Self-employed micro businesses and job creation: A missed Opportunity

By Felix Mwenge and Tamara Billima

In the face of the economic slowdown, Zambia’s ‘jobs challenge’ is becoming more pressing. One big, but too often neglected, part of the response must be a focus on the smallest enterprises.

This is because in Zambia’s economy the smallest enterprises – household businesses or what economists call “micro enterprises” with very few employees – are widespread. In 2014 self-employed micro businesses accounted for 41% of total employed persons respectively. They must be a vital part of any jobs plan. 

Yet, as part of its ‘Flagship Project’ on employment, recent ZIPAR research finds policies are not helping these enterprises. Instead, the policies tend to apply more to the needs of bigger businesses – those with more than ten employees.

Policy makers are working with an inaccurate understanding of the Zambian labour market. The official definition of micro-enterprises includes those with up to 10 employees and annual turnover of up to ZMW 150,000. Yet the majority employ fewer than four people while their turnover rarely exceeds ZMW 7,200 per year.

The missed opportunity could be large. Micro businesses are considered capable of creating employment of up to 10 persons, yet 86% of them had fewer than four employees in 2012.

More tailored policies for micro businesses, supporting them to create more jobs, are required. Many existing policies, based on the official definition, miss the point. 

One classic example is that the current “Micro Small and Medium Enterprise” strategy aims to simplify the listing requirements on the Lusaka Stock Exchange for MSME’s. Good as this may sound, the size and income levels of real-life micro-enterprises would not fit into this prescription.

Access to finance, though a common problem even among SMEs, is an even bigger problem for micro businesses. They may not utilise funds through alternative sources such as the Citizens Economic Empowerment Commission (CEEC) because of their limited scale.

For example, the CEEC is currently exploring a ‘franchise initiative’ in the tourism sector as a way of broadening access to capital. But successful franchises need more than huge capital; they also need basic business know-how, which many micro enterprises lack. 

A second example involves business licencing. Self-employed micro businesses are also not exempted from obtaining the multiple licenses required to run any Zambian business. Usually, business licensing is too fragmented and administered by multiple institutions and regulatory agencies of government. Operating a restaurant for example may require separate licenses from the Council, Ministry of Health, Zambia Environmental Management Agency, Fire Department and many others. Obtaining these may be too tedious for a micro business, especially one just setting up.

The multiple licenses by different agencies of government do not only hinder self-employed micro businesses, but also reflect a lack of policy coordination which should be addressed. Business reform efforts by the Private Sector Development Reform Programme to streamline many of the business licenses to a single business levy do not seem to have solved this problem entirely. As long as these remain, there is little hope for micro businesses.

Finally, we recommend, as a starting point, that future policies recognize and define self-employed micro business as a separate, unique and disadvantaged group of businesses. This will help underpin the development of tailor made policies. 

If Zambia is to generate sufficient employment opportunities for all its population, the potential of micro-enterprises cannot be ignored.

The authors are researchers at the Zambia Institute for Policy Analysis and Research (ZIPAR).
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