Across Africa, much of the discussion about entrepreneurship centres on how to create more businesses, attract investment and encourage young people to become entrepreneurs. That emphasis is understandable. Small and medium sized enterprises are central to employment, production and economic activity across the continent.
Yet another question deserves greater attention: what happens to businesses that are already viable when their founders leave?
A business can be commercially sound and still be vulnerable to closure if too much of its value depends on one individual. An owner may migrate, retire, become ill, face financial difficulties or simply decide to pursue another career. In some cases, the enterprise can be transferred to a family member or another manager. In others, its equipment, stock and other assets are sold separately and the underlying business disappears.
The distinction matters because the loss of a functioning enterprise can extend beyond the owner. Employees can lose their livelihoods, suppliers can lose a customer, customers can lose a service and communities can lose an established economic relationship.
The challenge is not unique to Africa. Business succession is an international issue, with governments and financial institutions in developed economies also attempting to improve the mechanisms through which established small businesses are transferred to new owners. The European Commission, for example, has recently strengthened its policy focus on business transfers, recognising that failed succession can result in the loss of jobs, economic activity and accumulated business knowledge. European Commission guidance on business continuity and transfers
For African economies, however, the issue intersects with several distinctive features of local enterprise.
The African Development Bank estimates that the private sector accounts for about 90 per cent of jobs, 70 per cent of gross domestic product and 70 per cent of investment on the continent. The bank has also noted that small and medium sized enterprises represent roughly 90 per cent of private firms in Africa, while limited access to finance remains a significant constraint on their ability to grow. African Development Bank private sector development strategy
The scale of these enterprises means that business continuity is not simply a matter of preserving individual companies. It can form part of a wider economic resilience agenda.
Nigeria provides a useful illustration. According to the National Bureau of Statistics and Small and Medium Enterprises Development Agency survey cited by PwC, micro, small and medium enterprises accounted for 96.9 per cent of businesses, 87.9 per cent of employment and 46.32 per cent of gross domestic product in 2021. The figures demonstrate the importance of smaller enterprises to the Nigerian economy, although they should not be interpreted as evidence that all such businesses are equally vulnerable to succession problems. PwC Nigeria’s 2024 MSME Survey
For many smaller firms, however, the owner can occupy several roles simultaneously. The founder may be responsible for securing customers, negotiating with suppliers, managing employees, keeping financial records and maintaining relationships with lenders and other stakeholders.
That concentration of knowledge can make the enterprise productive while the founder remains involved. It can also make the business difficult to transfer.
Research examining family owned SMEs in Nigeria has identified founder support, preparation of successors, trust and credibility as important elements in successful leadership transitions. Research into SMEs in Zambia has similarly examined succession planning as a factor in business continuity. These studies are relatively small and should not be generalised to all African enterprises, but they point to a recurring management issue that deserves greater attention. Research on leadership transition in Nigerian family owned SMEs Research on succession and SME continuity in Zambia
Zimbabwe offers another relevant perspective. Earlier research on SMEs in Harare identified succession planning as an important consideration for enterprises whose founders approach retirement or leave the business. While the research is older than the current evidence base, the underlying issue remains relevant to economies where smaller firms play an important role in employment and commerce. Research on succession planning among Zimbabwean SMEs
Migration adds another dimension.
African migration is frequently discussed in terms of remittances, skills and the movement of workers. But migration can also affect the ownership and management of businesses that remain in countries of origin.
The World Bank estimated that remittances to Sub Saharan Africa reached about $54 billion in 2023. Nigeria accounted for approximately 38 per cent of regional remittance inflows that year. The World Bank subsequently reported that remittances to the region were broadly stable at about $54 billion in 2023, with the cost of sending money to Sub Saharan Africa remaining comparatively high. World Bank remittance data and analysis
Remittances should not be treated simply as an untapped investment pool. Much of the money sent across borders supports households, education, healthcare, housing and other immediate needs. Those uses have substantial economic and social value.
The more useful question is whether a portion of diaspora wealth, where individuals voluntarily choose to invest, can be connected to productive enterprises through structures that reduce risk and improve transparency.
One possible approach is the acquisition of existing businesses rather than the creation of new ones.
Entrepreneurship through acquisition has gained attention internationally as a model in which entrepreneurs identify established private companies, acquire them and take responsibility for their management. However, conventional search fund structures developed largely around larger businesses and cannot simply be transplanted into African markets.
