This is a vital point. The key is moving beyond the choice between large firms and micro-enterprises, and focusing on the ecosystem that connects them.
China’s success came from building systems: supply chains, logistics, energy, & skills aligned around strategic goals. Micro-entrepreneurs can thrive within that system but the system must be built first. That requires state capacity and visionary private coordination.
China’s industrial rise wasn’t just about building big companies; it was about creating integrated production hierarchies. Large anchor firms (often state backed or supported) structured entire supply chains, creating stable demand and providing technology transfer that smaller, nimble suppliers could then innovate around.
Think of it as "structured scaling":
Large firms set quality standards, ensure export compliance, and drive operational efficiency.
Specialized SMEs inject flexibility, local market knowledge, and rapid iteration.
The goal shouldn’t be either big firms or micro-entrepreneurs it should be building the system that lets both thrive symbiotically. This requires state capacity to de-risk large scale investments and targeted support to help small producers meet those rising standards.
It’s the difference between planting one big tree versus cultivating fertile soil where many kinds of plants can grow together.
Thank you, I appreciate that. The rhetorical juxtaposition is crucial for shifting the conversation.
The real goal, as you know, is moving toward that integrated ecosystem where firms of all sizes can thrive symbiotically it's the system that matters most. Glad to be on the same page.
Africa’s informal sector is the consequence of infrastructural deficit, lack of strategic planning, government nonchalant attitude to policy reform , citizens’ cynical perceptions about anything ‘ professional or standard ‘ services, etc. For instance , in Nigeria we still experience flock of cows roaming streets where houses are worth N800,000,000. The average Nigerian believes if sectors become standardised and formal the economic situation might even be worse from the consumer viewpoint. Another aspect is poverty. People hawk items not because they enjoy exposing themselves to the elements but because they have no other choice to ply their trade .
It would take a comprehensive feasibility analysis/study on how to eradicate informal sector in a milieu where the population grows at 3% annually, where energy supply is erratic, inadequate social services to support a progressive policy on human development. When you raise the standard of living of a society their values , undoubtedly, changes .
In developed economies the pipe in which gas flows through for you to cook your meal in the kitchen has already been laid underground . But in Nigeria we still have to procure gas by taking the gas cylinder to a nearby shop in order to refill the cylinder. Imagine how many jobs a private gas company would have provided if it were to serve Lagos state alone?
Thank you for putting out such great posts. I'm really interested in ways to catalyse high economic growth in Nigeria and your "no bullshit" realist approach is refreshing.
There's something which is self evident in Africa, but ignored due to everything being racialised. Some examples are these. South Africa under White rule, was the most advanced country on the continent by far. The finest military, the best rail & road systems, finest ports, a world class power generation & distribution system, the finest weapons development & production system & even nuclear potential. Zambian mining industry under White control made it a powerhouse & the mainstay of the economy. Zimbabwe with White agricultural control was the breadbasket of Africa & a with very successful tobacco business. Under Black rule South Africa has collapsed, Zambia is impoverished & Zimbabwe is beyond belief. Given these facts surely allowing Whites to do what they do best in a non racial environment, would allow all three countries to prosper, creating masses of Black employment & developing their skills, since the economy would need them to keep growing & cater for the Black birth rate.
This perspective overlooks the profound role of institutional history, resource extraction, and global economic systems in shaping development outcomes. The advancement you describe was built upon exclusionary systems that concentrated power and opportunity an unsustainable model for inclusive growth.
Today’s challenges in South Africa, Zambia, Zimbabwe, or elsewhere stem from complex factors: structural adjustment, commodity dependence, governance transitions, and climate vulnerability, not innate capability. Meaningful progress requires honest engagement with this full history and forward-looking investment in education, infrastructure, and equitable institutions, not re-racialized development paradigms.
The Institutional history of Africa was mud huts when the Whites arrived. I don't see the relevance of the rest of your points. The only point I'm making is if the Whites were allowed to get on with growing the economy in todays environment of non-discrimination, they would easily rebuild what was, while empowering the Black population this time around.
Thanks Ken for the great summary here. A question though - what do you see as the recent role models for doing this well and achieving impact, in Kenya for example? This was something I see a lot of livelihoods program officer-types struggling with, and thus defaulting to the models you criticize.
