What are the biggest obstacles facing companies in Africa? When we asked the community at Venture Capital for Africa, the largest online community connecting African entrepreneurs and investors, we saw access to finance named as the biggest challenge to entrepreneurs in Africa. A recently released report of World Bank Group now finds that access to power tops access to finance as biggest obstacle of firms in many African countries.
More than one fifth (22%) of firms in Sub Saharan Africa see ‘access to power’ as their biggest obstacle. Also around one fifth of firms (19%) names ‘access to finance’. The obstacle ranking third, ‘competition from the informal sector’, is mentioned by around one tenth of firms in Sub Saharan Africa (10%). Companies in other regions consider other obstacles the top constraint (see figure below).
Top 3 obstacles per region. SSA= Sub Saharan Africa; EAP= East Asia & Pacific; ECA= Europe & Central Asia; LAC= Latin America & the Caribean; SAR= South Asia Region
The results are from the World Bank Group’s Enterprise Surveys (ES) data, featured in the recently released IFC Jobs Study report. For this research over 45,000 enterprises in 106 developing countries are surveyed. During the survey, the firm’s manager has to choose the one biggest constraint facing the company from a list of 15 obstacles. Country results differ widely, also within Africa.
Access to power
A whopping 73% of firms in Tanzania consider access to power their biggest obstacle. Next in line are Guinea, Nigeria, and Uganda (each about 64%). These numbers are nearly three times higher than the average in Sub-Saharan Africa (22%). The figure below shows the ten countries with the highest percentages for this obstacle, from all ‘developing’ countries in the world.
Access to finance
The figure below shows the ten countries where access to finance is named most often as a severe constraint. In the Democratic Republic of Congo over half of the firms (55%) consider access to finance their biggest obstacle, followed in Africa by Malawi and Mali, where about 46 percent of firms name access to finance as their biggest concern. This is more than two and a half times higher than the average in Sub Saharan Africa (19%).
As we saw above, African countries populate almost the entire top 10 lists for electricity and finance access. The top 10 list of developing countries where competition from the informal sector is named as the biggest obstacle lists ‘only’ three African countries: Cameroon, Swaziland and Niger. Still, in all three countries competition from the informal sector is considered the biggest concern by around a quarter of firms (around 27% in Cameroon and Swaziland and around 23% in Niger) This is two to three times higher than the average in Sub Saharan Africa (10%).
The whole developing world
Below is the entire list for the whole sample of all developing countries. While in Africa more than half of all companies name access to electricity and finance and competition from the informal sector as their biggest obstacles, also in the total developing world about 42 percent of all firms consider these three obstacles the most important ones.
What do you think of the numbers? And what do you see as most important obstacles for your country or company yourself? Please share your experiences below!