By Dumi Jere
As we end Women’s Month in Southern Africa and observe the cultural beauty that is our own Umhlanga Reed Dance, it is fitting to salute all the women out there today. After all, a world without women is a world that wouldn’t exist. In appreciating the work done by women, it’s equally important to look at the female entrepreneurship ecosystem.
Africa leads the world in terms of the number of women business owners. eSwatini is no exception. Like in the rest of Africa, women are more likely than men to be entrepreneurs. Women make up 58% of the continent’s self-employed population. However, a World Bank report, Profiting from Parity, shows that women entrepreneurs across sub-Saharan Africa continue to earn lower profits than men (34% less on average).
Job opportunities are relatively scarce in Africa, and this is, even more, the case for women who often have lower levels of formal education and may face discrimination in hiring practices. Additionally, women tend to be given most of the responsibility for home-based work, including childcare, so small-scale home-based businesses may be one of the few ways they can generate an income to help cover the needs of their families.
Since Africa is a world leader in women business owners, unlocking their potential will significantly contribute to our country’s growth and prosperity. So what is required to level the playing field?
Firstly, the uneven burden of childcare and social norms pushing women into less profitable sectors must be addressed as they hold women back.
For example, findings from the Democratic Republic of Congo (DRC) and Uganda pointed to sectoral segregation as an essential determinant of the gender earnings gap in entrepreneurship. In Uganda, for example, the average monthly profit in the female-dominated saloons sector is just USD 86. In contrast, male-dominated electrical sectors enjoy average monthly profits of USD 371.
Similarly, the Profiting from Parity report’s analysis finds that one-quarter of the gender gap in profits in the Democratic Republic of Congo can be explained by the fact that women operate in comparatively less profitable sectors. Therefore, exposure to male-dominated sectors through male mentors, training or work experience, and access to information on the difference in earnings available across different sectors are essential determinants of sector choice.
In addition, the private sector can be crucial in encouraging women to crossover through incubation initiatives and developing intra-firm programs.
Secondly, we need to close the educational and skills attainment gap between male and female entrepreneurs – particularly at the secondary level and beyond – to help address gender differences in strategic business decisions.
Many self-employed women have completed fewer years of education overall than self-employed men, and male entrepreneurs often have higher technical skills. However, the Profiting from Parity report shows that training programs providing traditional business skills to women entrepreneurs have had disappointing impacts on firm profits.
Moreover, new evidence suggests that we may simply be teaching the wrong skills. For example, rather than teaching traditional business skills like accounting, there is promising evidence that socio-emotional skills, such as personal initiative and perseverance, matter more. This is what we should focus on in levelling the field.
A good example Is a training initiative in Togo that taught small entrepreneurs to show initiative, be proactive, and demonstrate perseverance. Women who took the training saw a 40% average increase in their profits, compared to no significant increase for those taking traditional business training.
In training, there was one female entrepreneur who, before the training, rented wedding dresses. After receiving the personal initiative training, she expanded her clientele by selling dresses and offering accessories such as veils and gloves. She now owns boutiques in three African countries. This shows the positive results stemming from this training initiative.
Through private sector partnerships, such training could be scaled up throughout the country, both within larger firms as well as in the entrepreneurial community
Speaking of scalability, this brings us to the third and final point. The interventions to boost female entrepreneurship need to be scalable.
The World Bank has shown that low-cost, simple tweaks in project design can significantly impact women’s empowerment. For instance, a World Bank study in Malawi found that encouraging women to register their firms did not move their profits.
Yet, by combining help with registration with a simple information session at a bank and a business bank account, women significantly increased their use of a range of formal financial services, increasing profits by 20%. And this can be done at the cost of only $27 per firm. This is important in sub-Saharan Africa, where only 27% of women have an account at a financial institution.
In Ethiopia, the country’s banks successfully implemented a pilot program. The challenge was that female business owners did not have the collateral to access loans. Through a partnership with the private sector, an innovative psychometric test was introduced as an alternative to collateral.
The tests could predict the likelihood that an entrepreneur would repay a loan accurately, yielding a 99% repayment rate. Through psychometric testing, female entrepreneurs can obtain individual loans, expand their businesses, and diversify their income.
Bridging gender gaps requires identifying and implementing programs and policies that target the specific constraints that women entrepreneurs face. After all, advancing gender equality is smart economics, sound business practice, and essential development policy.
Dumi Jere is the Managing Partner at Talanta.co Consultancy Services, a management consultancy that partners with leaders in business and government to achieve meaningful, sustainable transformation.