To expand on this a bit. In some ag areas, efforts on cooperatives + related policy seems to be getting worse rather than better (e.g., coffee), and folks like Bitange Ndemo in positions of influence have been sharing similar analysis on tomato (vs. imports of tomato paste) regularly for years. Bright spots in firm growth in Kenya (e.g., growth firms in aquaculture, retail chains, and more) seem to be succeeding outside of industrial policy / sector targeted efforts, rather than because of it. And at least on the private funder side, the bits of funding portfolios currently going to working with industry seem even less impactful than the informal sector skilling or cash grant-type programming, probably because of execution and misaligned incentives (e.g., national industry orgs seeing more funding in positioning themselves as skilling implementers rather than sector improvement). So I see funders (and I imagine also govt leaders) who are in theory 100% aligned with what you shared and have discretion over non-trivial funding, understandably confused and/or cautious and defaulting to shovel-ready skilling. It seems like there's a need to build understanding and optimism on how support for firm growth can succeed.
I think part of the problem is that nearly everyone comes to the table convinced that skilling and micro-entrepreneurship are the only games in town. Which, to be brutally honest, means that the private sector stuff gets done for show (and implementing orgs know this, too, or are usually lacking in the ability to move the needle with firms).
For example, there is typically very little expertise on the commercial private sector, with everyone having a bias for skilling as a direct and measurable impact. So I would argue that the first step should be to work on frameworks and KPIs (and cultivate a tolerance for risk that comes with working in the private sector).
And just because there is no off-the-shelf program to make this work shouldn't be used as an excuse to not learn by doing. I say this because every time I have these conversations the one question that comes up is "can you give us a solution that we can simply plug into our programming cycle?" The problem with that approach, of course, is that the private sector doesn't work on the standardized donor programming cycle.
The aquaculture example is a good one, even though even there you see a lack of policy attention or coordination of capital flows to different bits of the value chain (and elongation of the value chain within the region to create more jobs).
You've perfectly captured the execution gap. The key isn't just to mimic old industrial policy, but to learn from new models of state-market symbiosis.
Look at China's Hefei: the government didn't pick winners arbitrarily; it acted as a strategic VC, de-risking entry for tech firms and building entire ecosystems around them.
The lesson for Kenya isn't to fund skilling or firms, but to fund skilling for specific firm led value chains like aquaculture or retail where demand is real and scaling is possible. It's about building the pipeline, not just sprinkling grants.
Optimism comes from showing this can work; that's where focused pilots with aligned incentives can light the way.
This is a vital point. The key is moving beyond the choice between large firms and micro-enterprises, and focusing on the ecosystem that connects them.
China’s success came from building systems: supply chains, logistics, energy, & skills aligned around strategic goals. Micro-entrepreneurs can thrive within that system but the system must be built first. That requires state capacity and visionary private coordination.
China’s industrial rise wasn’t just about building big companies; it was about creating integrated production hierarchies. Large anchor firms (often state backed or supported) structured entire supply chains, creating stable demand and providing technology transfer that smaller, nimble suppliers could then innovate around.
Think of it as "structured scaling":
Large firms set quality standards, ensure export compliance, and drive operational efficiency.
Specialized SMEs inject flexibility, local market knowledge, and rapid iteration.
The goal shouldn’t be either big firms or micro-entrepreneurs it should be building the system that lets both thrive symbiotically. This requires state capacity to de-risk large scale investments and targeted support to help small producers meet those rising standards.
It’s the difference between planting one big tree versus cultivating fertile soil where many kinds of plants can grow together.
You make an excellent point. My emphasis on firm size was a rhetorical juxtaposition vis-a-vis the fixation on micro-entrepreneurship in the region.
Thank you, I appreciate that. The rhetorical juxtaposition is crucial for shifting the conversation.
The real goal, as you know, is moving toward that integrated ecosystem where firms of all sizes can thrive symbiotically it's the system that matters most. Glad to be on the same page.
Africa’s informal sector is the consequence of infrastructural deficit, lack of strategic planning, government nonchalant attitude to policy reform , citizens’ cynical perceptions about anything ‘ professional or standard ‘ services, etc. For instance , in Nigeria we still experience flock of cows roaming streets where houses are worth N800,000,000. The average Nigerian believes if sectors become standardised and formal the economic situation might even be worse from the consumer viewpoint. Another aspect is poverty. People hawk items not because they enjoy exposing themselves to the elements but because they have no other choice to ply their trade .
It would take a comprehensive feasibility analysis/study on how to eradicate informal sector in a milieu where the population grows at 3% annually, where energy supply is erratic, inadequate social services to support a progressive policy on human development. When you raise the standard of living of a society their values , undoubtedly, changes .
In developed economies the pipe in which gas flows through for you to cook your meal in the kitchen has already been laid underground . But in Nigeria we still have to procure gas by taking the gas cylinder to a nearby shop in order to refill the cylinder. Imagine how many jobs a private gas company would have provided if it were to serve Lagos state alone?
