People widely celebrate Micro, Small, and Medium Enterprises (MSMEs) as the backbone of African economies.
Conventional economic thinking credits them with driving growth, creating employment, and fostering inclusive development.
While this narrative is popular and partially supported by headline statistics, it deserves closer scrutiny.
As Africa approaches 2030, with the Sustainable Development Goals (SDGs) serving as a global benchmark for progress, the performance of MSMEs raises uncomfortable questions.
Despite their numerical dominance and substantial contribution to employment, the continent remains far from achieving many of its development targets.
This suggests that the prevailing model of MSME-led development may be insufficient and, in some cases, misguided.
The standard argument is familiar. MSMEs account for more than 90 percent of businesses in Africa, contribute between 40 and 50 percent of GDP, and provide up to 90 percent of employment.
On paper, these figures paint an encouraging picture. However, the broader development outcomes present a different picture.
Poverty remains widespread across the continent.
Although several African countries have recorded reductions in poverty rates over recent decades, population growth has often outpaced these gains.
As a result, the absolute number of people living in poverty has remained stubbornly high and, in some regions, has even increased.
If MSMEs are truly the backbone of African economies, why has their dominance not translated into faster, more inclusive development?
The answer lies in productivity. Productivity—measured as value added per worker—is a central determinant of long-term economic growth, competitiveness, and rising living standards.
Recent global research highlights a stark productivity gap between MSMEs and large firms. On average, MSMEs worldwide are only about half as productive as large companies, with the gap even wider in emerging economies.
In Africa, this disparity is particularly severe. For example, in Kenya, MSMEs are estimated to be only 6 percent as productive as large firms, implying a productivity gap of 94 percent.
By contrast, in advanced economies such as the United Kingdom, MSMEs reach roughly 84 percent of the productivity of large firms.
This productivity gap matters more than headline employment figures. Economies grow and reduce poverty sustainably not by employing more people in low-productivity activities, but by increasing the productivity of work itself.
Celebrating MSMEs solely for their employment contribution risks overlooking the structural weaknesses that limit their developmental impact.
Low productivity means low wages, limited reinvestment, weak innovation, and minimal capacity to scale.
In these situations, MSMEs may be able to provide jobs that help people survive, but they have a hard time creating the kind of growth that would lift millions of people out of poverty.
Research indicates that bridging the MSME productivity gap could result in substantial economic benefits.
If MSMEs in emerging economies were able to reach the productivity levels of the top quartile relative to large firms, the impact could be equivalent to adding around 10 percent to GDP.
Furthermore, MSMEs that are integrated into business-to-business value chains—supplying larger firms rather than selling only to individual consumers—tend to have significantly smaller productivity gaps, sometimes up to 40 percent smaller.
This indicates that structure and integration matter as much as enterprise size.
Another critical issue is the composition of Africa’s MSME sector. More than 95 percent of MSMEs are micro-enterprises, often consisting of a single individual operating with minimal capital, skills, or technology.
These businesses rarely scale, and many are born out of necessity rather than entrepreneurial ambition. In contexts where formal employment opportunities are scarce, self-employment becomes a coping mechanism.
Indeed, many micro-entrepreneurs would prefer stable wage employment if such opportunities existed. This reality challenges the assumption that expanding the number of micro-enterprises is inherently beneficial for development.
Given these constraints, development strategies need to move beyond simply increasing the quantity of MSMEs.
The focus must shift toward improving their quality, productivity, and capacity to grow. One promising approach is value chain restructuring.
Rather than supporting enterprises in isolation, policymakers can target entire value chains, addressing bottlenecks that suppress productivity and limit market access.
The fisheries sector provides a useful illustration.
Productivity-enhancing interventions could begin at the point of harvest, ensuring fishers have access to modern equipment, sustainable practices, and reliable inputs.
Investments in cold-chain infrastructure would reduce post-harvest losses and enable products to reach urban markets, restaurants, and processing facilities in better condition.
Further along the chain, circular economy initiatives—such as converting fish waste into animal feed or organic fertilizer—can create new revenue streams, reduce environmental harm, and stimulate innovation.
Such value chain-based interventions strengthen linkages between micro-enterprises and larger firms, helping small producers access stable demand, better prices, and knowledge spillovers.
They also create opportunities for enterprises to specialize, scale, and improve productivity over time.
Crucially, this approach shifts policy attention away from counting enterprises and toward building competitive, resilient economic ecosystems.
Reforming MSME support in this way is essential if Africa is to make meaningful progress toward the SDGs by 2030.
Access to finance alone is not enough.
Targeted investments in infrastructure, technology, skills development, and market integration are needed to unlock productivity gains.
Encouraging stronger connections between small enterprises and larger firms, alongside promoting innovation and circular economy practices, can help address deep-rooted structural barriers.
Ultimately, the proliferation of low-productivity micro-enterprises will not achieve sustainable development.
It will come from building enterprises that are capable of growth, innovation, and the creation of quality jobs.
Rethinking microenterprise development by placing productivity and value chain integration at the center of policy offers a more realistic path toward inclusive growth and long-term poverty reduction in Africa.
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