Africa’s E — Enterprise

What is the current state of entrepreneurship in Africa?

February 16, 2005

What is the current state of entrepreneurship in Africa?

This is good news. After all, private enterprise, large and small, is the main engine that pulls people out of poverty.

Profitable enterprises produce needed goods and services, create jobs — and generate tax revenues. Governments, in turn, can use these revenues for social and other spending, as well as investment.

In addition, private businessmen are also one of the main channels for the capture and diffusion of innovation — which is key to helping societies advance.

As elsewhere, African enterprises tend to come in two sizes — they are either large (as in the oil and mining sectors) or quite small.

One crucial difference to the rest of the world is that few of Africa’s small firms grow to become mid-sized. Company growth rates are strongly linked to whether the entrepreneurs have had the opportunity to study at a university or not — regardless of ethnicity.

The fact that mid-sized enterprises are less prevalent than in richer countries is a distinct disadvantage.

In fact, some of the world’s largest economies — such as Germany’s — depend heavily on the economic prowess and ingenuity of mid-size companies.