600 million jobs need to be created by 2020 to keep up with demographic changes. The private sector is the key! This is the message from a recent IFC report published to compliment the World Development Report on Jobs.
The report draws attention to the fact that almost one third of workers in Developing Countries are poor, and about half- particularly women, are informal workers. Informality and under-employment are the main issues in most Developing Countries. Investors and business owners have an important role to play.
It is not just more jobs that are needed, but better jobs. However, we need to go one step further; every quality job that is created must be productive. Too often productivity in small or medium sized businesses is low. This is particularly true in Latin America. At the core of this issue is a shortage of trained personnel and ineffective utilisation of people and capital resources. The lack of economies of scale also provide significant challenges. According to the Inter-American Development Bank (IADB), 54% of all firms in the US have 10 people or less. This compares with Argentina that has 84%, and Bolivia with 90%. The least productive companies tend to be the smallest.
Currently, I am in Bolivia travelling with one of Chilasa’s founding Angels who is the owner of one of the leading businesses in the country and who grew up in the region. What we are finding is that there is no shortage of opportunities, but small businesses require heavy investment in capacity building and technical support. To sufficiently address these challenges it requires experienced on-the-ground managers who understand the operational challenges facing local entrepreneurs. Managing these kind of investments from a distance and without deep local knowledge is asking for trouble!
The IFC report emphasises there is no development without job creation. However, without winning companies whose shareholders take a long-term view, there is no possibility of quality jobs that lead to greater productivity. This leads to one conclusion: With 90% of enterprises employing 10 people or less, Bolivia requires investors with a passion for transformation, and the commitment to support entrepreneurs with patient capital and business building expertise.
Here is the link to the report: IFC Jobs
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