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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

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.

Suggested Citation

  • Vijaya Ramachandran & Manju Kedia Shah, 2007. "Why Are There So Few Black-Owned Firms in Africa? Preliminary Results from Enterprise Survey Data," Working Papers 104, Center for Global Development.
  • Handle: RePEc:cgd:wpaper:104
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    File URL: http://www.cgdev.org/content/publications/detail/12095
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    Keywords

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

    JEL classification:

    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development
    • M20 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - General

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