The economics are different.
Many African businesses that could potentially change hands operate at much smaller values. Transaction costs, legal fees, due diligence expenses and financing requirements can therefore become disproportionately large relative to the value of the business.
A functioning market for small business transfers would consequently require infrastructure designed for smaller transactions.
That could include verified business records, standardised financial information, evidence of revenue, customer and supplier references, ownership documentation, independent valuations and straightforward legal agreements. Escrow arrangements could potentially provide additional protection for buyers and sellers, while staged payments could reduce the risk associated with transferring a business whose performance remains dependent on the outgoing owner.
Digital financial systems could also play a role. Where historical accounting records are incomplete, verified transaction data from payment systems or other digital platforms could help establish a clearer picture of current trading activity. Such information would not eliminate investment risk, but it could improve the quality of decisions.
Trust is likely to be particularly important.
A buyer based in London, Johannesburg, Gaborone or Harare may be willing to invest in a business in another African market, but geographical distance can make verification more difficult. The same challenge applies to African investors who live within the continent but outside the market in which a business operates.
A credible transfer ecosystem therefore needs more than an online marketplace. It needs trusted institutions and professionals who can verify information, conduct due diligence, administer transactions and support the transition.
There is already evidence that African financial institutions and development finance organisations are experimenting with mechanisms designed to address some of the wider financing constraints facing smaller enterprises. In 2024, the International Finance Corporation announced partnerships intended to increase working capital and SME lending across African markets, including a risk sharing facility supporting lending to businesses in Côte d’Ivoire and Senegal. International Finance Corporation support for African enterprises International Finance Corporation and Bridge Bank SME facility
Business transfers could become another component of this financial ecosystem.
The objective should not be to encourage the indiscriminate acquisition of African businesses by foreign investors. Nor should diaspora participation automatically be treated as superior to local ownership.
A well designed market would need to recognise the importance of local entrepreneurs, employees, family members and communities. In some cases, the most appropriate successor may be a relative. In others, it may be a senior employee, a neighbouring business, a cooperative, a local investor or a returning member of the diaspora.
This is particularly important because business continuity is not synonymous with preserving the exact ownership structure of the past.
A bakery may continue under new ownership. A workshop may become an employee owned enterprise. A family business may pass to the next generation. A diaspora investor may provide capital while a local manager runs the operation. The central economic objective is that a viable enterprise should have a realistic opportunity to continue operating when its original founder can no longer or no longer wishes to manage it.
Governments can help establish the conditions for such transfers without necessarily becoming the principal operators of the market.
Improved company registries, accessible ownership records, digital tax and accounting systems, clearer rules for transferring small companies and efficient dispute resolution can reduce some of the uncertainty surrounding transactions. Governments can also work with banks, professional services firms, business associations and SME agencies to develop standardised mechanisms for smaller business transfers.
The challenge is that formalisation itself has costs. Many African businesses operate partly or entirely outside formal structures, and imposing complex reporting requirements could discourage entrepreneurship rather than strengthen it.
Any continuity framework would therefore need to be proportionate. A small family bakery should not be expected to satisfy the same administrative requirements as a multinational corporation.
The broader objective should be to create a graduated system in which businesses can become progressively more transparent and transferable as they grow.
There is also a cultural dimension. Business ownership in many African communities is closely connected to family, reputation, relationships and personal trust. These factors can be economic assets rather than obstacles. A transfer mechanism that ignores them may fail even if its legal and financial architecture is sound.
The challenge is therefore to combine formal systems with the forms of social trust that already underpin much African commerce.
Africa does need new businesses. It needs entrepreneurs, technology companies, manufacturers, retailers, agricultural enterprises and service providers capable of creating new economic opportunities.
But entrepreneurship policy should not measure success only by the number of businesses created.
An enterprise that survives for twenty years, employs people, pays suppliers, serves a community and can eventually be transferred to another owner may represent a different kind of entrepreneurial success from a business that exists for only a few years before its assets are sold.
The next stage of African SME development may therefore require greater attention to what happens after establishment.
Business continuity, succession planning, acquisition finance and transparent ownership transfers could help create an environment in which viable enterprises become less dependent on the individuals who founded them.
For African economies seeking to deepen domestic production, strengthen value chains and retain economic activity, that distinction matters.
The goal should not simply be to create more businesses.
It should also be to build businesses capable of outliving their founders.
