Africa Focus: Business reforms creating jobs in Africa – report
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E-mail Xinhua, January 15, 2013
Reforms that make it easier to do business are driving employment creation across Africa, a new report by the International Finance Corporation (IFC) said on Monday.
The report released in Nairobi indicates that the private sector is the most important employment creator, creating 9 out of 10 jobs across the continent and should therefore be allowed to thrive by making it easier to invest.
"The much-needed jobs in developing countries can be created at a faster rate if policymakers and development institutions make it a priority to remove the key obstacles to growth that private- sector companies face," said Jin-Yong Cai, IFC's Executive Vice President and CEO.
The report, "Assessing Private Sector Contributions to Job Creation," said that four obstacles pose a particular challenge to job creation in the private sector. They are a weak investment climate, inadequate infrastructure, limited access to finance for micro, small, and medium enterprises; and insufficient training and skills.
"Removing these obstacles can significantly increase job creation," notes the report.
The report cites evidence based on business reforms that it helped implement in Burkina Faso, Liberia, Rwanda, and Sierra Leone that has created about 50,000 jobs in those four countries from 2008 to 2010.
The business reforms generated cost savings for the private sector, about 1 million U.S. dollars to 5 million dollar in each of the four countries, helped attract private sector investment ranging from 5 million dollars to 51 million dollars in each country, and helped increase formal registration of an additional 23,000 enterprises, of which about 10,000 were informal and chose to formalize because of the improvement in business regulations.
IFC has been helping countries in Africa implement business reforms that reduce business registration and licensing processes among others.
These reforms are encouraging more local and foreign investors to set up more formalized business as there is less bureaucracy and therefore helping to create employment.
But the report notes that African countries must work more on improving the infrastructure to help the establishing businesses thrive.
For instance, in Sub-Saharan Africa, more than one fifth or about 22.3 percent of companies said access to power was their biggest obstacle.
"Infrastructure investments can be very effective in promoting more equitable growth. If households get access to electricity, saving large amounts of time spent on household activities, women are more likely than men to substitute income-earning work for this time," notes the report.
It cites the example of South Africa where for instance, electrification of rural communities led to a 13.5 percent increase in female employment.
The report found that micro, small and medium enterprises generate the most jobs in Africa but they are also less productive, pay less, and do not offer as much training and development opportunities for employees.
It found that smaller companies are also often most affected by obstacles to job creation, meaning they are unable to grow to their full potential. Access to finance is a key constraint for the small businesses and recommends that easing it can result in significant job creation. Endi
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