It’s the “International Year of Family Farming” and time we realized that families are key to rural development in Africa. Smallholders manage 80 per cent of African farmland, often doing a lot more than tilling the land. Homes and markets are full of family entrepreneurs, working in everything from entertainment to hairdressing to repairs. So we think that 2014 should also highlight the work of non-farm businesses.
In the 1960s and 70s these small businesses were low productive, survivalist activities run to offset the risks of farming. As Africa developed, policymakers and scholars expected cities to absorb labour from rural areas, feeding industrialisation and higher farm productivity. They expected rural businesses to become much less important.
In most African countries, GDP grew about twice as fast during the 2000s as during the 1990s. This growth was expected to cut the number of small rural businesses, with agriculture creating more jobs. In turn, these jobs would feed more and richer consumers in cities, and in industries and services in urban areas.
However, this never happened and today non-farm businesses are still common in rural Africa. In a recent IZA Discussion Paper, my project partners and I provide new data and analysis based on the World Bank’s LSMS-ISA surveys. This dataset covers more than 24,000 rural households in Ethiopia, Malawi, Niger, Nigeria, Tanzania and Uganda for 2005-2012.
We find that over 40 per cent of households run non-farm businesses, bringing in some cases more than a third of their income. Around half of this work takes place in or around the home and about a fifth in a market. Moreover, almost all businesses are informal, mainly employing family members. So it’s safe to say, rural businesses are not creating enough jobs for Africa’s young population!
Despite these findings, and little clarity about the nature and running of rural businesses, donors continue to fund start-ups. On the one hand, we know that access to credit or education act as pull factors to start a business. Basically, this means wealthier and better educated households are more likely to start a business. On the other hand, food shortage, surplus labour and shocks force poorer, more vulnerable households to start up non-farm businesses.
50 years ago, policymakers said rural development was a priority for Africa. Based on the most recent data, we find non-farm businesses continue to be small, informal and centred on the household. In general, they help to offset risks and employ surplus family labour.
Yet this current profile is barely different from the 1960s, despite a decade of high growth. Policies to support rural-urban migration, industrialisation, and job creation seem largely to have failed, if they were ever seriously attempted. Perhaps, as a recent FP article suggested, “the rumors of Africa’s explosive growth have been greatly exaggerated”?
MEDIA CREDITSIRIN / J.Jeffrey
UN Photo / F.Noy