Black-owned African Businesses Face $209 Billion Funding Gap, Report Finds

Black-owned and -led businesses across five African markets face an estimated $209 billion financing gap, highlighting persistent barriers to capital access as enterprises seek to expand, according to a new report by British International Investment (BII) and Swedfund.

The report, *Understanding the Investment Gaps in Black-Owned and -Led Businesses in Sub-Saharan Africa*, examines the representation of Black-owned and -led businesses, their financing needs and the factors limiting their access to investment.

The study covers Kenya, Nigeria, South Africa, Senegal and Côte d’Ivoire, combining market analysis with consultations involving stakeholders across the investment ecosystem.

The findings point to a significant disparity between the prevalence of Black-owned and -led businesses among small enterprises and their representation among larger companies, where access to greater volumes of capital is often available.

Across the five markets, these businesses account for between 89 per cent and 99 per cent of small businesses. However, their representation declines as companies grow, falling to 40 per cent of larger businesses in Kenya and 35 per cent in South Africa.

The report suggests that financing constraints and other barriers to expansion are limiting the ability of many businesses to progress beyond the small enterprise stage.

Nigeria accounts for the largest financing gap among the five countries at $131 billion, followed by South Africa at $45 billion and Kenya at $23 billion. Senegal has an estimated gap of $5.7 billion, while Côte d’Ivoire faces a $4.6 billion shortfall.

Collectively, the financing gap for Black-owned and -led businesses in the five markets is estimated at around four times that of businesses outside this category. Across sub-Saharan Africa, the overall gap is estimated at $1.842 trillion.

The businesses are concentrated in sectors such as food systems, trade, services, light manufacturing and agriculture, where local participation is relatively high and barriers to entry are lower.

However, expansion into capital-intensive industries, including infrastructure, energy and financial services, can be more difficult because of higher funding requirements and the need for specialised expertise.

The report identifies several constraints affecting businesses, particularly smaller firms, including limited investment readiness, inadequate access to suitable financing, shortages of skilled talent and restricted access to professional networks.

Investors, meanwhile, face challenges associated with limited local representation, insufficient knowledge of local markets, perceptions of risk and financing structures that do not always match the needs of businesses.

A particular gap exists among companies seeking between $100,000 and $1 million in growth capital. These businesses can struggle to secure funding because their requirements fall between grant-based financing and the larger investments typically pursued by institutional investors.

The study also finds that the barriers differ across markets, requiring financing approaches tailored to local conditions.

In Kenya, stakeholders identified limited access to investor networks and early-stage capital as significant challenges. In Nigeria, access to hard-currency financing emerged as a more prominent constraint.

Chris Chijiutomi, managing director and head of Africa at BII, said addressing the barriers could help businesses expand, create jobs and contribute to reducing economic inequalities.

“Black-owned and -led businesses are a driving force behind African economies, yet many continue to face significant barriers to accessing capital,” Chijiutomi said.

He added that the research would help BII strengthen its pipeline of investment opportunities, develop more appropriate approaches to reaching these businesses and work with partners to widen access to capital.

Kitanha Toure, regional director for West Africa at Swedfund, said the findings aligned with the institution’s commitment to reducing inequalities, increasing investment in low-income markets and improving access to capital for underserved businesses.

The report recommends a more deliberate investment approach, including stronger local partnerships, improved identification and preparation of businesses for investment, and greater representation of Black professionals among capital allocators.

It also calls for financing models that better reflect the needs of growing enterprises, including patient capital, local-currency financing, blended finance and risk-sharing arrangements.

Targeted technical assistance is another recommendation, with the report noting that businesses need support to become investment-ready and effectively absorb funding.

The research forms part of BII’s Black Ownership and Leadership for Development (BOLD) initiative, launched in 2022 to increase capital flows to Black-owned and -led businesses across sub-Saharan Africa.

The findings underline the need for investors, fund managers and development finance institutions to address financing barriers and develop investment strategies that enable more businesses to grow beyond the small enterprise stage.