What African Cities Are The Best To Launch A Startup?

Entrepreneurship is deeply embedded in African culture. The continent boasts the highest number of women entrepreneurs globally, with new businesses emerging daily across its vast landscapes.

Africa is often hailed as “the next frontier,” indicating that more developed nations are keen to invest in the continent’s burgeoning economic revolution. For both African entrepreneurs and foreign investors, selecting the best city to launch a startup is crucial. Factors such as market access, regulatory environment, investment opportunities, and infrastructure are vital in making this decision.

Africa leads the world in entrepreneurial activity, with the highest share of adults starting or running new businesses. According to a report by the African Development Bank (AfDB), the Organisation for Economic Co-Operation and Development (OECD), and the United Nations Development Program (UNDP), 80% of Africans view entrepreneurship as a viable career opportunity. Small companies with fewer than 20 employees and less than five years of experience are the largest employers in Africa’s formal sector. With 22% of the working-age population starting new businesses, Africa’s entrepreneurial and investment potential is undeniable.

Top African Cities for Startups

Mauritius (Port Louis)

Mauritius ranks 25th globally on the World Bank’s Ease of Doing Business Index, making it an excellent choice for setting up a business, especially one that doesn’t need to be resident in the country. The government encourages foreign investment with policies such as free repatriation of earnings, no capital gains tax, no withholding tax on dividends, and minimal accounting or reporting requirements. The island’s advanced fiber optic network provides internet speeds up to 100Mbps. However, with a population of just 1.26 million, the market size is limited. Nonetheless, Mauritius remains one of the best places on the continent to incorporate a business.

Kenya (Nairobi)

Nairobi is East Africa’s most active tech ecosystem, offering a favorable environment for entrepreneurs. With high mobile penetration and financial inclusion rates, Kenya provides excellent market access to its 48.5 million inhabitants. The country boasts some of the highest average internet speeds globally, and the government’s support for tech initiatives creates a favorable regulatory environment. The digital business registration process adds to its appeal.

Rwanda (Kigali)

Rwanda is known for its swift business setup time, averaging around a week. A Nigerian entrepreneur recently established a business in Kigali in just 4.5 days. Rwanda offers reliable infrastructure, including consistent power and nationwide 4G coverage. The government is keen on attracting foreign investment, and the country is one of the most politically stable in East Africa. While Rwanda’s market size is smaller compared to other East African nations, its favorable regulatory environment and infrastructure make it an attractive destination for startups.

Nigeria (Lagos)

With a population of nearly 200 million, Nigeria’s primary advantage is its large market size, making it Africa’s largest economy. Despite infrastructural challenges, the country’s significant lower middle class offers vast potential for startups aiming to scale. Lagos, the commercial hub, houses the nation’s largest tech cluster in Yaba and numerous investment opportunities. Although poor regulation, multiple taxation, and unrest in some areas pose challenges, the government has made strides in improving business registration processes.

South Africa (Johannesburg)

As Africa’s most developed economy, South Africa is a prime location for startups, provided visa acquisition is possible. The country excels in infrastructure, with fast internet speeds and reliable power supply. With a population of 55 million, there is a substantial market for startups. While political stability has been a concern, the election of President Cyril Ramaphosa has brought some improvement. South Africa ranks 82nd globally on the World Bank’s Ease of Doing Business Index, offering a relatively favorable regulatory environment and strong protection for minority investors.

Botswana (Gaborone)

Botswana is one of the world’s most stable countries, with a long-standing democracy. The country is keen to diversify its economy beyond diamond production and ranks 81st on the World Bank’s Ease of Doing Business Index. Although Botswana’s small population of 2.2 million limits market size, its stability and relatively quick business registration process make it an appealing location for startups.

Navigating Challenges and Opportunities

Africa’s entrepreneurial landscape faces challenges such as limited market access, poor infrastructure, political instability, and inadequate government regulation. However, certain cities stand out as more favorable environments for startups. Entrepreneurs and investors should focus on these locations to build and scale successful businesses. With the right support and resources, Africa's entrepreneurial potential can be fully realized, driving economic growth and innovation across the continent.