Africa: Micro-enterprises and entities founded by self-entrepreneurs, the overwhelming majority of which operate in the informal sector, provide 84% of total employment on the African continent

Micro-enterprises and entities founded by self-entrepreneurs, the overwhelming majority of which operate in the informal sector, provide 84% of total employment on the African continent, according to a report published on January 13, 2025 by the World Bank.

Titled “Estimating the number of firms in Africa,” the report draws on a methodology that combines multiple data sources, including censuses conducted by multilateral institutions such as the World Bank Entrepreneurship Database (WBED), national business registers, and national employment and household surveys, which are more widely available in Africa.

While the data collected varies from country to country in terms of defining the size of firms and their formal or informal status, the authors of the report used the sum of individuals reporting to be employers to estimate the total number of firms in each country and at the continental level. This calculation is facilitated by the availability of data on employers, employees, and own-account workers from the International Labor Organization (ILO).

By compiling the various available data, the World Bank estimated the total number of firms operating on the continent in 2020 at 244.4 million.

The vast majority of these businesses, more than 231.6 million, are entities founded by self-employed entrepreneurs (a business whose owner is the sole employee, often referred to as a self-employed worker).

The remainder (around 12.7 million) are businesses that employ workers. These are divided into four categories: micro-enterprises (fewer than 5 employees), small businesses (5-19 employees), medium-sized businesses (20-100 employees) and large businesses (more than 100 employees).

Informality mainly concerns small-sized businesses

In detail, the number of business entities launched by self-employed entrepreneurs represents 64% of the total workforce on the continent. If we exclude these self-employed entrepreneurs, the number of micro-enterprises amounts to 10.5 million entities that employed 20% of the workforce.

Small businesses, estimated at 1.5 million, employed 3% of the workforce, while there were some 603,000 medium-sized businesses providing 6% of total employment on a continental scale.

There were also 102,000 large businesses employing 7% of the workforce.

On another level, 94% of businesses founded by self-employed entrepreneurs are informal. This informality rate drops to 73% at the level of businesses that employ workers. A further breakdown shows that informality tends to decrease proportionally to the increase in the size of businesses. It is, in fact, at 87% in the ranks of micro-enterprises, against 14% for small businesses, 2% for medium-sized businesses and only 1% for large businesses.

The report also reveals that the density of self-employed business entities (enterprise density is the number of enterprises per 1,000 inhabitants) is higher in the poorest countries, while noting that informal and small-scale enterprises perform poorly in terms of both management and accounting practices and productivity, as they do not fully benefit from appropriate technologies, efficient production methods and access to finance and essential public services.

In contrast, the density of larger and formal enterprises is increasing in countries on the continent with the highest levels of GDP per capita.