The Infrastructure Tax on Small Companies
Blackouts, slow roads and weak internet cost small firms far more than big ones. What the World Bank’s data shows, three composite cases, and how founders plan around it.
There’s a tax most small companies pay that never shows up on a tax form.
It’s the cost of infrastructure that doesn’t work. The power that cuts out in the middle of a production run. The road that turns a two-hour delivery into a two-day one. The internet that drops every afternoon, right when orders come in. The port that holds your container for a week. The payment that sits in limbo because the system is down.
Big companies pay this tax too. But they can afford to buy their way around it: generators, private networks, their own trucks, people whose full-time job is managing the delays. Small companies can’t. So the same broken infrastructure costs a small firm far more, as a share of what it earns, than it costs a big one.
I call it the infrastructure tax. And in a lot of the world, it’s the single biggest thing standing between a good small business and a growing one.
What the goals say
Target 9.1 of the Sustainable Development Goals calls for quality, reliable, sustainable and resilient infrastructure, including regional and cross-border infrastructure, to support economic development and human well-being, with a focus on affordable and fair access for everyone (UN, Goal 9).
Notice the words “reliable” and “affordable and fair access.” The goal isn’t just to build infrastructure. It’s to build infrastructure that everyone can actually count on, including the smallest businesses.
What the data shows
The World Bank’s Enterprise Surveys ask firms around the world about the conditions they operate in. A 2025 World Bank brief on businesses facing unreliable electricity pulls the numbers together (World Bank, Businesses Facing Unreliable Electricity):
- 46.6% of firms worldwide experienced at least one electrical outage in the previous year.
- 30.2% consider electricity a major or very severe obstacle to their operations.
- In sub-Saharan Africa, 72.1% of firms experienced outages.
- Firms worldwide report an average of 3.8 outages a month.
- In South Asia, firms average 12.5 outages a month.
- In sub-Saharan Africa, outages average 1.9 hours each, adding up to about 14 hours a month without power.
- 30.5% of firms worldwide own or share a generator. In sub-Saharan Africa, it’s 51.1%.
The same brief cites research finding that electricity shortages reduced manufacturing firms’ revenues in India by at least 5%, and estimates that sales of firms in 14 sub-Saharan African economies could rise by 85% if outages fell to South Africa’s levels (World Bank, Businesses Facing Unreliable Electricity).
Read that last number again. 85%. That’s not a small efficiency gain. That’s the difference between a company that’s stuck and one that’s growing.
Why small firms pay more
The brief is direct about who carries the heaviest load. Power outages take a larger toll on smaller firms, and electricity-intensive sectors in countries with constant outages tend to have a lower share of small firms (World Bank, Businesses Facing Unreliable Electricity).
In other words, bad infrastructure doesn’t just hurt small businesses. It keeps them from existing in the first place.
The reasons are simple:
Generators are expensive. A large firm can spread the cost of a generator across a big operation. A small firm can’t. Larger firms are significantly more likely to own one (World Bank, Businesses Facing Unreliable Electricity).
Small firms have no slack. A large company can shift production to another site, draw on inventory or absorb a lost day. A small company often has one site, little inventory and a customer waiting.
Every delay costs more relative to revenue. A lost day of sales is a rounding error for a big firm. For a small one, it can be the month’s profit.
Small firms can’t negotiate. Large companies get priority connections, dedicated support and better terms from utilities and logistics providers. Small ones take what they get.
Case 1: the metal shop and the power cuts
This is a composite of a pattern I’ve watched more than once.
A small metal fabrication shop employs 15 people. It makes good parts, has steady orders and wants to grow. The power cuts out several times a week, often for an hour or more.
Every outage stops the machines. Workers wait. A weld gets interrupted. A batch of parts comes out wrong. Deadlines slip. Customers who were promised delivery on Friday get it the next Wednesday.
The owner looks into a generator. The upfront cost is more than three months’ profit. The fuel adds a significant monthly expense. The bank won’t lend for it, because the shop has no collateral beyond its equipment.
