African Economic Growth: Wrong to Rely on Small Businesses?*

Abstract

Most firms, including manufacturing firms in Sub-Saharan Africa are small firms. Indeed, even the large manufacturing firms in Africa are not very large when compared to large firms in industrialised countries. A defining feature of Africa's poor economic growth performance over the past 50 years has been the lack of private sector to grow fast enough, create sufficient numbers of jobs and generate growing exports to the rest of the world. Africa's economic failure is thus argued in this paper to be to a failure of small business. However, given that small businesses have played a positive role in economic development in many developed as well as developing regions (most notably South East and East Asia and the economies in transition) the paper attempts to identify the reasons why small businesses may not be an adequate engine of economic growth and development in Africa. Evidence from various firm-level surveys in Africa is analyzed and possible mechanism for the bootstrapping of economic growth and development in Africa identified.