Jobs and Entrepreneurship in Africa Portfolio

Overview

Africa will experience transformative population growth from approximately 1.4 billion today to 3.3 billion in 2075. Job creation and access to decent work pose immense challenges. Currently, 85 percent of employment in sub-Saharan Africa is informal, and 82 percent of tertiary educated young Africans are in informal employment.

The Jobs and Entrepreneurship in Africa (JEA) research portfolio, based at J-PAL Africa, aims to facilitate productivity growth and job creation in firms across sub-Saharan Africa. Growth-oriented enterprises—established but smaller firms trying to grow—can play a critical job creation role, but often face tough constraints in the region. Meanwhile, private sector development is an extremely promising area for investors, policymakers, and practitioners to stimulate and leverage evidence in support of employment and income growth. J-PAL Africa is launching the JEA portfolio to develop research and partnerships that use RCTs to uncover effective interventions in this often neglected area of mutual interest and enable evidence use in policy. To do so, JEA will support both original data collection, the use of administrative data for research, and institutional partnerships that can help to draw out actionable insights towards achieving these goals.

Research Priorities

JEA’s research agenda includes:

• Access to finance and targeting of high-impact entrepreneurs: In developing countries, the “size space” in which firms are too big for microcredit and too small for large financial institutions may be important. In recent years, flows of capital from private equity and VCs to sub-Saharan Africa have increased. Do smaller firms benefit from equity-like financing, and are they willing to allow outside ownership? Are these financing structures commercially viable for financial institutions and investors? Research has found that some “high-impact” firms may benefit more from credit and other sources of capital—suggesting that targeting these firms can be an efficient way to allocate capital—but how can one cost-effectively identify these high-impact firms ex ante? Can AI/ML tools leveraging non-traditional sources of data help? 
• Market access: Addressing demand-side constraints can lead to substantial firm growth, higher product quality, and higher-quality jobs, especially for larger firms. Are there market access methods that are effective for smaller firms? How can they connect to larger buyers, including those abroad? Do, for example, online platforms, innovations in export promotion, or regional trade agreements help African firms reach wider markets, and if so, how? How does the digitization of payments and marketplaces affect the ease of starting businesses in sub-Saharan Africa?
• Services-led growth: The services sector accounts for much of the current economic and job growth in some parts of sub-Saharan Africa. However, technology gaps and other factors may keep productivity of the sector low and constrain future growth as a result. What interventions and policies encourage firms to increase their adoption of innovative activities that lead to higher productivity? How can we measure this productivity growth? To what extent can the services sector create jobs? Can sub-Saharan African countries export services at scale?
• Access to other inputs: African enterprises may struggle to access affordable and high-quality inputs including high-skill workers and materials, thereby hindering productivity growth. How does greater access to different forms of inputs impact tangible “upgrading” markers such as for example product standards? What market frictions prevent access to high-quality material inputs, and how can firms overcome them? Do digital supply chain platforms improve input access, and are they viable for firms with limited digital literacy? How do expats and other ways to relieve middle management bottlenecks affect growth?
• Understanding the nature of firms: Should policy interventions target individual firms or groups of firms (whether “vertically” or “horizontally” defined)? What does new knowledge about the “nature” of firms, clusters of economic activity, and linkages across firms teach us about the unit to focus on in different forms of practical interventions?

Scientific Advisor

Portfolio team

• Julia Kaufman, Policy Manager (J-PAL Africa)
• Teresa Lezcano Cadwallader, Associate Director of Policy (J-PAL Africa)
• Julie Cobill, ESG and Corporate Partnerships Lead (J-PAL Global)

The seed funding for this portfolio was donated by the Kuo Sharper Foundation.