Africa’s Business Landscape: New Insights on Firm Numbers & Growth

The International Finance Corporation’s (IFC) latest report, "Estimating the Number of Firms in Africa," reveals that Africa has 244 million businesses, but 94% of own-account businesses and 73% of firms with employees operate informally. The study highlights a strong correlation between income levels and firm size, with larger, formal businesses concentrated in wealthier nations. Nigeria, Egypt, and South Africa account for 36% of all firms on the continent. The report emphasizes the need for business formalization, SME financing, and improved data collection to drive economic growth and policy reforms.

Africa’s Business Landscape: Insights from IFC’s Latest Report

A groundbreaking report from the International Finance Corporation (IFC), titled "Estimating the Number of Firms in Africa", sheds new light on Africa’s evolving business landscape. Released in January 2025, this study employs an innovative approach to quantify the continent's businesses, revealing key insights into firm demographics, informality, and economic growth patterns. The research uncovers a staggering 244 million businesses in Africa, but a vast majority—232 million—are own-account businesses, where a single entrepreneur operates without employees. Meanwhile, only 12.7 million firms employ workers, highlighting a significant disparity in the continent’s entrepreneurial ecosystem. One of the most striking findings is the dominance of informal enterprises, which account for 94% of own-account businesses and 73% of firms with employees. This high informality rate suggests a business environment largely driven by unregistered micro-enterprises, many of which struggle to scale due to regulatory and financial barriers. The report notes that firm size and informality are closely linked—while 82% of micro-firms (1–4 employees) are informal, the share drops to 66% for small firms (5–19 employees) and 38% for medium firms (20–99 employees). Larger firms (100+ employees) have the lowest informality rate at 20%, reflecting better access to formal structures and markets.

The study establishes a clear link between national income and business structure. Countries with higher per capita income tend to have more medium and large firms, whereas own-account businesses and micro-enterprises dominate low-income nations. This indicates that economic growth fosters business expansion and a shift toward formality. Notably, Nigeria, Egypt, and South Africa alone account for 36% of all African firms, even though their combined population represents just 26% of the continent. These nations showcase a relatively stronger formal business environment, in contrast to economies where informality is rampant. The findings of this report have significant implications for policymakers, investors, and development agencies. Key areas of focus include encouraging business formalization by simplifying regulatory processes and offering incentives for businesses to register, expanding SME financing to provide credit and financial services for small businesses transitioning from informal to formal structures, and improving data-driven decision-making by strengthening business registries and firm-level censuses to support economic development.

One of the major challenges in analyzing Africa's business ecosystem is data scarcity. Unlike developed regions with extensive firm-level statistics, Africa faces gaps in economic censuses and business registries. The IFC’s methodology seeks to address this by integrating multiple data sources, including household surveys and employer statistics, to provide a more reliable picture of firm demographics. While this study represents a significant step forward, further research and investments in business data collection will be essential for refining these estimates and guiding future economic policies. Strengthening national statistical agencies and expanding survey coverage will provide better insights into Africa’s dynamic private sector. The "Estimating the Number of Firms in Africa" report by the International Finance Corporation (IFC) presents a comprehensive and much-needed perspective on the continent’s business sector. With informality dominating and firm density varying widely across regions, policymakers and investors must prioritize strategies that support business growth, enhance data availability, and foster formalization. Africa's economic future will depend on its ability to bridge the gap between small-scale entrepreneurship and a thriving formal business environment.