In March 2020, when South Africa entered one of the hardest lockdowns on earth, the government did something governments rarely do: it opened the treasury. Business rescue packages appeared, real...
In March 2020, when South Africa entered one of the hardest lockdowns on earth, the government did something governments rarely do: it opened the treasury. Business rescue packages appeared, real money, aimed at exactly the kind of small enterprise that keeps a township economy breathing. And then thousands of the businesses that needed the money most discovered they could not touch it. Not because they were failing, not because they were fraudulent, but because, as far as the state's files were concerned, they did not exist. As one research team put it plainly, many entrepreneurs "were unable to access business rescue packages during the COVID-19 lockdown due to non-compliance," which is the polite word for running a business that was never registered.
That finding comes from The Future of Entrepreneurship in Africa: Challenges and Opportunities Post-Pandemic, a 2023 Routledge collection edited by Anthony Abiodun Eniola, Chux Gervase Iwu, and Abdullah Promise Opute, with chapters written mostly by South African and Nigerian university researchers. It is the only African-authored research volume on our shelf, and the chapter this essay leans on, chapter 10, on informal entrepreneurship, was written by Elona N. Ndlovu-Hlatshwayo and Alufheli Edgar Nesamvuni.
One honest note before we start, because this book earns honesty and we owe it back. This is not a family-business book. Nowhere in its twelve chapters does it study family firms, succession, or inheritance; it studies African entrepreneurs as a whole, most of them informal. Every application to family enterprise in this essay is our translation, made deliberately, and we will flag the seam each time we cross it.
Here is the one idea this essay carries, in a single sentence. Across most of Africa the unregistered business is not a fringe case but closer to the norm, and since registration is an event a family may delay for years, the family's own ledger, its private record of who owns what, who put in what, and who is owed what, has to come first, because the day paper suddenly matters is never a day you get to choose.
The word "informal" carries a smell in polite financial company. It suggests something provisional, unserious, a hustle waiting to grow up. The numbers in this book do not support the smell.
Ndlovu-Hlatshwayo and Nesamvuni reproduce a remarkable table, a decade of estimates, 2010 to 2018, of informal output as a percentage of official GDP across more than forty African countries, drawn from a World Bank-associated econometric study by Elgin, Kose, Ohnsorge, and Yu. Zimbabwe leads the entire table: 62.4 percent of its economy was informal in 2010, and after a decade of everything Zimbabwe went through, the figure had barely moved, still 58.7 percent in 2018. Nigeria, the continent's largest economy, sat at 56.2 percent in 2018, and it was the only major economy in the table whose informal share was rising in the final year measured. Most of the West and Central African states in the table, Benin, Gabon, The Gambia, Zambia, Cote d'Ivoire, cluster between 38 and 52 percent. The outliers are at the bottom, not the top: South Africa held steady between 27 and 28 percent across the whole decade, and Mauritius, at 21.3 percent, posted the lowest reading on the continent.
Read that table as a family, not as an economist. If your people are in Harare, Lagos, Cotonou, or Lusaka, the odds are close to a coin flip, or better, that the family's economic life runs through enterprises no registry has ever heard of. The shop, the tailoring business, the transport sideline, the plot that sells produce in season: real revenue, real employees, real assets, no file.
And here the chapter does something rare for an academic book: it admits its own numbers are contested. Elsewhere in the same chapter, the authors cite an official Statistics South Africa figure putting the informal sector at just 5.2 percent of GDP for 2015, against the 27 to 28 percent their own table shows for the same years. That is a fivefold gap, and the authors flag it without resolving it. We will not resolve it either, but we will point at what it proves. The informal economy is so far off the books that the people whose job is counting it disagree with each other by a factor of five. Invisibility is not a detail of this world. It is the defining condition.
Here is where the book gets more interesting than the standard sermon. The usual advice aimed at informal business owners, from banks, from NGOs, from formalization campaigns, is some version of: register, comply, become legible, and then good things will happen. Ndlovu-Hlatshwayo and Nesamvuni argue almost the reverse. Their policy recommendations ask African governments to legalize trading without registration, and they point to a real, named precedent: the Gauteng Township Economy Bill in South Africa, which allows informal entrepreneurs to trade lawfully without formal registration, provided they respect by-laws about trading spaces. They go further, proposing that revenue offices "halt requirements for registration until the income exceed a threshold of $16 000," their worked example of a level below which the state should simply leave a young business alone.
