SELF EMPLOYMENT AND POVERTY REDUCTION IN BOTSWANA: GENDER DIMENSION AND POLICY IMPLICATIONS

Transcription

1 International Journal of Economic Issues, Vol. 4, No. 2 (July-December, 2011): International Science Press SELF EMPLOYMENT AND POVERTY REDUCTION IN BOTSWANA: GENDER DIMENSION AND POLICY IMPLICATIONS S. M. KAPUNDA Associate Professor in Economics, University of Botswana, P/Bag 0022 Gaborone. B. D. MOFFAT Senior Lecturer in Economics, University of Botswana, P/Bag 0022, Gaborone. The thrust of this study is to examine gender-wise the role of self-employment in poverty alleviation in Botswana. The article has shown empirically that self-employment has increased faster than paid employment in the past 2 decades or so. Women who are, on average, poorer than men dominate mostly small self-employment activities. Policy recommendations have been provided to ensure that they can embark on large self-employment enterprises (with many employees) thereby contribute significantly to poverty reduction. 1. INTRODUCTION Self-employment as a percentage of total labour force has recently increased significantly in Botswana in the past 2 decades or so. A similar trend may be observed in many other countries. One aspect of the main explanation possibly hinges squarely on increasing unemployment rates and high poverty levels especially among women. For a long period the education systems in many African countries including Botswana have been essentially geared towards paid employment and white collar jobs. However, with a rise of the educated population unemployment rates have been generally increasing. In Botswana, for instance, unemployment rate increased from 13.9 per cent (1991 census) to 19.5 per cent (2001 census).the 1995/96 labour force survey estimated the rate at 21.5 per cent and the most recent nation wide household income and expenditure survey (HIES) estimated the unemployment rate at 23.8 per cent in 2002/ 03. Self-employment is a positive response to the above-shown trends. Although the poverty rate has been declining over time it is still somewhat high (30 per cent as per 2002/03 HIES).Over the period the unemployment rates and poverty levels have been generally higher among females. These trends pose a great challenge to the Botswana s Vision which aims at attaining full employment and eradicating absolute poverty to all men and women by the year The main objective of this article is to examine gender wise the role of self employment in poverty alleviation in Botswana. The ultimate aim is to provide

2 310 / INTERNATIONAL JOURNAL OF ECONOMIC ISSUES recommendations which are expected to be useful to policy makers, practioners, researchers and the general public. Empirical studies on self employment and poverty reduction in Africa and Botswana in particular are scarce. Those focusing on gender perspective are hardly seen. However, many of the studies analyze tangentially self-employment when discussing the informal sector employment. This study focuses on self-employment per se and relates it to poverty reduction in Botswana. The study, therefore, contributes positively to the limited stock of such studies. Furthermore, its emphasis on the gender perspective of self- employment and policy implications remains a special contribution. Although the policy implications and recommendations are made with reference to Botswana they are likely to be relevant to many African and other countries. The rest of format of the study is as follows: Section 2 deals with the conceptual framework. Section 3 presents an overview of self-employment trends in various countries especially African countries including Botswana. Methodology is provided in Section 4. Section 5 examines and interprets the empirical findings for Botswana. Socio-economic, policy implications and recommendations are outlined in Section 6. Section 7 summarizes and concludes the study. 2. CONCEPTUAL FRAMEWORK The conceptual framework of this study is based on the premise that the role of selfemployment activities in poverty alleviation especially among women is significant. Several theoretical propositions form the theoretical framework of the study. The following propositions are in order. Self employment has been increasing in the recent decades so has its role in poverty reduction. In many African countries self-employment is dually related to education. Firstly, people with low educational status (never attended, possess non-formal education and attended primary education) tend to opt for self-employment. This is comparable to what Kuhn et al (1998:3) calls employment of last resort after failing to obtain paid employment. Secondly, those higher formal education (secondary and above) tend not to opt initially for self-employment because they expect paid and white collar jobs. Furthermore, they are not trained for self-employment and have limited vocational education and similar skills. However, as Kreb et al (1994:4) found out in some countries like Brazil many of such employees take formal sector jobs to accumulate human and financial capital and quit before retiring age to open their own business. Nevertheless, many educated workers in Africa tend to join self-employment after retirement. Given the liberal education system and limited vocational education and skills compounded by limited capital some of them end up into frustration and early death. Since low education is generally positively correlated with poverty most women who are, on average, poorer than men (Kapunda 2006, 2005, Mmolawa 2002) tend to opt inevitably for self-employment. This also applied to the

