing business

in a country, including ‘starting a business’, ‘dealing with licences’,

‘getting credit’, ‘paying taxes’, ‘enforcing contracts’ as well as ‘employing

workers’. The measurement of labour regulation, which is the focus of

this paper, is an important component of the survey. Indeed one of the

studies that provided the intellectual inspiration for the DB Survey is

exclusively concerned with labour market regulation.

1

The DB Survey, f‌irst published in 2004,

2

makes ambitious claims about

its capacity to measure and compare aspects of the legal systems of

different countries. The Survey has become the World Bank’s best-selling

publication, and has been widely used to promote legal reform aimed at

making economies more business friendly. However, there is now an

increasing body of literature, from both inside and outside of the World

Bank, which demonstrates that the methodologies used in compiling the

data on which the survey is based are inadequate for comparing and

ranking legal systems in the way in which the Survey purports to do.

3

Quantifying the costs of any form of regulation is a complex matter. In

the following section, we consider some of the methodological challenges

* Professor of Law, University of Cape Town; Director, Cheadle, Thompson & Haysom

IncAttorneys.

† Coordinator: Labour and Enterprise Policy Research Group (LEP), University of Cape

Town.

1

J C Botero, S Djankov, R La Porta, F Lopez-de-Silanes &A Schleifer ‘The regulation of

labor’ (2004) 119Quarterly Journal of Economics 1339.

2

World Bank Doing Business in 2004: Understanding Regulation (2004), available at http://

www.doingbusiness.org/Documents/DB2004-full-report.pdf (hereinafter: DB 2004).

3

For a comprehensive overview of the extensive body of literature generated in response to

Doing Business, see S Lee, D McCann & N Torm ‘The World Bank’s ‘‘Employing Workers’’

index: f‌indings and critiques – a review of recent evidence’ (2008) 147 International Labour

Review 416. The 2008 Report of the World Bank’s Independent Evaluation Group, Doing

Business: An Independent Evaluation – Taking the Measure of the World Bank-IFC Doing Business

Indicators (hereinafter: IEG Report) can be accessed at http://siteresources.worldbank.org/

EXTDOIBUS/Resources/db_evaluation. pdf.

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2009 Acta Juridica 204

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involved in costing regulation and in the more ambitious project of

comparing and ranking regulation across countries. We do so with

specif‌ic reference to labour regulation. Our discussion includes an exami-

nation of previous endeavours to assess the impact of labour regulation in

South Africa, and of the methodology developed by Botero et al, which

served as the intellectual inspiration for Doing Business. In section III we

examine in some detail the results of the DB Survey for South Africa. We

suggest that the DB Survey has made signif‌icant errors in the case of South

Africa, which are directly attributable to f‌laws in the methodology and its

informing paradigm. In this regard, we consider institutional and aca-

demic critiques of the DB approach, as well as the relevance of the DB

Survey’s ranking for an agenda for reforming labour market regulation.

We conclude that the DB Survey is of limited value in informing an

agenda for labour law reform in South Africa because of its problematic

methodology, its simplistic conception of law, and the limited and

selective scope of the topics covered in the survey.

II METHODOLOGICAL CONSIDERATIONS IN COSTING

REGULATION

The origins of the endeavour to cost labour market regulation can be

traced back to the body of economic and political thought that gave rise

to the project of ‘deregulation’, and that found its most inf‌luential

adherents in the USA and the UK under the governments of Reagan and

Thatcher. In South Africa, under the apartheid regime, this project took

the form of legislation to ‘remove restrictions on economic activity’ by

creating industrial hives where labour legislation did not apply

4

and

limited initiatives to create a special dispensation for small business.

Arguments for a special dispensation for small business resurfaced after

1994 and the impact on small business was at the centre of contention

around the adoption of the Basic Conditions of Employment Act 75 of

1997 (BCEA). This led to a government-sponsored study which tested

employer perceptions of the new law.Although the study suggested that

the impact of the BCEA would not be signif‌icant, the Minister neverthe-

less enacted a special dispensation for businesses employing ten or fewer

employees.

5

The report motivating this dispensation emphasised the

limited capacity of small businesses to comply with the new legal

4

The TemporaryRemoval of Restrictions on Economic Activity Act 87 of 1986.

5

The study was led by government’s Ntsika Enterprise Promotion Agency (NEPA), and

included a telephone survey of small entrepreneurs and qualitative interviews with small

business owners. See NEPA ‘National small business regulatory review: discussion paper’

(1999), and S Godfrey & J Theron ‘Labour standards versus job creation:An investigation of the

likely impact of the new Basic Conditions of Employment Act on small businesses’ (1999)

Monograph, Institute of Development and Labour Law,University of Cape Town.

205COSTING,COMPARING AND COMPETING

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