25/06/2026
The most common reason an African business fails due diligence is not poor performance. It is undisclosed liability. The kind that was never recorded because nobody thought it needed to be.
The pattern is consistent across markets and deal stages. A business presents clean management accounts and growing revenue. Due diligence opens and within weeks the advisors find the same cluster of issues: verbal equity arrangements with early employees or co-founders that were never formalised, tax exposure accumulated across multiple years of non-filing or incorrect filing, supplier agreements operating without written contracts, and regulatory gaps in markets the business entered informally.
None of these liabilities are unusual. They are the structural inheritance of businesses built fast, in markets where formality was not always enforced, by founders who were focused on growth rather than compliance. They become deal-killers not because they are necessarily terminal but because they are undisclosed, and undisclosed liabilities signal to investors that the founder does not fully understand the risk profile of their own business.
The regulatory environment is tightening. Nigeria's 2026 tax reform framework now uses real-time detection to identify errors and late filings, triggering penalties faster than any previous system. Ghana's Modified Taxation Scheme, launched in November 2025, directly targets informal sector non-compliance among SMEs. Across the continent, the window for cleaning up undisclosed liabilities before they become enforcement actions is narrowing.
The advisory principle is straightforward: surface the liability before the investor does. A liability disclosed proactively is a negotiation point. A liability discovered at due diligence is a deal-breaker.
Spica Advisory works with founders across 11 African markets on investment readiness, governance architecture and liability mapping before the fundraise begins.
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