3 SELF-EMPLOYMENT AND POVERTY REDUCTION IN BOTSWANA: GENDER DIMENSION AND / 311 unemployed, retired and poor, and other vulnerable groups. It follows from this proposition that unemployment, poverty and low education tend to be positively correlated to self-employment. Men and women entrepreneurs with high level of formal education and greater experience are more likely to embark on large projects than those with lower formal education (Rutashobya 1998).This essentially because they have accumulated significant human and financial capital. Capital or liquid constraints limit the poor from embarking on such serious projects. See for instance, Blanchflower (1998) and Mosotho (2003). Women especially in Africa tend to shy away from certain education types like vocational education and from jobs which are traditionally considered being male jobs like construction (BIDPA 1997).This is one of the constraints to female self-employment. Many governments frequently see self-employment as a route out of poverty and disadvantage and for this reason offer aid and assistance for small business. The justification for these action is usually that this will help promote invention and innovation and thus create new jobs; new firms may also raise the degree of competition in the product market bringing gains to consumers; and greater self-employment may also go along with increased self-reliance and well-being. (Blanchflower 1998:2). 3. OVERVIEW OF SELF-EMPLOYMENT TRENDS IN VARIOUS COUNTRIES (INCLUDING BOTSWANA) 3.1. Introduction As pointed out earlier in Section 1 empirical studies on self-employment in Africa and in Botswana in particular are scarce. However, many of the studies analyze self employment under the informal sector employment concept or entrepreneurship. Many of them tend to show that informal sector employment (hence, implicitly, selfemployment) has been increasing in the past three decades or so (Davies 1978; ILO 2000; Kapunda 2006; Mosotho 2003; Mukras 2003; Mwamba 2004 and Sunny et al, 1994) The Case of Africa and Elsewhere According to ILO (2000) the informal sector has been a major provider of urban jobs in Africa for along time. By 2000 the informal sector was accounting for over 60 per cent of the total urban population in Africa as a whole. In Africa the informal sector is substantial and it is like a parallel economy. On average the informal economy was estimated to have been 42 per cent of Gross Domestic Product (GDP) in 1999/2000. Zimbabwe, Tanzania and Nigeria were at the high end with 59.4, 58.3 and 57.9 per cent respectively. At the lower end it was Botswana and Cameroon with 33.4 and 32.8 per cent respectively (Mwamba 2004:28). Kapunda (2006) has shown that despite globalization and fierce competition the informal sector or small and medium enterprises have recently played a major role in

4 312 / INTERNATIONAL JOURNAL OF ECONOMIC ISSUES poverty reduction through employment and income generation especially in rural areas of Africa where the majority of the people live. Similar views were given by Mukras (2003) and Mwamba (2004). In Tanzania, between the past two labour force surveys: 1990/91 and 2000/01 informal sector employment grew by about 56 per cent. Self-employment grew by around 73 per cent while paid employment declined by 100 per cent. It is worth noting that self-employment formed about 83 per cent of total informal employment in 1990/ 91 while it comprised of about 93 per cent in 2000/01. For details see Table 1. Table 1 Employment in the Informal Sector in Tanzania (Numbers in Millions) Type of employees 1990/ /01 % change Paid employees Self-employees Unpaid helpers Total Informal Employment Source: 1990/91 and 2000/01 Labour Survey (United Republic of Tanzania 1992, 2002). As Mwamba (2004:32) argued the informal sector in Tanzania had been growing rapidly due to the restructuring of the economy and the process of retrenchment in the government and parastatal sectors. Thus the limited ability of the formal sector to create adequately job opportunities led to the growth of the informal and selfemployment activities. Poor people especially women took advantage of the growing informal sector. Teal (2006:41) has also noted that the surveys carried out in Tanzania and Ghana indicate that an increasing number of people, including young people and women are finding work in the self-employment sector. In Kenya it is estimated that employment in the informal small enterprises rose more than three-fold between 1981 and 1991 and the growing trend is still positive. Most of the enterprises are carried out on a self-employment basis managed by both men and women (Kapunda 2006:556). Interestingly enough, even in some of the more developed countries (MDCs) selfemployment has been increasing over time. In England, for instance, self employment as a percentage of total labour force grew from 6.6 per cent in 1966 to 12.4 per cent in In New-zealand it rose from 13.9 per cent to 19.1 per cent while in Portugal it increased from 24.1 per cent to 26.3 per cent in the same period (Blanchflower 1998: 27). Projections to 2010 also show increasing trends. For details see Table 2. Table 2 Self-Employment as Percentage of Total Labour Force in Selected Countries Country * New Zealand Portugal United Kingdom United States of America Source: Blanchflower (1998:30) Note: *2010 are projections.

