Why Private Companies Will Rise Before Stronger and Efficient Public Institutions Will Emerge in Africa

In the narrative of Africa’s development, there is a structural inversion we must accept: private companies will lead the charge before public institutions become truly capable. To hope that public institutions must be perfect before private enterprises can flourish is to misunderstand how nations have historically evolved.

Rockefeller invented the US oil sector before the government came to regulate. Vanderbilt was writing the script on the railways as the government followed, and Carnegie seeded steel making well beyond the understanding of the bureaucrats. You can see same in finance in the age of JP Morgan. In Nigeria, movie entrepreneurs created Living in Bondage before the government put out any regulation for Nollywood.

Simply, when you look back at some economies — whether in Europe, North America, or East Asia — you’ll discover that robust private firms often preceded the full maturation of efficient public institutions. Why? Because governments rely on tax revenue, investments, and economic vibrancy to build functional institutions. Without thriving companies generating value, there is no fuel for institutional evolution.

This was my concern in a piece in Harvard where I noted that Africa was urbanizing before industrialization, flipping centuries-old script that you industrialize, and then urbanize. As Lagos, Port Harbourt and Onitsha urbanize, the industries are even fading, triggering massive loss of social welfare.

So, we cannot demand flawless roads, world-class schools, or nimble regulatory bodies first, then build businesses — that path is a recipe for perpetual delay. Africa’s case is the same. We can—and should—lay down the entrepreneurial seeds even when many of the enabling conditions are suboptimal. The logic is simple: the success of private firms creates the resources and moral force with which states can upgrade institutions.

Good People, too often in African discourse we hear: “We must fix infrastructure, governance, education — then we can attract serious businesses.” But this is backward. Waiting for a perfect environment is a form of analysis paralysis. Governments are resource constrained; they cannot fix everything at once. In truth, public institutions often languish because there isn’t a thriving private sector to pay the piper.

In Nigeria, for instance, many critics say we must solve power, roads, or corruption before investing. But who pays for those fixes? Who generates the tax base? Who attracts the talent? Without strong and scalable private firms, these ambitions remain illusions.

Of course, many think Nigeria has a big purse. Our national budget is about the size of the healthcare budget of South Africa which spends close to $100 billion more in national budget even though it has about 30% of our population. Yes, I get it – how efficient are we the little we have?

Catalysts of Institutional Change

When private firms begin to scale, they do more than pay taxes: they pressure the state to respond. As corporations grow, they demand better regulation, consistency, predictable enforcement, and smart policies. When that pressure becomes real, governments are forced — or persuaded — to evolve.

Consider sectors that did not exist until entrepreneurial pioneers emerged. Those pioneers create markets, demonstrate value, and force governments to invent agencies, rules, and oversight bodies. Without those catalysts, institutions wait in the wings, hoping for charity or foreign aid.

The Chicken-and-Egg That Isn’t

Yes, institutions matter. Yes, without them, firms face headwinds. But there is no global case where first they built perfect public institutions, and then prosperous firms sprouted. Rather, industrious private actors often spring—even amid institutional weakness—and provide the very impetus for institutional reform.

Largely, my point is not that public institutions are unimportant; rather, their maturation is downstream of private sector dynamism. Simply, you must build and thrive to fund the stronger and efficient governments you expect!

A Strategic Prescription

1. Invest where you can now. Don’t wait for perfect infrastructure; find niches or sectors where friction is lower, and begin building.

2. Scale matters. Focus on firms that can grow across borders, exploit digital platforms, or leverage regional linkages.

3. Engage the state. Use the legitimacy and resources of growing firms to persuade governments to improve regulatory, legal, and administrative frameworks.

4. Build symbiosis. The ideal African development model is not top-down, nor purely laissez-faire, but a mutually reinforcing ecosystem of private excellence and responsive public institutions.

Conclusion

In African states, the path to better governance does not begin with perfect public institutions — it begins with bold, capable, scalable private enterprises. These firms create both the resources and impetus for states to step up. The road to stronger institutions in Africa passes through the thriving of private companies first. And so, for those who want to see African institutions become efficient and strong, the real work is in enabling — and investing — in private companies today.

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