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Type Journal Article - South African Journal of Economics
Title How large is the private sector in Africa? Evidence from the national accounts and labour markets
Volume 81
Issue 1
Publication (Day/Month/Year) 2013
Page numbers 140-165
In recent years, the private sector has been recognised as a key engine of Africa’s economic development. Yet, very little is known about its size and characteristics. We present novel estimates for 50 African countries and show that the private sector accounts for about two thirds of total investments, four fifths of total consumption and three fourths of total credit. Countries with small private sectors include a sample of oil exporters and some of the poorest countries in the continent. Surprisingly, the size of the private sector does not appear to be significantly correlated with growth performance. Labour market data reinforce the idea of a large private sector, which provides about 90% of total employment opportunities. However, most of this labour is informal and characterised by low productivity: permanent wage jobs in the private sector account on average for only 10% of total employment. South Africa is the notable exception, with formal wage employment in the private sector representing 46% of total employment. Finally, we find evidence of negative private sector earning premiums (-13% on the average), suggesting that market distortions abound. These are likely to prevent the efficient allocation of human resources and to reduce the overall productivity of the African economies.

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