5 SELF-EMPLOYMENT AND POVERTY REDUCTION IN BOTSWANA: GENDER DIMENSION AND / 313 The study also showed that the least educated have the highest probability of being self-employed. However, evidence showed that the most educated also have relatively high probabilities. Branchflower also showed that the probability of being self-employed is higher among men than women and rises with age. Furthermore, some governments continue supporting self-employment. In UK and France for example, government programmes provide transfer payments to the unemployed while they attempt to start business. Government also provide loans to small business and even exempt small business from certain regulations and taxes.futhermore many states and municipalities in the US had programmes which encourage minority and female owned small business ( Blanchflower, 1998:2) A study by Kuhn et al (1998) shows that between 1982 and 1995 there was a 70 per cent increase in self-employment in Canada compared to a 45 per cent increase in paid employment. The study also indicates that relative strong rate of job creation among labour market researchers both in Canada and abroad who have considered macroeconomic conditions, tax policy demographic and industrial structure are some of the reasons for the increase in self-employment. Additionally, the study argues that the increase in self-employment among women is attributed to an increase in their skills and experience (Kuhn et al, 1998:3). Another interesting note is that in some countries women form organizations or associations relevant to self-employment. The Self-Employment Women s Associations (SEWA) in India was established about 30 years ago represents 700,000 women working in the informal sector. As Mwamba (2004: 40) clarifies SEWA organizes home workers, street vendors, pepper pickers, refuse collectors and the like. The association has created an infrastructure of flanking services: a bank providing micro credit, a vocational and trade union training programme at different levels, producers co-operatives (artisans and agricultural producers), service co-operatives (health, housing). In South Africa, the Self-Employed Women s Union (SEWU) has been organized along the same lines The Case of Botswana The spirit of self-reliance and the implied self-employment are consistent with the four national principles of democracy, development, unity and self reliance that have guided development in Botswana since independence in 1966 (Republic of Botswana 2005:2). The visible problem of unemployment especially among the youth since the 1970s justified the need for self-employment spirit. Thus the 1977 National Policy in Education was introduced essentially to attempt to prepare students to productive life. As the policy underscored, schools would have to prepare students for a useful productive life in the real world whether in paid employment or self-employment through relevant bias to the curriculum (Hoppers 1984:21 ). As a result, a focus on work-related skills was to follow the basic education and was provided through brigades or other non-formal programmes organized by non-governmental agencies (Hoppers 1984:22). However, with the time the brigades and other programmes could not solve the youth unemployment problem essentially due to their increased numbers.

