Understanding the Rise of African Business
ABSTRACT: In light of recent enthusiasm over the African private sector, this paper reviews the existing empirical literature on successful African enterprises and proposes an analytical framework for understanding African firm success. Overall, it is argued that we need to develop an understanding of African firm strategy and performance that takes into account the specificities of the African business environment and African firm capabilities.
The paper starts by juxtaposing the widespread pessimistic view of African business with more recent, optimistic studies on African firms’ performance. The latter suggests that profound improvements in African business performance are indeed under way: with the private sector playing a more important role as an engine of growth, with the rise of a capable African entrepreneurial class, and with the emergence of dynamic and competitive African enterprises.
The paper proceeds to review the limited research on factors shaping the performance of African enterprises. It is observed that particularly the strategic component is often overlooked as is the role of internal capabilities and resources of African enterprises. Based on this identification of voids in the literature, the authors suggest an analytical framework for understanding African business performance, underlining the interplay between contextual specificities, firm capabilities, and firm strategy. I. Introduction From “The Hopeless Continent” (Economist, 2000) to “The Hopeful Continent” (Economist, 2010), African business lions are rising to fame.
Media project that new generations of African firms and soaring consumption are turning Africa into “the new Asia” (Newsweek, February 2010). Development organizations are increasingly seeing private sector development as the solution to many of Africa’s perils (World Bank, 2005; Commission on Growth and Development, 2008; Danish Africa Commission, 2010). But behind this hype, what does the empirical evidence actually tell about African business success and the factors driving it?
And which research gaps need to be addressed to ensure a better understanding of the new African business lions and the possibilities of sustained private sector growth? This paper endeavours to review the existent empirical literature on the rise of African firms, to identify voids in the literature, and to propose a framework that may guide future research on successful African enterprises.
The paper is organized as follows: first we will discuss the evidence of the recent rise of African enterprises. Second, we will review the debates on what the possible drivers and conditions of African enterprise growth are. Finally, based on the above, the paper will outline the contours of an analytical framework for understanding African enterprise development. It should be noted that as this is an initial attempt to address a relatively un-chartered field of research, the paper takes a helicopter-perspective, trying to understand trends and developments across African countries and sectors. Moreover, as South Africa and northern Africa stand out from the remaining parts of Africa in many respects, the review will focus on the Sub-Saharan African (SSA) countries other than South Africa.