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

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  • Vijaya Ramachandran

    ()

  • Manju Kedia Shah
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    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.

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    Bibliographic Info

    Paper provided by Center for Global Development in its series Working Papers with number 104.

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    Length: 25 pages
    Date of creation: Jan 2007
    Date of revision:
    Handle: RePEc:cgd:wpaper:104

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    Related research

    Keywords: Sub Saharan Africa; extractive industries; formal private sector; indigenous entrepreneurs; credit;

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