6 314 / INTERNATIONAL JOURNAL OF ECONOMIC ISSUES The National Development Plan 5, (NDP5), however, had formally spelt out the role of self-employment and non-formal employment as follows: In the long run higher incomes for Botswana will depend on the availability of more productive work for Botswana. This means that only formal employment must be expanded, but also that new opportunities for non-formal employment and self-employment must be provided (Republic of Botswana, NDP5: 1980: 67). Today the thorny unemployment problem and the poverty incidence among the youth including young women is still great. Considering the national vision s goals of eradicating absolute poverty and attaining full employment by the year 2016 (Republic of Botswana 1997:8) there is a great need to find a solution to the problem. Self-employment contributes significantly to the solution. Thus there is a great need to emphasize it. As noted earlier the literature on self-employment in Botswana is scarce. This study is one of the attempts to reduce the scarcity intensity. However as an overview two references examining self reliance in Botswana through informal sector approach are in order. Sunny et al (1994) found that the distribution of owners of small or micro enterprises (dominated by self-employment owners) was managed by low education owners (about 80 per cent) in Botswana. The distribution of owners of the micro enterprises by education attainment and by gender is shown in Table 3. The study also indicated the following: Women with low education (never attended school and primary school) tend to dominate marginally ownership of the enterprises. Men entrepreneurs with technical education outnumber women entrepreneurs with such education. Women dominated in managing micro and small enterprises (MSEs) in Botswana. Women entrepreneurs were mostly concentrated in trade (almost threequarters concentration) followed by manufacturing and services. The study further argued that the dominance of micro enterprises in Botswana was historical. As it had been there even in the earlier years. The study suggested two possible reasons for the female dominance. Firstly, was the possibility for a higher rate of unemployment among women compared to their male counterparts. Women lacked not only formal training but also industrial skills and therefore relevant experience which made it more difficult for them to locate jobs in the sector of the economy. Hence the MSEs provided the necessary and readily available safety net for such otherwise unemployable women. Secondly, it was possible that the significant percentage of MSEs were actually owned by absentee owners mainly husbands or boyfriends who were involved in other economic activities elsewhere in the country or elsewhere who normally provided the initial capital to start the small business (Sunny et al (1994:43). A recent study Modisaotsile (2010) revealed that with regard to performance (profitability) female owned enterprises perform worse than those owned by men. See also Kapunda et al (2010).

7 SELF-EMPLOYMENT AND POVERTY REDUCTION IN BOTSWANA: GENDER DIMENSION AND / METHODOLOGY 4.1. Data Sources The study makes intensive use of data from the most recent nation-wide household income and expenditure Survey (HIES) carried out from June 2002 to August 2003 and the most recent informal sector (2007) in Botswana. For the sake of comparability analysis data from the main earlier informal sector (1999) and nation-wide surveys, namely the 1985/86 and 1993/94 surveys, have also been used. Futhermore, the study uses secondary data from various documents and literature from the main University library, Central Statistics Office (CSO), government departments and other sources Hypotheses/Theoretical Propositions The following pro-gender hypotheses/propositions arising mainly from the conceptual framework are examined closely and empirically in this study: (i) (ii) Self-employment as a percentage of labour force has increased in the recent decades for both men and women Self-employment has grown faster than paid employment in the recent decades for both sexes. (iii) Self-employment as a percentage of labour force is higher for female than for men. (iv) There are more women managing small enterprises or business than men Method of Data Analyses Data analysis involved statistical techniques and computation leading to cross tabulation, frequencies and percentages. 5. EMPIRICAL FINDINGS OF THE STUDY 5.1. Self-employment Trends Self-employment, as a percentage of labour force, has increased in the past two or so decades for both men and women in Botswana. As noted from Table 3 it increased by about 31 and 5 per cent for men and women respectively, while the increase for both sexes was about 16 per cent. Table 3 Self-Employment as Percentage of Total Labour Force Across Gender (1985/86 and 2002/03) Gender 1985/ /03 % change Male Female Both sexes Source: Calculated and Compiled by the authors from the 1985/86 and 2002/03 Survey data. Despite the relatively low increase for female the absolute percentage for female in 1985/86 and 2002/03 were higher than those of men. It is also worth noting that at

8 316 / INTERNATIONAL JOURNAL OF ECONOMIC ISSUES national level and for both sexes self-employment in Botswana has grown faster than paid employment in almost decades. Between the 1985/86 and 2002/03 nation-wide household income and expenditure surveys while self-employment for both sexes increased by almost 16 per cent paid employment increased only by about 3 per cent as indicated in Tables 4 and 5. Although the increase in paid employment was high for women the average is low due to almost no change of the paid employment for men. For details see Tables 5 and 6. Table 4 Paid Employment as Percentage of Total Labour Force Across Gender 1985/86 and 2002/03 Gender 1985/ /03 % change Male Female Both sexes Source: Calculated and Compiled by the authors from the 1985/86 and 2002/03 Survey data Findings from the 2002/03 Nation-wide Household Survey Data According to the most recent nation-wide household income and expenditure survey (HIES 2002/03), the number of economically active persons aged 12 years and above (labour force) was 606, 826.Out of this, 56,328 (9.3 per cent) were in self-employment (running their own businesses). 6.4 per cent of the males were in self-employment while 12.4 per cent of the economically active females were in self-employment. For details see Table 5. Table 5 Self-employment as Percentage of Total Labour Force (2002/03) Location Gender Cities/Towns Urban villages Rural National Male Female Both Sexes Source: Calculated and compiled by the authors from 2002/03 nation-wide household income and expenditure survey data. Interestingly enough, the magnitude of these figures are comparable to some of those for MDCs like UK cited in Section 3.2. The percentages of females in self-employment are significantly higher than those for males. This has been the case since the 1985/86 nation-wide household income and expenditure survey. This points to the historical female dominance of self-employment activities. The trend seems to be the same across location strata (rural and urban) in all the three major nation-wide household surveys as illustrated in Tables 5 and 6.

