Why Are There So Few Black-Owned Firms in Africa? Preliminary Results from Enterprise Survey Data

Vijaya Ramachandran () and Manju Kedia Shah

No 104, Working Papers from Center for Global Development

Abstract: Much of the growth in Sub-Saharan Africa in the past decade has come from extractive industries, rather than from private, entrepreneurial activity. Furthermore, non-extractive activity in the private sector is often dominated by firms owned by ethnic minorities. This paper analyzes the characteristics of the formal private sector in five countries in sub-Saharan Africa, with a particular emphasis on Black African-owned (indigenous) firms. We find that indigenous firms start smaller and grow more slowly; however their rate of growth is positively influenced by whether the owner-entrepreneur has a university degree. We do not find overwhelming evidence that credit is the binding constraint but we do find that indigenous firms get less access to trade credit than firms owned by minority entrepreneurs. Finally, we discuss policy solutions that might enable a larger number of indigenous entrepreneurs to enter and survive in a vibrant, multi-ethnic private sector.

Keywords: Sub Saharan Africa; extractive industries; formal private sector; indigenous entrepreneurs; credit (search for similar items in EconPapers)
JEL-codes: M20 O1 (search for similar items in EconPapers)
Pages: 25 pages
Date: 2007-01
New Economics Papers: this item is included in nep-afr, nep-dev and nep-ent
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:cgd:wpaper:104

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