At the inaugural African Development Impact Forum (ADIF) held in Addis Ababa, Executive Secretary of the United Nations Economic Commission for Africa (ECA), Claver Gatete, called for a shift in focus from creating startups to helping existing businesses scale. He emphasized that Africa has no shortage of entrepreneurial ideas or innovation but faces significant challenges in transforming successful ventures into larger, competitive companies capable of creating jobs and driving economic growth.
Gatete argued that the continent’s primary challenge is no longer innovation but implementation. While many African countries have developed successful economic models in sectors such as manufacturing, technology, agriculture, and entrepreneurship, these achievements are often isolated and difficult to replicate across the continent. He stressed the importance of expanding proven business models and creating mechanisms that allow successful enterprises to grow beyond their local markets.
The issue is particularly urgent given Africa’s demographic trends. Between 10 and 12 million young people enter the labor market each year, while the creation of formal jobs remains insufficient to meet demand. Studies indicate that between 70% and 80% of African startups fail within their first five years, often because they lack access to growth capital, broader markets, and long-term support systems rather than because of weak business ideas.
Despite continued interest in African entrepreneurship, funding patterns have become increasingly challenging for businesses seeking expansion capital. While startups collectively raised approximately $3.9 billion in 2025, investment activity has shifted toward early-stage funding, leaving a significant gap for companies that need capital to scale. Growth-stage and late-stage financing transactions have declined sharply, creating what investors often refer to as the “missing middle” in African business financing.
The financing environment has become more restrictive as Africa-focused investment funds raised significantly less capital in 2025 than in previous years. Investors have also increasingly favored debt financing over equity investments, reflecting greater caution in the market. This trend makes it more difficult for high-growth companies to secure the flexible funding needed to expand operations, enter new markets, and increase employment.
The situation is further complicated by a reduction in support from development finance institutions (DFIs), which have traditionally played a critical role in reducing investment risk and attracting private capital. Organizations such as the International Finance Corporation (IFC), British International Investment (BII), the European Investment Bank (EIB), and the African Development Bank (AfDB) have reduced their share of commitments to Africa-focused venture capital funds, leaving fewer sources of patient capital for growing businesses.
At the same time, broader global economic conditions have created additional challenges. Official development assistance to Africa has declined significantly, while the continent continues to receive only a small share of global climate and clean-energy investments despite its growing development needs. High borrowing costs, risk perceptions, and limited institutional investment further increase the difficulty of financing business growth.
To address these issues, the ECA launched the African Development Impact Forum as a platform designed to connect policy development, capital mobilization, project implementation, and impact measurement. The initiative aims to encourage stronger collaboration between governments, investors, development institutions, and private-sector stakeholders to support scalable business models across Africa.
