Launch of Top Line Findings Wednesday 16th June 2010 Intercontinental Hotel – Lusaka, Zambia

2. Launch of Top Line FindingsWednesday 16th June 2010Intercontinental Hotel – Lusaka, Zambia

3. OUTLINE • Background • Approach • Profile of the Private Sector • Scope, scale & key characteristics • Drivers of informality • The infrastructure dilemma • Complexities in access to finance • Productivity drivers & profiles • New segmentation provides powerful insights • Implications • Next Steps

4. Background & Rationale • A vibrant and productive private sector is key to promoting growth & prosperity in Zambia • Accelerated & diversified growth will require a substantial increase in investment and business productivity • GRZ & other stakeholders are determined to broaden growth in rural, as well as urban, areas • MSMEs dominate in numbers of enterprises, but heretofore there has been little information about them • Public & private players must better understand the characteristics & constraints of Zambia’s private sector • This survey will help to improve policy, programme, and service design & delivery • NB: The source for all data is the ZBS, except for slides 5-7, which are sourced from the World Bank Investment Climate Report, 2009, and slide 10, which was sourced from the Zambia Labour Force Survey, 2005.

5. Zambia’s business environment is a great deal better than it was in 2003

6. However, performance of large Zambian manufacturing businesses – as measured by labour productivity – lags far behind the performance of large manufacturing enterprises in the best performing African economies

7. Yet, these low productivity firms can thrive due to lack of competition. Zambia has a much lower competition index compared to firms in more successful economies (meaning firms with low productivity have high market share)

8. A NEW APPROACH GIVES US A NEW VIEW • The MSME component • Nationally representative survey of 4 800 MSMES • Covered urban, peri-urban and rural areas • All nine provinces • Small, difficult to find, and informal businesses are fully represented • The Large Enterprise component • Sample of 161 large enterprises • 50+ employees • Urban, peri-urban & rural • Complemented by: • Government's Labour Force Survey • World Bank's Doing Business Indicators • World Economic Forum's Competitiveness Report • World Bank's Investment Climate Assessment • FinMark Trust’s FinScope Consumer Survey

9. MSMEs AND LARGE ENTERPRISES IN ZAMBIA OCCUPY TWO DIFFERENT WORLDS

10. While larger firms drive the economy, they employ only 7% of the workforce. Most Zambians are employed in its MSME sector.

11. Two-thirds of MSMEs in Zambia are tiny, owner-operated businesses Most of the remainder are microenterprises with 10 or fewer employees

12. Most MSMEs are based in rural areas & are small farms or retail traders, whereas Large Enterprises are highly diversified

13. MSME owners have less formal education than Large Enterprise managers (as measured by the highest education level reached)

14. LOW PRODUCTIVITY FUELS INFORMALITY Differences in access to infrastructure drive differences in productivity Almost all large enterprises are registered with the relevant government agencies But few MSMEs – especially in rural areas – are registered with any government agency Informality is a rational choice Avoiding taxes & regulation is NOT the driver of informality Making infrastructure services more available should encourage registration, by improving productivity

15. Low incomes and poor access to information often drive informality

16. MSMES ESPECIALLY THOSE IN RURAL AREAS DO NOT HAVE ACCESS TO BASIC INFASTRUCTURE Lack of available water and electricity makes farmers dependent on rain Basic infrastructure for agro-processing is missing Other than cell phones, few MSME owners have access to information and communications (ICT) infrastructure

17. Whereas most large enterprises have connections to infrastructure services, most MSMEs do not