So the shop doesn’t grow. It turns down a large order from a retailer because it can’t promise the delivery dates. It doesn’t hire the five people it could have hired. Its competitor down the road, a bigger firm with a generator, takes the order.
Nothing about the shop’s products or people changed. The infrastructure decided the outcome.
What helped in the versions of this that ended well: a shared generator with two neighboring businesses, splitting the cost three ways. Later, solar panels with battery storage for the most critical machines, financed through a supplier payment plan. The shop also started scheduling power-hungry work for the hours outages were least likely, and building a buffer of three days into every delivery promise.
Case 2: the online seller and the roads
A small producer makes a specialty food product. Online orders come in from across the country. The product is good, and customers come back.
But getting the product to them is a nightmare. Roads between the producer’s town and the main cities are slow and unreliable. Courier services charge high rates for the region and deliver late. Some packages arrive damaged. A share never arrive at all.
Shipping costs eat a large part of the margin. Late and damaged deliveries bring refunds and bad reviews. Customers in the biggest markets, where competition is toughest, are the ones most likely to get late deliveries.
The founder starts to wonder whether selling nationally is worth it.
What helped: consolidating shipments, sending larger batches to a partner warehouse in the main city every week and shipping to customers from there. Better packaging to cut damage. Clear delivery promises that accounted for real conditions instead of the courier’s optimistic estimates. And pricing that included the true cost of delivery instead of hiding it.
Case 3: the service firm and the internet
A small design and software services firm has talented people and clients in other countries. The work is entirely digital.
The internet is unreliable. Connections drop several times a day. Large files take hours to upload. Video calls with clients freeze. The team stays up late to work during the hours the connection is better.
Clients notice. Deadlines slip. A couple of clients move to firms in places with better connections, even though the work was good.
Connectivity has spread a lot. By 2025, 5G reached 55% of the world’s population. But coverage ranged from 84% in high-income countries to 4% in low-income ones, and 12% of people in the least developed countries still had no mobile broadband signal at all (UN, SDG 9 factsheet).
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What helped: two internet providers instead of one, so the team could switch when one went down. A mobile data backup. Scheduling large uploads overnight. And being honest with clients about working hours and turnaround times, which built more trust than pretending the problem didn’t exist.
Case 4: the exporter and the border
A small company makes a specialty component for manufacturers in neighboring countries. The product is competitive on quality and price. On paper, the market is huge.
In practice, getting goods across the border is slow and unpredictable. Shipments wait at crossings. Paperwork takes days. A missing stamp sends a truck back. Customers abroad need deliveries on a schedule, and the company can’t promise one.
So it sells mostly at home, in a smaller market, at lower prices. A bigger competitor with a dedicated logistics team and a customs broker on staff wins the export contracts.
Target 9.1 explicitly mentions regional and cross-border infrastructure for exactly this reason (UN, Goal 9). For a small exporter, the border is infrastructure, and when it doesn’t work, the export market might as well not exist.
What helped: working with a freight forwarder who handled several small exporters together, sharing the cost of expertise none of them could afford alone. Getting every document right the first time, with a checklist built from past delays. And quoting delivery windows that included realistic border time.
The hidden part: damage and maintenance
There’s another piece of the tax that rarely gets counted. Bad infrastructure doesn’t just interrupt work. It breaks things.
The World Bank brief notes that in Tanzania, about a third of firms reported appliances damaged by brownouts (World Bank, Businesses Facing Unreliable Electricity). Power surges ruin equipment. Rough roads damage vehicles and goods. Heat and dust kill electronics faster than they should.
For a small firm, losing one key machine can stop everything for days, and replacing it can wipe out months of profit. Voltage protection, surge protectors and regular maintenance are boring. They’re also some of the cheapest insurance a small business can buy.
Why this is a growth problem, not just a cost problem
It’s tempting to think of all this as a cost of doing business. Annoying, but manageable. That misses the bigger picture.
