Abstract:
Botswana has a large informal economy which continues to grow at a rapid rate. The
Government recognises the importance of the sector in reducing unemployment and
poverty. However, not much is known about informal firms in order for Government
to assist in their development. The objective of this paper is to empirically identify the
characteristics of the firms in Botswana’s informal economy. A binary logistic regression
model is used to model the characteristics of Botswana’s informal firms, and data
employed came from the 2015/16 Botswana Multi-Topic Household Survey (BMTHS).
Findings indicate that informal firms in Botswana are likely to be situated in rural areas,
they operate in their own households, as sole proprietors. Results further depict that,
firms that did not need a loan when starting up (because business needed little capital
or business was inherited) are more likely to be informal, than businesses that used
household savings or sold assets to start the business. Furthermore, it was also revealed
that informal firms are less likely to have small businesses and institutions as the main
buyer of their goods and services, as compared to individual buyers. The paper advocates
for a policy that is tailor made for the informal sector, to address the specific challenges
the sector faces. Government needs to boost the business environment in rural areas,
to allow for growth of firms, and create more jobs. More initiatives should be geared
towards the encouragement of partnerships, as this will help individuals pool resources
and ideas for sustained growth in these firms.
Description:
The series comprises of papers which reflect work in progress, which may be of interest
to researchers and policy makers, or of a public education character. Working papers
may already have been published elsewhere or may appear in other publications.
