A Macro-perspective on Small Enterprise Growth in Southern Africa

Abstract

This chapter looks at the small enterprise/informal sector from a macroperspective: Does the sector expand or contract, and when and why does it expand or contract? Macroeconomics tend to focus only on the formal sector and therefore generally have little to say about the informal sector. The small enterprise literature has more to say, but provides many, different and often conflicting interpretations and conclusions about development trends. These are difficult to test, because almost all our knowledge about small enterprises and the informal sector is based on cross-sectional data or at best a few (rarely more than two) comparative cross-sections, which are usually not strictly comparable. Models and theories of small enterprise development are therefore inferences from cross-section data and not really based on solid empirical knowledge. This becomes a problem, when we attempt to draw conclusions about the effect of events such as structural adjustment, because we cannot know whether the observed changes are a result of short-run policies or long-run structural changes.