Household Enterprises and Poverty Reduction in Sub‐Saharan Africa

Abstract

Employment in Household Enterprises (HEs) has been an integral part of the recent economic growth in sub-Saharan Africa (SSA). Yet employment and development strategies tend to exclude the sector, despite the fact that households with HEs tend to be richer. A good example is Mozambique, where 34% of households rely on income from this source. Analysis of household livelihoods using panel data shows that starting HEs is associated with upward wealth mobility and poverty reduction, particularly for rural and poorly-educated households. Targeted programmes directed towards the constraints to HE creation, survival and income growth would be likely to enhance the effectiveness of employment and poverty reduction strategies in Mozambique as well as in other low income countries in SSA.

Non-Farm Enterprises and the Rural Youth Employment Challenge in Ghana

“…Empirical evidence from Haggblade et al (2007Haggblade et al ( , 2010 indicates that non-farm enterprises account for about 35 per cent of rural income in Africa. Fox and Sohnesen (2016) provide an optimistic projection of 38 per cent of new employment avenues between 2010 and 2020. However, while there is some consensus regarding the relative importance of non-farm enterprises in income diversification, there is debate about the incentives for participating in these activities and their ability to create employment avenues to absorb surplus labour from the agriculture sector.…”

“…Using more robust empirical techniques and data from the northern part of Ghana, findings from Owusu, Abdulai and Abdul-Rahman (2011) indicate that non-farm work is a valuable source of income which helps in income smoothing, which is in turn useful for household consumption smoothing. Fox and Sohnesen (2016) disagree and suggest that these enterprises have existed for long periods and are therefore sustainable in the solutions they may proffer to the employment challenge. This argument may be problematic in the sense that enterprises may have existed for long durations but may still operate at the subsistence level, using low productivity technologies and largely dependent on family labour.…”

“…Also, Whitehead and Kabeer (2001) and Dercon and Krishnan (1996) contend that non-farm activities may be a source of surplus income which can be invested in productivity-enhancing methods on farms, and other forms of capital or asset accumulation. Using data from Mozambique, Fox and Sohnesen (2016) argue that non-farm enterprises offer a particularly unique opportunity for upward mobility and consumption growth for households with relatively low education levels.…”

“…Due to the diversity and dynamism within non-farm activities as well as across countries, it is imperative to have in-depth, sector-specific and country-specific analysis based on good quality panel data, before any conclusive generalisations may be put forward. Haggblade et al (2010), Rijkers and Costa (2012) and Fox and Sohnesen (2016) argue that non-farm enterprises play an important role in the rural economy, and its relative contribution to household employment and income continues to rise across the African continent. Estimates by suggest that these enterprises are expected to employ about 15 per cent of Africa's labour force; they are also expected to create millions of jobs in rural Africa over the next decade (Fox and Pimhidzai 2013;Fox and Sohnesen 2016).…”

“…Haggblade et al (2010), Rijkers and Costa (2012) and Fox and Sohnesen (2016) argue that non-farm enterprises play an important role in the rural economy, and its relative contribution to household employment and income continues to rise across the African continent. Estimates by suggest that these enterprises are expected to employ about 15 per cent of Africa's labour force; they are also expected to create millions of jobs in rural Africa over the next decade (Fox and Pimhidzai 2013;Fox and Sohnesen 2016). But what does the literature say about who is presently involved in the rural non-farm economy?…”