# **2. Evidence of gender gaps in enterprise performance in Africa**

In Sub-Saharan Africa, entrepreneurship is very important for women’s livelihoods, representing almost 50% of women’s non-farm labor force participation. Women are equally represented among entrepreneurs as men (Hallward-Driemeier, 2013). This sets Sub-Saharan Africa apart from all other regions in the world, especially the Middle East and North Africa, where there is a large gender gap in participation in entrepreneurship (Hallward-Driemeier, 2011; Kelley et al., 2012).

However, even in Sub-Saharan Africa there are still important differences between businesses owned by women and those owned by men. Women entrepreneurs are very likely to work alone, while men are more likely to have employees, which is a reflection of the different sizes of their businesses. Moreover, firms owned by women tend to underperform those owned by men on a number of dimensions including profitability, survival rates, average size, and growth trajectory.

Bardasi et al. (2011) show that the average sales of women-owned firms in Africa<sup>3</sup> are 13 percent lower than those of male-owned firms after accounting for country and sector of operations. Brixiová and Kangoye (2015) show in the context of Swaziland that monthly sales and number of employees for women-owned firms are less than half of those owned by men. Costa and Rijkers (2012) find large differences in size between male and female non-farm rural enterprises in Ethiopia. Nordman and Vaillant (2014) find that in Madagascar the level of value added is 28 percent lower in women-owned firms after controlling for firm and entrepreneur characteristics. McKenzie and Woodruff (2015) identify a positive relationship between being a male entrepreneur and the sales and profits of firms even after controlling for business practices and other factors. Hallward-Driemeier (2013)<sup>4</sup> finds that the average value added per worker of firms with women ownership in Africa is 6 percent lower than that of firms owned by men before controlling for other firm characteristics.

As per Figure 1, Hallward-Driemeier (2013) suggests that the gap in value-added per worker between male- and women-owned firms in Africa can be fully explained by firm size, sector and capital intensity. This – confirmed in various studies – indicates that there is a set of important strategic choices that largely explain the gender differences in firm productivity. It also suggests that we should focus a large part of our research on exploring the underlying constraints that shape female entrepreneurs’ choices regarding these core dimensions. The importance of strategic choices in business development guides the framework we use in this note, which is presented in the next section.

> 3 Whenever we use the term “Africa” we are referring to Sub-Saharan Africa (i.e. all of Africa, excluding North Africa, which the World Bank usually groups with the Middle East as part of MENA).

> 4 Hallward-Driemeier (2013) is based on data from the World Bank Enterprise Surveys. It should be noted, however, that World Bank Enterprise Surveys may oversample larger firms, when female-owned enterprises are more prevalent among the micro, small and medium enterprises (MSMEs). Bossuroy et al. (2013) compares the Enterprise Surveys data with that of an MSME survey based on household sampling in South Africa to conclude that the sampling mechanism leads to large firms in the first (eg: 25 percent of women-owned firms are exporters) and small firms in the latter (eg: almost no exporter in the sample), while women-owned firms represented only 13 percent of those sampled in the Enterprise Survey and 60 percent of those sampled in the MSME survey.

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