Why Africa needs more big firms — not just more entrepreneurs

But now researchers are questioning if this popular thinking isn't actually missing the bigger picture.

A new study led by researchers from Japan’s Waseda University and the European Commission’s Joint Research Centre suggests Africa may have it backwards.

According to the study, published in The Journal of Technology Transfer, the continent already has too many entrepreneurs, especially small-scale informal ones, and not enough big companies that can create the kind of jobs and exports needed for long-term development.

They argue that not all entrepreneurship is created equal.

“It is concerning that a number of entrepreneurship scholars seem to be pushing an agenda for Africa's economic development based on personal ideology rather than empirical evidence,” says Prof Alex Coad from Waseda Business School, Waseda University, Japan.

The report says millions of youth are self-employed not by choice but because they can’t find jobs. From hawking airtime to fixing boda bodas, many are hustling just to survive, making Africa the most entrepreneurial continent in the world, at least by numbers.

But according to Prof Coad, that statistic can be misleading. High self-employment, he says, often reflects a lack of opportunities rather than economic dynamism.

The study found that countries with the highest rates of self-employment, like many in Africa, also tend to have the lowest gross domestic product (GDP) per capita.

In many parts of Sub-Saharan Africa, self-employment rates are exceptionally high, underscoring persistent structural challenges in formal labour markets. Countries topping the list include Niger (94 percent), Chad (93 percent), Burundi (91 percent), Guinea and Madagascar (both at 89 percent), Ethiopia (89 percent), and Nigeria (85.9 percent).

Others with similarly high rates are Togo (around 90 percent), the Democratic Republic of Congo (88–90 percent), Tanzania (about 85 percent), Uganda (83–85 percent), Mali (82–84 percent), Malawi (80–83 percent), Rwanda and Benin (both around 80 percent), Mozambique (78–80 percent), and Sierra Leone (approximately 78 percent).

These figures reflect a reliance on informal and subsistence-level economic activity, driven more by necessity than opportunity.

Sub-Saharan Africa’s average self-employment rate stands at approximately 68.5 percent, significantly higher than the global average of about 40.6 percent, according to the World Bank.

This high rate of self-employment correlates with lower GDP per capita and highlights the limited availability of formal job opportunities across the region.

Rather than reflecting a surge in entrepreneurial ambition, these figures typically point to a labour market where many people engage in subsistence farming or run informal businesses out of necessity, not choice.

The researchers argue that Africa could learn from East and Southeast Asian countries such as South Korea, Singapore and Malaysia.
"These countries did not grow rich by having more entrepreneurs. They succeeded by building strong institutions, supporting large firms, investing in infrastructure and actively encouraging exports and foreign investment," they said.

Instead of hundreds of informal businesses selling the same low-margin goods, they vouch for nurturing of competitive industries, attracting multinational corporations and creating national champions in manufacturing and technology.

This is especially important because sub-Saharan Africa is still far from the global technology frontier. Unlike advanced economies that need cutting-edge innovation, African economies can still grow rapidly by adopting and adapting existing technologies, building factories and producing goods for global markets.

One of the clearest signs of Africa’s growth challenge is the absence of large firms, says the report, noting that the continent has very few big companies and even fewer medium-sized ones, while most businesses remain small and informal with little chance of scaling up.

Large firms are crucial for creating stable well-paying jobs, boosting exports, supporting smaller suppliers and driving innovation and investment. Without them, small businesses are stuck in survival mode, unable to grow or hire. And that limits the entire economy.

The researchers recommend a shift in policy focus from promoting entrepreneurship at all costs to building ecosystems that can support firm growth and industrial development.

That means improving infrastructure like roads and electricity, investing in education and vocational skills, strengthening legal and regulatory frameworks, supporting industries with export potential, attracting foreign direct investment and selecting strategic sectors to grow.

It also means rethinking donor and government programmes that glorify the hustle without addressing the deeper structural issues that prevent businesses from growing.

Prof Coad says: "The continent is in last place in terms of economic development, although it comes first in terms of having the world's highest entrepreneurship rates, measured in terms of proportion of self-employed entrepreneurs. Boosting entrepreneurship further seems like a step in the wrong direction. The bottleneck is a lack of large firms. Africa should focus on reducing total entrepreneurship rates and building large firms.”

"It’s not that entrepreneurship is bad. In fact, strong entrepreneurship is essential in any economy. But pushing everyone into small-scale business without the tools or environment to grow will not get Africa to middle-income status," the team of researchers says.

"Instead of celebrating high numbers of startups, we should ask how many of them are growing, creating jobs or exporting. Africa in particular doesn’t just need more people selling things. It needs more people making things, building things, employing others and competing in global markets."