CHAPTER 1. The Services Sector in Africa: Emerging Trends
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performance have indirect costs amounting to less than 15 per cent of total costs, whereas indirect costs in poor African countries account for 20 to 30 per cent of total costs, often exceeding labour costs. It may be seen that a considerable share of indirect costs in African firms comprises costs related to infrastructure and public services such as energy, transport, communications, water and security, which constitute significant barriers to the international competitiveness of African manufacturers. The services sector accounted for 32.4 per cent of total employment during the period 2009–2012. The services sector accounted for 32.4 per cent of total employment in Africa during the period 2009–2012 (International Labour Organization, 2014). As shown in figure 2, among the eight services exports-dependent economies for which employment data are available, only Cabo Verde, Liberia and Mauritius sourced more than 40 per cent of their formal employment from the services sector. Services-oriented countries do not necessarily source a large share of their formal employment from the services sector. In fact, during the period 2009–2012, the correlation coefficient between the share of services in total employment and in output was a weak 0.08. In some countries (for example Ethiopia, Mozambique, Rwanda and Zambia) where services contributed more than 40 per cent to output over the period 2009–2012, the services sector accounted for less than 20 per cent of total employment. This may be due to the nature of the services sector in these economies, the labour intensity of the services sector (for example, in tourismdependent economies such as Mauritius and Seychelles, the services sector is highly labour intensive) and the fact that in these economies, the services sector coexists with a labour-intensive and low value added agricultural sector. In order for the services sector in Africa to increase its contribution to employment and output, the issue of informality in the services sector will need to be addressed. The informal sector ranges from 50 to 80 per cent of GDP and 60 to 80 per cent of total employment and accounts for 90 per cent of new jobs (Benjamin and Mbaye, 2014). Some of the fastest growing sectors of West African economies (wholesale trade and retail trade, restaurants and transportation) are dominated by informal firms. African services are predominantly informal and small in scale. Addressing the issue of how to bring informal services firms into the formal sector is crucial for raising productivity and the contribution of the services sector to growth and employment.