Columbia International Affairs Online: Policy Briefs

CIAO DATE: 05/2010

Africa's Private Sector: What's Wrong with the Business Environment and What to Do About It

Vijaya Ramachandran, Alan Gelb, Manju Kedia Shah

March 2009

Center for Global Development


Why has the private sector failed to thrive in much of sub-Saharan Africa? Drawing on a unique set of enterprise surveys, we identify inadequate infrastructure (especially unreliable electricity and poor quality roads) and burdensome regulations as the biggest obstacles to doing business. We find as well that the private sector in many countries is dominated by ethnic minorities, which inhibits competition and lowers demand for a better business environment. Solutions include investing in infrastructure, providing risk guarantees, and reforming regulations to lower the cost of doing business, as well as increasing access to education for would-be entrepreneurs.