Sit with what that implies. Two African researchers, having studied the informal sector closely, conclude that registration should function as a graduation, not an admission requirement. A business earns its way to the registry by surviving long enough to matter. Until then, forcing paper on it mostly adds cost without adding protection.
For a family enterprise, this reframing lifts a quiet shame many owners carry. If the family shop has traded for eleven years without registering, the family has not been cheating. It has been doing what most of the continent does, in a system that the researchers themselves say is built backwards. Informal is a legal status. It is not a verdict on seriousness.
But the same chapter that defends the unregistered business also documents, without flinching, what invisibility costs when it finally bills you. The COVID-19 lockdown was that bill for South Africa's informal traders: the one moment in a generation when the state showed up with rescue money, and the unregistered could not prove they existed to receive it. The authors note that informal entrepreneurs are "largely excluded" from the support structures of the formal ecosystem, and that what they build instead is social capital: networks, relationships, collective arrangements like the stokvel, a South African rotating savings group we have written about elsewhere, in which members pool fixed monthly sums and take turns receiving the pot. In Addis Ababa, the chapter notes, citing research by Kebede, entrepreneurs lean on social networks precisely to substitute for what the formal economy will not give them.
Social capital is real capital; the book is right to honor it. But notice its one structural weakness: it lives in memory. The network knows the shop is Mama Grace's, knows her brother in Manchester paid for the second freezer, knows the nephew worked unpaid for two years against a future share. The state knows none of this, and, more dangerously, nothing outside the memory of the people involved records it either. When the claim day comes, whether the claimant is a relief fund, a bank, a buyer, a court, or a grieving family dividing an estate, memory is the one form of evidence that dies, emigrates, and disagrees with itself.
Everything above is the book's own ground: informal enterprise, national data, policy. What follows is our translation into family terms, and we say plainly that the book does not make this argument. It never studies family businesses at all; family enterprise appears in this volume exactly once, in a single generic table row borrowed from Western literature. The book stops here. We go one step further.
The step is this: separate, in your mind, two different kinds of "informal." A business can be informal to the state, unregistered, untaxed, invisible to the registry, and the book has just told you that this may be a rational, even researcher-endorsed, condition for years. But a business must never be informal to itself. Being off the government's books is a timing decision. Having no books at all is a slow-burning family emergency.
Because think about what a family enterprise actually contains that no registry would capture anyway. Who contributed the startup money, and was it a gift, a loan, or a stake? The diaspora cousin in Ohio or Berlin who wired the money for the delivery motorcycle: does anything on paper say what she is owed, or will her claim surface for the first time at a funeral? The land the kiosk sits on, held in a grandfather's name, understood by everyone and documented by no one. The three years a daughter ran the shop for nothing while her brothers studied: what is that worth when shares are finally discussed? None of these questions require a lawyer or a registrar today. Every one of them requires a written record, dated, agreed, and kept where the family can find it.
And the record has a second job: it is the on-ramp to formalization when the moment comes. The Gauteng-style threshold logic cuts both ways. If registration is a graduation, then a family should be able to graduate fast the week it becomes worth doing, when the contract, the loan, the export order, or the next rescue package appears. The businesses that crossed that line smoothly during the pandemic were not the ones with the best lawyers. They were the ones that could reconstruct their own history: revenues, contributors, assets, agreements. A ledger kept for five quiet years turns registration from an excavation into an afternoon.
Here is the one thing to do this month, and it requires no government office and no fees.
Open a single record for the family enterprise, even if, especially if, it is unregistered. Four pages will do to start. Page one: what the business owns, and whose name each asset actually sits under. Page two: every person who has put in money or unpaid work, with dates and the terms as everyone remembers them, and get each entry acknowledged by the people it names while they are alive and on speaking terms. Page three: what the business earns and spends, however roughly, month by month from now on. Page four: what the family intends, who is being groomed to run it, and what has been promised to whom. Then scan all of it into your Document Vault in LegacyPot, where the receipts, the acknowledgments, and the agreements sit beside the family's other permanent papers, so that the record survives the phone, the flood, and the fading memory of the uncle who knew everything.
Registration can wait for the threshold, just as the researchers suggest. The ledger cannot wait, because the day it is needed, a lockdown, a windfall, a death, arrives without notice, and on that day the difference between a family that wrote things down and a family that trusted memory is the difference between a claim and an argument.
Most of Africa's economy runs off the books. The book behind this essay has convinced us that this is not the scandal outsiders think it is. The scandal would be a family that, knowing this, kept itself off its own books too.