9 SELF-EMPLOYMENT AND POVERTY REDUCTION IN BOTSWANA: GENDER DIMENSION AND / 317 Table 6 Self-employment as Percentage of Total Labour Force Across Gender and Location Strata 1985/86 and 1993/94 Location Gender Cities/Towns Urban Villages Rural National Male (1985/86) Female (1985/ Both sexes (1985/86) Male (1993/94) Female (1993/94) Both sexes (1993/94) Male (2002/03) Female (2002/03) Both sexes (2002/03) Note: Not tabulated for that year. Source: Calculated and compiled by the authors using 1985/86, 1993/94 and 2002/03 HIES data. The table also shows that self-employment as a percentage of labour-force increased from 8% in 1985/86 to 9.3% in 2002/03. Apart from historical reasons the higher self-employment percentage for females is mainly due to their higher unemployment rates. In 2002/03 unemployment rate was 23.8 per cent for the nation. The unemployment rates for males and females were 21.4 and 26.3 per cent respectively. As noted in the conceptual framework there seems to be a positive correlation between self-employment and unemployment rate (see also Table 7). This is possibly because many unemployed people take self-employment as last resort.the higher unemployment rates for females stems from other related factors especially lower disposable incomes and implied poverty and lower education levels. Table 7 Self-employment and Unemployment Rates 2002/03 Gender Self-employment Unemployment Rate Male Female Total Source: Calculated and compiled by the authors from 2002/03 HIES. For details see Table 8. Table 8 Basic Household Economic Characteristics in Botswana (2002/03) Characteristics Male Female Total Mean monthly cash disposableincome (Pula)* Percentage of heads of households with secondary education Vocational education enrolment ** Unemployment rate (%) Notes: *IUS $ = 5 Pula ** Estimates for individuals rather than households. Source: Calculated and complied by the authors from 2002/2003 HIES data and data from Ministry of Education.

10 318 / INTERNATIONAL JOURNAL OF ECONOMIC ISSUES Regarding self-employment with and without employees is concerned the following trend is worth noting. Across all location strata women dominate in self employment activities with no employees. These are normally small scale enterprises. For illustration see Table 9. Table 9 Percentage of Self-Employment With or Without Employees Across Gender and Location Strata (2002/03) With no Employees Self-Employment Households With Employees Gender Cities/ Urban Rural Total Cities/ Urban Rural Total Towns villages Towns villages Males Females Both Sexes Source: Calculated and compiled by the authors using 2002/03 HIES data. The majority of households managing small-scale enterprises (mainly women) have no more than secondary education and have limited vocational education. Additionally, their household sizes are relatively large and yet have limited capital and disposable. However, the number of households depending on these small-scale enterprises are almost 3 times the households headed by relatively large self-employment enterprises with employees. For details see Table 10. Table 10 Households Size and Income by Heads Level of Education, Category of Self-employment and Paid Employment 2002/03 Self-Employment Household s socio-economic characteristics With employees Without employees Paid employment Mean household size Mean monthly disposable income (Pula)* Number of households who attended 25,531 8, ,317 secondary education (percentage)** Note: *1US$ = P5 (2002/03) **Percentage of households in the stated category. Source: Calculated and compiled by the authors using 2002/03 HIES data. The 2007 Informal Sector Survey also tend to show the same trend. The majority of most women are self employed without employee. For detail see Table 11. This trend fortifies the last hypothesis and is a reflection of women status as expressed in most of the earlier hypotheses. On the other hand men dominate the relatively large self employment enterprises which employ more people, thereby contributes significantly to poverty alleviation. The role of self-employment in poverty reduction in Botswana is therefore still limited. It can be enhanced if self employed entrepreneurs especially women are given more support by government and non

