Promoting Entrepreneurship in Botswana: Constraints to ...

1 Report No. 59916-BW Promoting Entrepreneurship in botswana : Constraints to Micro Business Development March 2011 Financial and Private Sector Development Africa Region and The botswana Institute of Development Policy Analysis (BIDPA) Document of the World bank Table of Contents Acronyms and Abbreviations .. iv Acknowledgement .. v Executive Summary .. i 1. Introduction .. 1 Why should we care about microenterprises? .. 1 The Pilot survey .. 2 Objectives of this report .. 3 Organization of the report .. 5 2 Profile of the microenterprise sector .. 5 What do microenterprises do?

2 Where? And how do they do it? .. 5 Who are the micro-entrepreneurs? .. 14 Capability groups of microenterprises .. 24 3 Constraints to micro-business development .. 43 Informality, productivity and access to services .. 43 Access to services and markets .. 49 Constraints to the growth of active microenterprises .. 66 4 Conclusion: lessons for the design of market assessments for services .. 68 References .. 73 List of Figures Figure 1: Registration and licensing status by tax registration status .. 10 Figure 2: Registration and licensing of the registered or licensed.

3 11 Figure 3: Average net income per person engaged in tax registered enterprises .. 12 Figure 4: Difference in probability tax registration by gender of business owner (%) .. 16 Figure 5: Difference in probability (%) of tax registration by education level of make business owners- (high school grads primary school complete) .. 16 Figure 6: Percent difference in probability of tax registration by business motive of male entrepreneurs- (active enterprises involuntary enterprises) .. 19 Figure 7: Average net income per person engaged in active enterprises (involuntary enterprises = 100) 21 Figure 8: Fixed investment as % of net income.

4 22 Figure 9: Average annual employment growth rate since start up (%), all sectors .. 23 Figure 10: Average annual employment growth rate since start up, services only .. 23 Figure 11: Annual net income of own-account workers by time in business (000 pula) .. 28 Figure 12: Annual net income per worker by time in business and registration status- .. 29 Figure 13: Percent of registered licensed enterprises-own account work only .. 31 Figure 14: Percent of registered licensed enterprises only those engaging 2-4 people .. 31 Figure 15: Percent distribution of active enterprises by line of business.

5 34 Figure 16: Percent distribution of involuntary enterprises by line of business .. 34 Figure 17: Annual net income per worker by age group of owner (000 pula) active enterprises .. 38 Figure 18: Percent of registered or licensed enterprises by schooling of business 39 Figure 19: Percent of enterprises of high-school-graduates by line of business .. 41 Figure 20: Percent of enterprises of non-high school grads by line of business .. 42 Figure 21: Respondents rating factors as major barriers registration by registration status (%) .. 45 Figure 22: Respondents rating various factors as major barriers to business registration (%).

6 45 Figure 23: Percent rating factors as major deterrent to business registration by registration status .. 46 Figure 24: Business owners who saw indicated benefits from registration (%) .. 47 Figure 25: Business owners rating factors as major growth obstacles (%) .. 48 Figure 26: Percent rating factors as major Constraints to growth by business motivation .. 50 Figure 27: Percent of active enterprises rating various factors as major growth Constraints .. 51 Figure 28: Involuntary enterprises rating factors as major growth Constraints (%) .. 52 Figure 29: Active enterprises rating factors as major growth obstacles (%).

7 53 Figure 30: Enterprises using external finance for investment or working capital (%).. 54 Figure 31: Enterprises using supplier and informal finance for investment or working capital (%) .. 55 Figure 32: Enterprises using external finance l by source .. 56 Figure 33: Percent of enterprises with non-residential business premises .. 57 Figure 34: Percent of enterprises connected to the public electrical grid .. 58 Figure 35: Enterprises with non-residential business premises by owners age group (%) .. 60 Figure 36: Enterprises connected to the public electrical grid by owners age groups (%).

8 61 Figure 37: Enterprise owners who had graduated from high school (%) .. 62 Figure 38: Vocationally trained business owners (%) .. 63 Figure 39: Percent of enterprises keeping books .. 64 Figure 40: Percent of enterprises using services of a professional accountant .. 65 List of Tables Table 1: botswana Pilot Survey Sample Distribution by Location .. 3 Table 2: Pilot Survey Sample Distribution by Sector and Type of Location .. 6 Table 3: Distributions of sample enterprises in other manufacturing and other services .. 7 Table 4: Distribution of sample by scale and other business characteristics.

9 8 Table 5: Average number of persons engaged per enterprise and net incomes per person .. 9 Table 6: Percent of enterprises by registration 10 Table 7: Distribution of the sample by registration status .. 13 Table 8: Distribution of sample by business owner's characteristics .. 15 Table 9: Distribution business owners by reason for being in business .. 18 Table 10: Distribution business owners by reason for being in 20 Table 11: Distribution by business age and size groups and business motivation .. 25 Table 12: Average Annual net incomes and annual turnover per enterprise .. 27 Table 13: Annual net incomes per worker and fixed assets per worker.

10 30 Table 14: Percent distribution of business owners by demographic characteristics .. 33 Table 15: Annual net incomes and turnover per establishment by owner s age and schooling .. 35 Table 16: Annual net incomes per worker and fixed assets per worker by owners' characteristics .. 36 Table 17: Percent distribution of enterprises by business owners' characteristics .. 37 Acronyms and Abbreviations BDS Business Development Services BIDPA botswana Institute for Development Policy Analysis CEDA Citizen Enterprise Development Agency FAP Financial Assistance Policy IFS Integrated Field Services LEA Local Enterprise Authority MTI Ministry of Trade and Industry NDB National Development bank NSO National Strategy Office SBPA Small Business Promotion Agency SEEP Small Enterprise Education and Promotion SMME Small, medium, and micro enterprise UYF Umsobomvu Youth Fund (South Africa) Vice President.