# **6. Concluding remarks**

The debate on how to promote productive income earning opportunities for the rapidly growing labor force in Sub-Saharan Africa is a lively one. This paper contributes to this debate by providing empirical evidence on the role HEs have played, and can be expected to play. in meeting this employment challenge. We find that owing to the demographics and current structure of low income SSA economies, even exceptionally high economic growth rates in the non-farm sectors have not and will not generate enough new non-farm wage employment to absorb both the new entrants and those who seek to leave the agricultural sector. HEs are growing as a share of the labor force not because of regulatory or economic growth failures, but because in low income SSA countries HEs usually are the best option for labor force participants who want to use their skills and energy to create a non-farm income source for themselves and their families. Our simulations suggest that this is not likely to change in the medium term under any feasible growth pattern.

On the positive side, the livelihood analysis shows that HE ownership appears to be a good option for the segment of the labor force that has completed primary education but cannot get wage employment and does not want to work in the agricultural sector. Indeed controlling for education, a household can perform just as well when adding an HE as primary employment as adding a wage income. This is because for those with less that secondary education, private wage incomes are very low - there is almost no return to primary education in the non-farm wage sector. This is an important finding for national development strategies because for at least the next ten years, the majority of those who enter the labor market in SSA will not have had the opportunity to attend secondary school. Developing a HE sector is therefore not a coping strategy, it is a growth strategy. _With 40-50 percent of households engaged in non-farm enterprises on average, and the share increasing in many countries, any investments which result in more household having a viable HE or higher incomes for even half of the HEs would have a substantial impact on GDP and poverty._ Our analysis of HEs and their owners shows that most HEs are engaged in non-tradable sectors such as retail trade, personal services, and processing of natural resources. Their competition is therefore internal. Earnings are higher for more educated owners, showing the importance of the expansion of educational opportunities for incomes in this sector. Despite being in a competitive sector, the majority of HEs appear to be viable enterprises, having been in operation for several years. In urban areas, it is common for HEs to operate full time as primary employment, but in rural areas HEs tend to operate less than 6 months per year and only a few days a week. If the owner is able to build the HE into a primary employment source, earnings and the contribution to household welfare tend to be higher. However, in all countries studied here, the vast majority of HEs continue to be self-employed even as the sector has grown, indicating that growth of employment in this sector will happen through the growth of new businesses, not through existing businesses taking on employees.

Contrary to popular belief, the majority of HE owners are registered, licensed, or in other ways known to the local authorities. Many report paying taxes or license fees to these subnational governments, and often the traders pay a fee to have a place in the public market. This demonstrates that the relationship between enterprise and the state cannot be summarized in a simple “formal/informal” dichotomy, as indicated by the variable “registration of enterprise” - the relationship is more complex, with variations across and within countries. Though from a research point of view a national register of all HEs would be helpful, it does not seem necessary (or even feasible) to try to develop such a program given the vast number of HEs and their lack of integration into the national economy. A focus on local governance for HEs is justified also by 28