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Aid for Trade and Gender: Lessons from African Women EntrepreneursTuesday, July 11, 2017 > 09:45:39
Gender-focused aid for trade initiatives in Africa have the potential to considerably accelerate the achievement of the Sustainable Development Goals. This article sets out the case and highlights key actions required to deliver transformative change for women and for African economies.
Aid for trade has the potential to speed up the achievement of the collective commitment set out by the United Nations in the Sustainable Development Goals (SDGs), especially Goal 1, to end poverty in all its forms everywhere, and the target of eradicating extreme poverty by 2030. Africa is a continent where over half the world’s people living in extreme poverty reside, with 389 million people in Sub-Saharan Africa still living on less than US$1.90 a day in 2013. One of the most effective ways to catapult them to better lives is to connect firms owned by women to markets, and women to jobs in export sectors.
While the nature of women’s economic participation in Africa is varied, one thing is the same in every part of the continent: their high level of involvement in economic activity. The potential returns on their work are almost always unrealised, however, particularly where trade is concerned. While only 15 percent of exporting firms worldwide are owned by women, this figure is as low as 6 percent in Côte d’Ivoire and as high as 46 percent in Kenya. The majority of these firms are small and medium-sized enterprises (SMEs). They are on average smaller than male-owned firms, and when they engage in trade in tasks within a value chain, they are significantly more likely to trade across multiple regions than when they are only involved in trade in final goods. We also know that large, labour-intensive exporting companies tend to employ more women.
Why does the gender of the worker or the company owner matter?
There are only three million new formal jobs to offer the 13 million Africans who enter the workforce each year. SMEs account for more than half of formal jobs, and ensuring they can participate in trade helps them create and sustain the jobs that are vital to the economic and social fabric of the continent. Although Sub-Saharan Africa boasts the highest rate of female labour force participation and thus the narrowest gender gap, analysis suggests that this is likely to reflect a need to work in the absence of social protection programmes. This is further substantiated by the high levels of employment in the informal sector.
As firms owned by women expand their reach, they employ more women. Data from the International Trade Centre (ITC) show that the female share of employment in firms owned by women that trade globally is as high as 66 percent compared with 39 percent for firms trading in the home region. Trade has provided higher incomes and formal employment to women in manufacturing, tradable services and high-value agriculture sectors, and cross-border trade has helped households in border areas achieve better levels of welfare.
These trends are encouraging, but if African women are to fully reap the benefits that trade can generate, a few things need to happen first.
Last year, only 2 percent of total official development assistance focused principally on women’s economic empowerment. A mere 16 percent of aid for trade flows explicitly mention gender in terms of objectives, and the share of investment with gender equality as a principal objective has not been calculated.
More investment in initiatives targeted at women and trade is required to address the specific challenges women face, ranging from legal impediments, to gender biases and gender-blind trade policies, as well as access to the information, networks, and resources required to trade.
Activating the private sector
But this will not be enough to bridge the gap between the US$55 billion spent on aid for trade initiatives and the total amount of financial resources required to achieve the 2030 Agenda for Sustainable Development, which could reach US$4.5 trillion per year according to some estimates.
Laetitia Kayitesire’s Rwanda-based Sake Farm offers a telling glimpse of the potential leverage that can be achieved by activating the private sector. Laetitia employs 30 workers, most of them women, to produce and process coffee for export from a 30-hectare plantation. She also purchases and processes coffee from 1,500 surrounding smallholder farmers. Under a partnership with ITC’s SheTrades initiative, Sucafina and Jacobs Douwe Egberts, technical advice and targeted investment is helping to improve Sake Farm’s productivity, efficiency, and coffee quality. Additionally, the partnership seeks to increase the incomes of the smallholder farmers by developing their service delivery structure and incorporating a major commitment to enhance women’s participation in the supply chain.
Solving the challenge of access to finance
Supporting agribusiness entrepreneurs to grow their businesses should be an imperative for Africa to reduce its annual food import bill of US$35 billion. Monica Musonda is an example. Monica purchases produce from farmers locally and manufactures nutritional foods for the domestic market in Zambia. She is looking to expand her business regionally, to meet needs on the continent, and internationally, to cater to the fast growing health food sector in Western markets. But like many other women entrepreneurs who identify access to finance as their biggest impediment, she has not yet been able to access the funding required for expansion, despite a glowing track record of professional successes.
Combining aid for trade interventions that train, mentor, and connect women to export markets with financial instruments tailored to the specific challenges faced by small firms owned by women could spur credit and investment. This approach focuses on lowering risk and creating a high quality deals that meet the requirements of lenders and investors.
In the Silicon Savannah, digitalisation is driving innovation and helping to close gender gaps. Phyllis Mwangi is, among other things, a real estate agent in all but name. Her business, Tandao Commerce, is a full service e-commerce platform, operating out of Kenya, which enables SMEs to lease online stores and trade their goods and services globally. Phyllis’s original business was selling flowers online, but digitalisation redirected her well-laid plans, unlocking an opportunity for her to leverage technological capabilities to create a scalable and innovative service business.
The same cannot be said for the majority of women in Africa, whose use of the internet still lags behind that of men by 23 percent. They face obstacles that include affordability, access to digital tools and skills, payments and logistics requirements, and regulatory restrictions on e-commerce transactions.
Policies, programmes, and digital infrastructure and tools are crucial to ensuring that African women entrepreneurs can harness digitalisation to innovate, grow, and open up new trade opportunities.
Laetitia, Monica and Phyllis are three of the 1 million women with whom ITC and its partners – including the private sector – are working to connect them to markets as part of the SheTrades initiative. Since joining SheTrades recently, Monica’s company is beginning to attract the attention of investors. Laetitia has been able to improve the quality of her coffee and secure better prices by exporting to Switzerland. And Phyllis has received mentoring from global industry leaders, moving from a regional to an international reach, and increasing her number of employees by 50 percent.
The path to 2030 is shortening and the donor resources available to fuel the journey are limited. Well-targeted aid for trade focused on delivering comprehensive action that addresses the range of issues women face in Africa, in concert with the private sector, civil society, and governments, is the key to unlocking women’s full economic potential.
The Sixth Global Aid for Trade review hosted by the WTO in July 2017, the first since the adoption of Agenda 2030, provides the perfect opportunity for WTO member states, the donor community, development organisations, and other trade stakeholders to articulate their vision and state their commitments to aid, trade, and the Sustainable Development Goals, including gender equality.
Author: Vanessa Erogbogbo, Head, Women and Trade Programme, International Trade Centre.