(Ecofin Agency) - The report highlights that Africa's entrepreneurial landscape is mainly made up of small, informal businesses, which face structurally low productivity levels and limited access to capital.

Micro-businesses and self-employed entrepreneurs most of whom operate in the informal sector account for 84% of total jobs across Africa, according to a World Bank report published on January 13.

Titled Estimating the Number of Firms in Africa, the report uses a methodology that pulls data from multiple sources, including surveys conducted by multilateral institutions such as the World Bank Entrepreneurship Database (WBED), national business registries, and household and labor market surveys, which are more widely available in Africa.

Since data collection methods vary across countries especially in defining business size and formal versus informal status the report’s authors estimated the total number of businesses by summing up the number of individuals who identified as employers. This approach was supported by available labor market data from the International Labor Organization (ILO), which tracks employers, salaried workers, and self-employed individuals.

By compiling these diverse data sources, the World Bank estimated that in 2020, Africa had approximately 244.4 million businesses. The vast majority more than 231.6 million—were sole proprietorships, meaning businesses owned and operated by a single individual, often referred to as self-employed workers. The remaining 12.7 million businesses had employees and were categorized into four groups: micro-businesses (fewer than five employees), small businesses (5-19 employees), medium-sized businesses (20-100 employees), and large businesses (more than 100 employees).

Informality Dominates Small BusinessesSelf-employed businesses alone accounted for 64% of the total workforce in Africa. Excluding these sole proprietors, micro-businesses made up 10.5 million entities, employing 20% of the workforce. Small businesses, estimated at 1.5 million, employed 3%, while about 603,000 medium-sized businesses provided jobs for 6% of Africa’s workforce. Meanwhile, 102,000 large businesses accounted for 7% of total employment.

Informality remains a defining feature of Africa’s business landscape, particularly among smaller enterprises. A staggering 94% of self-employed businesses operate informally. Among businesses with employees, the informality rate stands at 73%. A deeper breakdown reveals that the share of informal businesses declines as company size increases 87% of micro-businesses are informal, compared to 14% of small businesses, 2% of medium-sized businesses, and just 1% of large enterprises.

Business Density and Economic GrowthThe report also highlights a link between business density and economic conditions. Business density the number of businesses per 1,000 people is highest in Africa’s poorest countries. However, small and informal businesses tend to struggle due to weak management practices, poor accounting systems, and low productivity. Many lack access to modern technology, efficient production methods, financial services, and essential public infrastructure.

In contrast, countries with higher per capita GDP tend to have a greater concentration of larger, more formal businesses.