Thank you for putting out such great posts. I'm really interested in ways to catalyse high economic growth in Nigeria and your "no bullshit" realist approach is refreshing.
There's something which is self evident in Africa, but ignored due to everything being racialised. Some examples are these. South Africa under White rule, was the most advanced country on the continent by far. The finest military, the best rail & road systems, finest ports, a world class power generation & distribution system, the finest weapons development & production system & even nuclear potential. Zambian mining industry under White control made it a powerhouse & the mainstay of the economy. Zimbabwe with White agricultural control was the breadbasket of Africa & a with very successful tobacco business. Under Black rule South Africa has collapsed, Zambia is impoverished & Zimbabwe is beyond belief. Given these facts surely allowing Whites to do what they do best in a non racial environment, would allow all three countries to prosper, creating masses of Black employment & developing their skills, since the economy would need them to keep growing & cater for the Black birth rate.
This perspective overlooks the profound role of institutional history, resource extraction, and global economic systems in shaping development outcomes. The advancement you describe was built upon exclusionary systems that concentrated power and opportunity an unsustainable model for inclusive growth.
Today’s challenges in South Africa, Zambia, Zimbabwe, or elsewhere stem from complex factors: structural adjustment, commodity dependence, governance transitions, and climate vulnerability, not innate capability. Meaningful progress requires honest engagement with this full history and forward-looking investment in education, infrastructure, and equitable institutions, not re-racialized development paradigms.
The Institutional history of Africa was mud huts when the Whites arrived. I don't see the relevance of the rest of your points. The only point I'm making is if the Whites were allowed to get on with growing the economy in todays environment of non-discrimination, they would easily rebuild what was, while empowering the Black population this time around.
Thanks Ken for the great summary here. A question though - what do you see as the recent role models for doing this well and achieving impact, in Kenya for example? This was something I see a lot of livelihoods program officer-types struggling with, and thus defaulting to the models you criticize.
To expand on this a bit. In some ag areas, efforts on cooperatives + related policy seems to be getting worse rather than better (e.g., coffee), and folks like Bitange Ndemo in positions of influence have been sharing similar analysis on tomato (vs. imports of tomato paste) regularly for years. Bright spots in firm growth in Kenya (e.g., growth firms in aquaculture, retail chains, and more) seem to be succeeding outside of industrial policy / sector targeted efforts, rather than because of it. And at least on the private funder side, the bits of funding portfolios currently going to working with industry seem even less impactful than the informal sector skilling or cash grant-type programming, probably because of execution and misaligned incentives (e.g., national industry orgs seeing more funding in positioning themselves as skilling implementers rather than sector improvement). So I see funders (and I imagine also govt leaders) who are in theory 100% aligned with what you shared and have discretion over non-trivial funding, understandably confused and/or cautious and defaulting to shovel-ready skilling. It seems like there's a need to build understanding and optimism on how support for firm growth can succeed.
I think part of the problem is that nearly everyone comes to the table convinced that skilling and micro-entrepreneurship are the only games in town. Which, to be brutally honest, means that the private sector stuff gets done for show (and implementing orgs know this, too, or are usually lacking in the ability to move the needle with firms).
For example, there is typically very little expertise on the commercial private sector, with everyone having a bias for skilling as a direct and measurable impact. So I would argue that the first step should be to work on frameworks and KPIs (and cultivate a tolerance for risk that comes with working in the private sector).
And just because there is no off-the-shelf program to make this work shouldn't be used as an excuse to not learn by doing. I say this because every time I have these conversations the one question that comes up is "can you give us a solution that we can simply plug into our programming cycle?" The problem with that approach, of course, is that the private sector doesn't work on the standardized donor programming cycle.
The aquaculture example is a good one, even though even there you see a lack of policy attention or coordination of capital flows to different bits of the value chain (and elongation of the value chain within the region to create more jobs).
You've perfectly captured the execution gap. The key isn't just to mimic old industrial policy, but to learn from new models of state-market symbiosis.
Look at China's Hefei: the government didn't pick winners arbitrarily; it acted as a strategic VC, de-risking entry for tech firms and building entire ecosystems around them.
The lesson for Kenya isn't to fund skilling or firms, but to fund skilling for specific firm led value chains like aquaculture or retail where demand is real and scaling is possible. It's about building the pipeline, not just sprinkling grants.
Optimism comes from showing this can work; that's where focused pilots with aligned incentives can light the way.