11 SELF-EMPLOYMENT AND POVERTY REDUCTION IN BOTSWANA: GENDER DIMENSION AND / 319 Table 11 Employed Population in Business Households by Employment Status and Gender Employment status Male Female Total % Total % Employees 17,289 16,521 33, , Self employed without employees Self-employed with employees 7,106 21,326 28, , Family business 6,599 3,713 10, , Land/Cattlepost Not stated 562 1,286 1, , , , , Total 33,818 43,423 77, , Source: Adopted by authors from CSO (2009:29) government agencies. Women with provision of more income, capital and education can embark on large projects than the current situation and contribute more to poor reduction. This is elaborated in the subsequent section. 6. SOCIO-ECONOMIC POLICY IMPLICATIONS AND RECOMMENDATIONS From the empirical analysis and the conceptual framework the following policy implications and recommendations are in order. 1. Since self-employment can play a significant role in Botswana where unemployment is still high given the nation s goals of attaining full employment and eradicating poverty in the next ten years or so, it is recommended, as at least a short-term measure, that government and nongovernmental agencies should increase their support to self-economic activities especially those which contribute to poverty reduction (through employment) and government revenue (through taxes).special support should be given to women who, hitherto, have dominated self-employment enterprises despite their limitations of incomes, capital and education. However, their participation is mainly in small projects. The following recommendations are therefore in order: (a) Women should be encouraged to manage not only small scale enterprises (with no employees) but also large self employment enterprises (with employees).encouraging and supporting measures should include availability of credit opportunities as elaborated in the subsequent recommendation. (b) Credit should be made available by financial institutions to entrepreneurs (especially female ones) to promote projects and economic activities which increase their purchasing power and that of the poor. The current main credit agency in Botswana (Citizen Entrepreneurial Development Agency CEDA) should give priority to women in providing subsidized loans.

12 320 / INTERNATIONAL JOURNAL OF ECONOMIC ISSUES 2. As the cited cases of women associations and unions in India and South Africa, women entrepreneurial associations or self-employment associations and unions should be promoted at national or sub-national levels in conjunction with some networks on different activities performed such as tailors associations, food vendors association, handcrafts associations and the like. 3. Since vocational and entrepreneurial education is important on embarking in self-employment activities and since the current formal education system is geared towards liberal education effort to change and implement more practical and entrepreneurial education should be made by the government and education institutions with a long term goal of attaining balanced education. Additionally, special endeavour should be made by the government and vocational institutions to enrol more women in technical/vocational education which has been traditionally considered to be education for males. Furthermore, women should stop shying away from such education. Although these policy implications and recommendations are made with reference to Botswana they are likely to be relevant to many other countries. 7. CONCLUSION This article has examined gender-wise the role of self-employment in poverty reduction in Botswana. The article has examined empirically the hypotheses centred on women s constraints in entrepreneurship. It has been argued that the role of self-employment in reducing poverty in Botswana is still limited. This is because the majority of selfemployment enterprises is small and cannot expand employment significantly. They are mainly managed by women. The role of self-employment in poverty reduction can therefore be enhanced by giving women entrepreneurs more support in terms of income, capital, and education especially vocational education. This and other socioeconomic policy recommendations relevant to poverty reduction have been elaborated in this article. Although the given recommendations refer to the case of Botswana, they are possibly relevant to many African and other countries. References BIDPA (Botswana Institute of Policy Analysis) (1997 ), A Study of Poverty Alleviation in Botswana, Gaborone: BIDPA. Blanchflower, D.G. (1998), Self-employment in OECD Countries Canadian International Labour Network (CILN) Conference Proceedings, Ontario, Burlington. CSO (Central Statistics Office) (2009), Informal Sector Survey 2007, Gaborone: CSO. CSO (2004), Household Income and Expenditure Survey 2002/03, Gaborone: CSO. CSO (1995), Household Income and Expenditure Survey 1994/95. Gaborone: CSO. CSO (1988), Household Income and Expenditure Survey 1985/86. Gaborone: CSO. Davies, R. (1978), The Informal Sector: Solution to Unemployment. London: Catholic Institute for International Relations. Hoppers, W. (1984), After training, Youth Training and Self-Employment in Botswana and Zambia. Lusaka: Research Report to the Commonwealth Youth Programme, African Centre.

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