CDC's Alex MacGillivray and Andrew Palmer write about a new report from the Africa Programme at Chatham House, which was commissioned by CDC.
Last year, Kampala-based fast-moving consumer goods distributor African Queen grew by 19 per cent. No mean achievement given the gale-force economic headwinds Ugandan businesses are facing. African Queen now has over 190 employees and on current trends will soon make the transition from a medium-sized to a large enterprise. That’s a journey that not enough African firms are making.
At least 15 million people enter the labour market every year in Africa. Economic growth across the continent is under half that of the South Asian economies, while Africa has double the portion of unemployed. If the continent is to achieve decent work and economic growth for all – Sustainable Development Goal 8 and a frequent electoral promise from African politicians – it needs many more thriving businesses in the formal sector to create millions of good new jobs.
Key to overcoming the challenge is creating environments that allow businesses in Africa to grow to the scale that the continent needs, and encouraging more investment. While Africa has 15 per cent of the world’s population, it only receives 4.4 per cent of total foreign direct investment.
It’s easy to diagnose this economic problem. The challenge is to fix it. That’s why we commissioned the Africa Programme at Chatham House to tell us how small and medium-sized enterprises (SMEs) can scale-up and create the jobs Africa requires.
Growing Businesses of Scale in Sub-Saharan Africa is their blueprint for doing so and will be launched on 8 September 2017. It includes deep dives into four countries in sub-Saharan Africa: Nigeria, Tanzania, Uganda and Zambia, All face the challenge of creating an environment where local businesses can grow and provide more formal employment for people.
The research team listened carefully to entrepreneurs from 60 businesses across the four countries. Their findings identify numerous opportunities for business growth in these regions. While there is no ‘silver bullet’, there are some common prescriptions identified across all of them. For example, providing much greater access to finance for SMEs, building a network of capable business managers and fixing critical infrastructure – particularly electricity, connectivity and logistics. According to the entrepreneurs, these are the secrets of success for unleashing business growth.
The report celebrates the strong entrepreneurial spirit across sub-Saharan Africa, which, if properly harnessed through education and skills training, and enabling business environments, can go far in enabling local companies to grow.
It provides on-the-ground voices from a wide range of business leaders looking to grow their companies to complement the numerous desk-based studies on African growth. We hope it gives people working towards sustainable development new insight into what sub-Saharan Africa needs if it’s to meet the jobs challenge it faces and achieve the Global Goals.
Find out more
Click here to visit the Growing Businesses of Scale in Sub-Saharan Africa page on the Chatham House website.
CDC is the UK government-owned development finance institution. CDC’s mission is to support the building of businesses throughout Africa and South Asia, to create jobs and making a lasting difference to people’s lives in some of the world’s poorest places.
We provide investment capital in all its forms, including equity, debt, mezzanine and guarantees, and this capital is typically used to fund growth. This capital is provided directly and through fund managers that are aligned with our aims.
CDC uses its own balance sheet to invest and has net assets of £3.4bn.