Black-owned and -led businesses across five African countries face a combined financing gap of $209 billion, with Nigeria accounting for $131 billion, according to a new report by British International Investment (BII) and Swedfund.
The report, Understanding the Investment Gaps in Black-Owned and -Led Businesses in Sub-Saharan Africa, examines the representation of black-owned and -led businesses, their access to finance and the barriers limiting their growth.
The study covers Nigeria, South Africa, Kenya, Côte d’Ivoire and Senegal. It combines market analysis with consultations involving stakeholders to assess the scale of the funding shortfall and identify opportunities for investors, fund managers and development finance institutions.
The research forms part of BII’s Black Ownership and Leadership for Development (BOLD) initiative, launched in 2022 to increase capital flows to black-owned and -led businesses across sub-Saharan Africa.
Across the five markets, these businesses account for between 89 and 99 per cent of small businesses. Their representation, however, declines as businesses grow, falling to 40 per cent of larger businesses in Kenya and 35 per cent in South Africa.
The findings point to difficulties in scaling beyond the small-business stage, where companies typically require larger and more sophisticated financing arrangements.
Nigeria has the largest financing gap among the five countries, estimated at $131 billion, followed by South Africa at $45 billion and Kenya at $23 billion.
Senegal and Côte d’Ivoire have estimated gaps of $5.7 billion and $4.6 billion, respectively, highlighting the scale of the challenge across markets of different sizes.
Across sub-Saharan Africa, the financing gap for black-owned and -led businesses is estimated at $1.842 trillion.
The report said the funding gap for these businesses across the five countries was approximately four times that of non-BOLD businesses.
It added that black-owned and -led businesses are concentrated in food systems, trade, services, light manufacturing and agriculture, where local participation is relatively strong and barriers to entry are lower.
However, expansion into capital-intensive sectors such as infrastructure, energy and financial services can be more difficult because of higher funding requirements and the need for specialised expertise.
The report identified several barriers to investment, including limited access to suitable financing, inadequate investment readiness, shortages of skilled talent and restricted access to investor networks.
Investors, meanwhile, face challenges such as limited local representation, insufficient understanding of local markets, perceptions of risk and financing structures that do not adequately reflect businesses’ needs.
A particularly significant gap exists for businesses seeking between $100,000 and $1 million in growth capital. These firms can struggle to secure funding because their requirements fall between grant-based support and the larger investments typically made by institutional investors.
The report also highlighted differences across markets. In Kenya, stakeholders pointed to limited access to investor networks and early-stage capital, while access to foreign-currency financing emerged as a more prominent constraint in Nigeria.
The findings suggest that a uniform approach to financing may not adequately address the different challenges facing businesses across the continent.
