Walk through almost any African city and you will see businesses everywhere.
There are shops, farms, transport companies, technology start-ups, construction firms, restaurants, professional services and trading businesses. New ventures appear whenever people identify an unmet need or a way to earn an income.
Africa is not short of entrepreneurs.
What it lacks is a sufficient number of businesses that continue growing long after they have been established.
Recent World Bank analysis found that a formal business in Sub-Saharan Africa operating for more than 26 years employs only about twice as many workers as it did when it started. Comparable firms in other developing economies grow more, while mature firms in high-income countries employ more than three times their original workforce.
Businesses are being created, and many survive for years, but only a few develop into large institutions capable of operating successfully across several countries.
Why?
A large market is not necessarily an easy market
At first, this is difficult to understand.
Africa has a large and growing population. The continent needs housing, food, transport, energy, healthcare, financial services, telecommunications and almost everything else required by a modern economy.
Surely that demand should produce more large companies.
The difficulty is that potential demand is not the same as demand a business can serve profitably.
Millions of people may need a product. That does not mean they can afford it, access it or be reached at a reasonable cost.
A company expanding across Africa must deal with different currencies, tax systems, customs procedures, languages, product standards and licensing rules. Poor roads, unreliable electricity and weak logistics can make distribution expensive. Low and irregular incomes also limit what many customers can spend.
Africa’s population represents enormous commercial potential, but the continent does not yet operate as one seamless market.
The African Continental Free Trade Area could reduce some of these barriers over time. For now, however, crossing an African border can still feel less like entering a neighbouring market and more like starting a new business.
Businesses respond to what the system rewards
The rules of an economy influence the kinds of companies that emerge within it.
In Why Nations Fail, Daron Acemoglu and James Robinson distinguish between inclusive and extractive institutions. The language sounds academic, but the basic argument is straightforward.
Inclusive institutions allow a broad range of people to participate in the economy. Property rights are protected, contracts can be enforced, new businesses can enter markets, rules are reasonably predictable, and commercial success depends largely on whether a company can offer something customers value.
No country meets this standard perfectly. Corruption, favouritism and unequal access exist in rich and poor countries alike.
Extractive institutions work differently. Political power and economic opportunity are concentrated among a limited number of people. Access to land, credit, licences, government contracts, tax advantages or protection from competition may depend more on political relationships than business capability.
The important question is what the system rewards most consistently.
Where success depends on serving customers, businesses invest in better products, skilled employees, efficient systems and competitive prices.
Where success depends mainly on access to political power, companies invest more heavily in relationships.
Businesses quickly learn which approach produces results.
Some companies are built for a political season
In some African countries and industries, political connections remain an important route to commercial success.
A company may rise when a particular government comes to power. Its owners gain access to public contracts, land, import licences or regulatory advantages. The business grows quickly and appears highly successful.
That company may not be building a competitive business at all; it may be building political access.
Tunisia under former President Zine El Abidine Ben Ali provides a well-documented example. The World Bank found that 220 firms connected to the ruling family accounted for less than 1 per cent of private-sector employment but captured 21 per cent of private-sector profits.
Tunisia should not be used to describe every African economy. Political favour also shapes businesses outside Africa. The case shows what can happen when access to power becomes more valuable than productivity.
A politically connected company can become large without becoming strong.
It may have revenue, assets and employees while lacking the management systems, technology, financial discipline and independent customer base needed to compete elsewhere.
When a government changes, contracts may disappear, payments may slow, and creditors may become nervous. The business weakens because its most valuable asset was its relationship with those in power.
Public procurement is not itself the problem. Government contracts can help legitimate companies gain experience, hire employees and expand.
The problem begins when contracts reward connections rather than capability.
A company built mainly to win the next government tender is unlikely to be preparing itself to enter the next country.
When the owner becomes the business’s greatest limitation
The political environment does not explain everything. Some of the biggest obstacles are found inside the businesses themselves.
Many African companies begin with one determined founder.
The founder provides the capital, finds the first customers, approves purchases and makes the important decisions. During difficult periods, personal money keeps the company alive.
That commitment is often the reason the business survives. As the company grows, the founder can also become its greatest limitation.
Business income begins to pay household expenses. Personal money is deposited whenever salaries are due. Company vehicles become family vehicles and relatives are given important positions without clear responsibilities. Every significant decision must wait for the owner.
The company has employees, but it has not yet become an institution.
This challenge is not uniquely African. Founder dependence has limited businesses in every part of the world, but its effects can be more severe where legal protections are weak, professional management is scarce and access to long-term finance is limited.
Mixing personal and company finances creates immediate problems.
A lender cannot clearly understand the company’s cash flow, an investor cannot value it confidently, and managers cannot be assessed using reliable financial information. Profits that could finance expansion may instead be withdrawn for personal use.
