2010). A similar pattern is observed with electrification where rural areas being electrified had a higher share of households starting up HEs (51 % compared to 34 %). Obviously the decision to build markets and electrify rural areas is not random and other reasons that also matter for HE start-up could be highly correlated with the decision to build infrastructure, so a causal inference cannot be made. Households that have access to infrastructure complain about reliability as a constraint. In the RICS survey, among electrical users 56 and 36 percent report problems with outages and costs of electricity, compared to 16 and 25 percent among non-users of electricity. Similarly, 44 percent of non-users report problems of access compared to 32 percent among users. These results can suggest that expansion of public infrastructure can support HE development, but access is not enough if service is unreliable.

# **Concluding remarks**

The recently published plan for poverty reduction (Plano de Acção para Redução da Pobreza–PARP) for 2011 to 2014 acknowledges that the private sector, whether formal or informal, is central to the objective of creating employment opportunities, leading to higher household income and a reduction in poverty rates. MSMS enterprises are considered a key part of this strategy, however its policies focus on improving the business environment through simplifying procedures to obtain business licenses, pay taxes, acquire land use rights, and trade across borders etc. all of which are aspects that are likely to be beneficial in their own right and relevant to some enterprises. However, they do not appear to be central to HE creation or sustainability. Hence HEs are largely ignored in PARP. The government’s SME policy (GoM, 2007) also excludes HEs as only micro enterprises with more than five employees are included in the policy framework.

The lack of an HE policy is unfortunate for a number of reasons. The analysis above shows that HE creation and HE employment is associated with higher consumption in both rural and urban areas, and upward mobility particularly for rural and poorly educated households. This means that encouraging households to create HEs is a good strategy. And with 34 percent of households already relying on HEs, any improvement in income from existing HEs would likely contribute even further to poverty reduction.

Based on the analysis here, a strategic government policy focus on expanding HEs as a potential livelihood option in Mozambique could include (i) efforts to increase access to financial services for households, including encouraging the development of institutions which can offer products suitable to the needs and means of lower income households; (ii) expansion of secondary and linkage roads to insure access to markets for HEs; (iii) development of local market places to create clusters as is found in other SSA countries; and (iv) continued attention to aspects outside the business environment such as access and quality of public services such as education, health services, and water supply which could lower household risk and influence the amount of available labor in the household. The first and most important first step would be to include the HE sector in the policy agenda.

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