6.1 The informal sector: Gender Entrepreneurship and Competitiveness in Africa 2007

Entrepreneurs—male or female—constitute a very small percentage of the population, according to household survey data. Almost everywhere, less than 1 percent of all women of working age (15 to 65 years old) are “employers”—that is, women who own a business in which they employ hired labor. In Africa, most working women are not “formal” entrepreneurs but are rather self-employed and own-account workers in the informal sector.

The informal sector is particularly important in Africa, and is often an entry point for broadening participation in the private sector. International Labour Organization (ILO) data indicate that the informal sector represents 48 percent of nonagricultural employment in North Africa, and 72 percent of nonagricultural employment in sub-Saharan Africa.19 Informal employment is generally a larger source of employment for women, though not in North Africa.

For example, the recently completed Gender and Growth Assessment (GGA) for Tanzania confirmed the importance of the informal sector in the economy, noting that the vast majority of businesses in the country are outside the formal legal system.

It is estimated that the number of women entrepreneurs ranges from 730,000 to 1.2 million, and are particularly found in the micro, small, and medium-sized enterprise (MSME)

sector where they make up 43 percent of the total.

Barriers to the formalization of a business—particularly lengthy and complex business registration, incorporation, and licensing practices—have a disproportionately negative effect on women, in some cases making it impossible for them to formalize their businesses.20

Women’s participation in the informal economy may help in understanding their participation in the formal sector. It has been argued, for example, that women running informal enterprises value the higher flexibility offered by the informal sector.This is confirmed by women entrepreneurs in both Kenya and Tanzania.21 One of the important reasons that women may prefer the flexibility of informal arrangements is that this flexibility makes it easier for women to manage their “double workday.” Because women usually have to assume by far the greater burden of domestic tasks, as revealed in time allocation data in Africa, their capacity to engage in economic, including entrepreneurial, activity is much more constrained.22 Moreover, the boundary between economic and household activity is less well drawn in Africa than in other regions,23 and conventional labor force data capture a much more limited share of women’s total workload than men’s.

This additional workload means that women can essentially carry out economic activities only in conjunction with or after fulfilling their domestic responsibilities.This may help to explain why, as indicated earlier, women are more likely to be involved in family enterprises that are more compatible with combining both domestic and economic activity. To learn more about this author, visit World Economic Forum's Website.

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