Among the incongruence one discovers in the tapestry of Africa’s economy, small and medium-sized enterprises (SMEs) stand out as the unsung heroes, while weaving threads of innovation, resilience, and opportunity across the continent.
SMEs are not just surviving—they are thriving, driven by the need to build and the desire to solve challenges, propelling Africa toward a future of self-sustained growth. As the world grapples with economic uncertainties, Africa’s SME sector has emerged as a beacon of momentum, driven by a youthful population, and often by digital leaps.
These businesses, often born from necessity and nurtured by ambition, are reshaping the narrative of African entrepreneurship. With over 44 million SMEs already operational, their expansion signals a paradigm shift: Africa is no longer waiting for external aid but building its own economic fortress, and solving its own challenges.
The Surge in SME Development: A Wave of New Ventures
The rate at which small businesses are developing in Africa is nothing short of remarkable, outpacing many global peers and underscoring the continent’s entrepreneurial spirit. According to recent data, Africa leads the world in entrepreneurial choice, with 22% of working-age individuals actively pursuing new ventures—a figure that dwarfs the global average.
This fervor has translated into tangible growth: in 2024 alone, company registrations across Africa reached 5.63 million, marking a 3% increase from 2023. This surge reflects a broader trend, where SMEs now constitute 95% of all registered businesses in sub-Saharan Africa.
Regional Differences
Zooming into specifics, Sub-Saharan Africa saw over 291,000 new business registrations in 2022, the latest comprehensive World Bank figure available, with projections for 2024-2025 suggesting continued acceleration.
In South Africa, a key economic hub, new registrations hit 434,024 in 2022, though they dipped in 2024 due to economic pressures, highlighting regional variances. Yet, the continent’s overall trajectory is upward. The African Development Bank (AfDB) forecasts regional economic growth of 4.3% in 2025, up from 3.7% in 2024, with SMEs at the forefront. Nine of the world’s fastest-growing economies are African, many propelled by SME booms in sectors like fintech, agritech, and e-commerce.
This growth isn’t uniform but adaptive. In East Africa, Kenya’s startup ecosystem registered thousands of new digital SMEs in 2024, leveraging mobile money platforms like M-Pesa. West Africa’s Nigeria saw a 12% rise in informal SME formations, per national surveys. Challenges like regulatory hurdles persist, but initiatives such as AfCFTA are streamlining cross-border trade, enabling SMEs to scale regionally. As Brookings Institution notes, African women are twice as likely to start businesses as men globally, adding a gender-inclusive layer to this momentum. Projections for 2025 estimate another 6 million registrations, driven by AI adoption and green energy startups, positioning SMEs as Africa’s growth engine for the decade.
Economic Backbone: SMEs’ Revenue Contribution to Africa’s GDP
SMEs are the lifeblood of Africa’s economy, injecting vitality into GDP figures that belie their modest scale. Collectively, they contribute over 50% to the continent’s total GDP, a staggering share considering their fragmented nature. In low-income African countries, this rises to more than 50%, with informal SMEs pushing the informal sector’s input to around 40% in some nations. The World Bank’s SME Finance report highlights this, estimating that informal enterprises alone generate unmet financing demand equivalent to 8% of developing economies’ GDP—translating to $2.1 trillion continent-wide.
In 2024, as Africa’s GDP grew by 3.7%, SMEs accounted for the bulk of this expansion through value addition in agriculture, manufacturing, and services. For instance, in sub-Saharan Africa, SMEs drive 50% of GDP, per World Economic Forum insights, with formal small businesses contributing 19% in South Africa alone. The AfDB’s African Economic Outlook 2025 projects sustained 3.9% growth, with SMEs poised to amplify this via intra-African trade under AfCFTA, potentially unlocking $450 billion in annual revenue by 2035.
Revenue streams are diverse: agrifood SMEs in Ethiopia generate billions in exports, while Nigerian e-commerce platforms like Jumia report SME vendor revenues exceeding $1 billion yearly. However, the “missing middle”—SMEs too big for microfinance but too small for banks—limits full potential. Bridging this could boost GDP by 10% by 2025, especially through female-led funds, as McKinsey suggests. In essence, SMEs aren’t just contributors; they’re multipliers, turning local resources into global competitiveness.
Employment Powerhouse: SMEs as Job Creators
No discussion of SME momentum is complete without their transformative impact on employment. SMEs employ nearly 80% of Africa’s workforce—over 400 million people—making them indispensable in combating youth unemployment, which hovers at 13% continent-wide. In low-income countries, this share climbs to 63%, with micro-enterprises absorbing the majority in informal sectors. The Brookings Institution highlights that SMEs account for 80-90% of jobs, generating 80% of new employment while also bearing the brunt of losses during downturns.
In 2024, South Africa’s 3 million MSMEs supported 13.4 million jobs, comprising 60% of formal employment. Across Africa, the GeoPoll MSME Pulse 2024 survey revealed that while 40% of SMEs laid off staff amid post-pandemic recovery, 40% plan hires in 2025, signaling rebound. Nigeria’s PwC MSME Survey 2024 pegs SME employment at 80%, underscoring their role in absorbing 73% of the labor force into often precarious but essential roles.
This employment isn’t just quantitative; it’s inclusive. Women-owned SMEs employ 30% more women than large firms, per UN data, while youth-led ventures in Kenya and Ghana create tech jobs at rates 2x the national average. Yet, challenges loom: underemployment affects 40% of SME workers, and skills gaps hinder productivity. Investments in vocational training could unlock 10 million jobs by 2030, tilting the balance toward sustainable livelihoods.
Fuelling the Fire: Investments Pouring into African SMEs in 2025
The year 2025 has dawned as a watershed for SME funding, with investor confidence soaring amid resilient deal-making. Year-to-date through October, African startups and SMEs have raised $2.2 billion, a 40-78% leap from 2024’s corresponding period. September alone saw $140 million inflows, pushing totals past this milestone and highlighting debt financing’s rise—exemplified by Senegal’s Wave Money securing $137 million.
Early 2025 was robust: $1.055 billion in the first five months, per African Leadership Magazine, with fintech and climate tech leading. By August, Launch Base Africa tracked $1.98 billion, including South Africa’s hearX at $100 million for health tech. Mega-deals like Kenya’s Burn Manufacturing ($80 million) underscore sector diversity, from renewables to agritech.
Local investors are stepping up, comprising 25% of funding, reducing dollar dependency. Yet, seed-stage remains tough, with only 15% of deals under $1 million. Bloomberg’s 2025 watchlist features fintechs like Angola’s Anda, signaling untapped potential. This capital influx—projected to hit $4 billion by year-end—validates SMEs’ momentum, enabling scale and innovation.
Navigating Challenges, Seizing Opportunities
Despite the surge, SMEs face headwinds: access to finance gaps $331 billion annually, regulatory silos, and climate vulnerabilities. The 2025 SME Funding Landscape report in South Africa notes a persistent funding chasm for informal sectors. AI adoption could add $15.7 trillion to global GDP by 2030, with Africa capturing 10% via SMEs.
SME’s – An Unstoppable Force
Africa’s SMEs are more than businesses; they’re the continent’s beating heart, pulsing with potential. With explosive growth, half of GDP, 80% employment, and $2.2 billion in 2025 investments, their momentum heralds a prosperous era. By fostering inclusive policies, Africa can harness this force for equitable, sustainable development, proving that small beginnings can yield giant leaps.