The real damage is to decisions. When a founder can’t count on power, roads or internet, they make smaller bets. They don’t take the big order. They don’t open the second location. They don’t hire ahead of demand. They don’t try exporting. Every decision gets shaped by the question of what will break.
Multiply that across millions of small firms, and you get economies where businesses stay small because staying small is the only safe choice. That’s the infrastructure tax’s real price: not the hours lost, but the growth that never gets attempted.
What the infrastructure tax really costs
Add it up and the tax shows up in five places:
Lost sales. Orders you can’t fulfill, customers who leave after a late delivery, contracts you can’t bid on because you can’t guarantee delivery.
Higher costs. Generators and fuel, backup internet, premium shipping, spoiled materials, damaged equipment.
Lost time. Workers waiting for power, staff working around connection problems, founders spending hours managing delays instead of growing the business.
Lost growth. The hires you don’t make. The markets you don’t enter. The investment you don’t attempt.
Lost businesses. The companies that never start, because the founder looked at the conditions and decided it wasn’t possible.
That last one never shows up in any data. It might be the biggest cost of all.
How founders plan around it
You can’t fix national infrastructure on your own. But you can reduce how much the tax costs you.
Measure it. For one month, track every hour lost to outages, every late or damaged delivery, every connection failure. Put a cost on each. Most founders are shocked by the total. Once you see the number, you can decide what to invest in.
Protect the critical few. You don’t need backup for everything. Identify the machines, systems or processes that would cost the most to lose, and protect those first.
Share the cost. Shared generators, shared warehouses, shared transport. Neighboring businesses facing the same problems can split solutions none of them could afford alone.
Look at newer options. Solar with battery storage is increasingly practical for small businesses with modest electricity needs. The World Bank brief notes that for small businesses with low electricity intensity, distributed generation solutions such as solar panels can provide the energy needed to keep operating (World Bank, Businesses Facing Unreliable Electricity).
Build buffers into your promises. Promise what you can actually deliver under real conditions, not ideal ones. Customers forgive slow far more than they forgive late.
Have two of everything that matters. Two internet providers. Two couriers. Two suppliers for critical inputs. Redundancy costs money, but less than a lost customer.
Plan production around the grid. If outages follow patterns, schedule the work that needs power for the most reliable hours.
Price it in. If the infrastructure tax is real for your business, it belongs in your prices. Don’t hide it in your margin.
Speak up. Utilities, governments and development programs respond to evidence. A group of small businesses with real numbers on what outages cost them is much harder to ignore than individual complaints.
What has to change
Founders can work around the tax. They shouldn’t have to.
The SDG 9 targets point in the right direction: reliable infrastructure, fair access and affordable connectivity. What’s needed is to judge infrastructure investment by whether it reaches the smallest businesses, not just whether it gets built.
A few things would make a real difference:
- Report reliability, not just coverage. A grid that reaches a town but cuts out daily isn’t really access.
- Make small firms a priority in upgrades. Industrial zones and market districts full of small businesses should be first in line.
- Finance backup solutions for small firms. Lending programs for solar, storage and backup connectivity designed for companies without collateral.
- Tell businesses about planned outages. The World Bank brief notes that keeping businesses informed of planned outages is good practice, because it lets them adapt and reduce losses (World Bank, Businesses Facing Unreliable Electricity).
- Measure the cost to small businesses. Track what infrastructure failures cost firms of different sizes, so the true burden is visible.
The point
The infrastructure tax is invisible because it doesn’t appear on an invoice. But it’s real, and it falls hardest on the companies least able to pay.
When infrastructure works, a small business competes on its product, its people and its price. When it doesn’t, it competes on how much it can afford to work around the failures, and the big firms win that contest every time.
Fixing infrastructure isn’t just an engineering problem. It’s one of the most powerful things a country can do for its small businesses.
Robert Nikic is an entrepreneur, TEDx speaker and advisor on innovation and economic growth. He writes about what he has seen build and break companies, and about the rules that decide whether small businesses get a fair shot. Read more from Robert Nikic on why small businesses belong at global policy tables, or browse his Journal.