The business may continue operating for many years, while its growth remains tied to the founder’s money, memory and relationships.
A company cannot become a multinational while it remains an extension of one person’s wallet.
Complete control comes at a price
Many founders are reluctant to accept outside investors.
That concern is not always irrational.
An owner may fear losing a company they spent years building. Investors may demand changes the founder dislikes. A previous partnership may have ended badly. Courts may be slow, and shareholder protections may not inspire confidence.
Keeping complete control can therefore feel safer, but complete control comes at a cost.
Without outside capital, expansion may have to be financed through retained profits and bank loans. That process can be extremely slow where long-term credit is scarce and interest rates are high.
Founder control can provide stability, commitment and a long-term view. It becomes a problem when the founder would rather own all of a small company than share control of a much larger one.
Growth eventually requires professional managers, effective directors and people who can challenge the owner.
Delegation is not simply about hiring more staff. It means giving capable people real authority and holding them accountable for results.
A multinational cannot operate as a personal kingdom.
Africa has a finance problem and investability problem
African businesses face genuine financing barriers.
Small and medium-sized companies often struggle to obtain affordable working capital, long-term loans or equity for expansion. Interest rates can be high, collateral requirements demanding and capital markets shallow.
The financing problem has two sides: businesses say banks and investors will not fund them, while banks and investors say too few businesses are ready to receive funding. Both can be right.
A company may have strong sales and still be difficult to finance because its accounts are unreliable, ownership is unclear, contracts depend on political relationships and every important decision rests with the founder.
Investors are not asking only whether the business can make money. They also want to know whether the company can be trusted with money.
Can its financial statements be relied upon? Are its taxes and licences in order? Can it operate without the founder? Are minority shareholders protected? Does the business have a capable management team? Will the company survive a change in government?
Africa therefore faces both a shortage of suitable capital and a shortage of companies structured well enough to attract that capital.
The two problems reinforce each other.
Businesses remain informal because they cannot obtain finance. They struggle to obtain finance because they remain informal.
Why so few businesses cross borders
Operating successfully in one country is difficult enough. Expanding into several countries exposes every weakness inside a company.
The business must deal with different currencies, taxes, labour laws, licences and customer habits. It needs reliable financial reporting from every location. It needs managers who can act without calling the founder several times a day.
Political relationships may help a company win business at home, but they are less useful in a country where the owner knows nobody.
This is where many African businesses reach their ceiling.
They may have built successful domestic companies, but they have not developed a model that can be repeated without the founder’s constant presence.
Opening an office in another country does not automatically make a business multinational.
A genuine multinational must be able to reproduce its systems, culture and standards across borders. It must understand local markets without losing control of the wider organisation.
That requires more than ambition. It requires an institution.
The four separations required for scale
For a business to become a lasting institution, it usually has to make four difficult separations.
First, it must separate itself from the political cycle. Its survival cannot depend on which party controls government.
Second, it must separate the owner’s money from the company’s money. The business needs its own accounts, assets and financial discipline.
Third, it must separate ownership from total operational control. Founders can continue to own their companies, but professional managers and directors must be given meaningful authority.
Finally, it must separate itself from the limits of its home market. Its products, systems and management practices must work in places where the founder has no personal influence.
These separations are difficult because they require founders to surrender something: political protection, financial flexibility, personal control or the comfort of a familiar market. Without them, a growing business may never become an enduring institution.
Building companies that can outlive their founders
Africa’s shortage of multinationals is not caused by one problem.
Infrastructure matters. So do trade barriers, limited finance, low incomes and inconsistent regulation.
The institutions surrounding businesses matter, but so do the systems that owners build within their own companies.
Weak systems can produce wealthy individuals. They can even produce large businesses.
They struggle to produce independent companies that survive political change, welcome competition, attract outside capital and grow through capability rather than access.
Africa does not simply need more businesses created to capture the next opportunity.
It needs more companies built to survive their founders, outlive the governments that awarded their first contracts and compete in countries where their owners know nobody.
Entrepreneurship creates the business. Strong institutions are what allow it to grow beyond the entrepreneur.
Sources and further reading
Acemoglu, Daron, and James A. Robinson. (2012). Why Nations Fail: The Origins of Power, Prosperity, and Poverty. The book develops the distinction between inclusive and extractive institutions.
World Bank. (2026). Africa’s Firms Are Not Growing—New Data Reveal a Jobs Challenge. This supports the opening evidence about the slow growth of firms in Sub-Saharan Africa.
International Monetary Fund. (2025). Bottlenecks to Private Sector Development in Sub-Saharan Africa: A Firm-Level Analysis. This examines corruption, financing constraints and other obstacles affecting African firms.
World Bank. (2014). All in the Family: State Capture in Tunisia. This provides the evidence about the 220 firms linked to the Ben Ali family capturing 21 per cent of private-sector profits.
Leave a Reply