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SUB-SAHARAN AFRICA’S corporates are coming of age. The region has long been a repository of well-run enterprises with ambitions that stretch across the region and beyond. But improving infrastructure, better access to capital and rising wealth permeating through to the middle classes are turning leading firms into bona-fide multinationals and clever start-ups into the next blue-chips. The result is good for everyone, not least the army of regional and foreign investors looking to invest in and profit from the best corporates the region has to offer.
Nigeria and South Africa still dominate, boasting 45 of the region’s 50 largest corporates by market capitalization, according to data from Bloomberg. At the head of the queue sit the usual suspects, from Nigeria’s Dangote Group and oil and gas firm Century Group to South African giants such as Standard Bank, carrier MTN and energy-to-chemicals group Sasol.
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Nairobi-listed East African Breweries |
But look elsewhere and a host of interesting and aspiring corporates spring forth. In Kenya, Safaricom, inventor of the ground-breaking mobile banking service M-PESA, stands out, as does Nairobi-listed East African Breweries. Tanzania’s METL has fast become one of the leading conglomerates in eastern Africa, while energy-to-services group Taleveras has used its flourishing home market in Ghana as a springboard to francophone western Africa. Even the skies are filled with homegrown success stories, from budget carrier Fastjet to the sleek hulls of long-haul expert Ethiopian Airlines.
African champions
Edward George, head of group research at Ecobank, points to the emergence of “a new generation of African champions”, which is challenging the status quo. He points to rising innovation and ambition in the financial services space, highlighting his own, Togo-headquartered employer, which now boasts a presence in 34 regional states, as well as a host of Nigerian lenders, including GTBank, UBA and Access Bank.
South Africa’s powerhouse is also spawning a new generation of firms focused on regional domination, from supermarket chain ShopRite to consumer goods specialist Tiger Brands, both now expanding into frontier markets in Africa. Then there are the numerous energy and oil firms that have exploded on to the scene, benefiting from liberalization and deregulation in key economies. Standout examples here include a quartet of Nigerian corporates: power generator Oando, oil producer Seplat, and a pair of energy explorers, Orion Oil and South Atlantic Petroleum.
The region’s increasing economic clout is also pushing corporates and investors to focus on the industries that will drive and define its financial success over the coming years and decades. Angus Downie, head of economic research at Ecobank, points to oil and gas, despite a recent sharp fall in prices, as a sector with enormous long-term prospects.
According to data from the UN Environment Programme, investors pumped $1.3 billion into renewable energy projects in Kenya in 2014, more than the combined invested total over the previous three years. Much of the funding was channelled into fast-growing local firms such as lantern maker D.light and solar home-lighting firm M-KOPA. South Africa took its share of the plaudits, with $5.5 billion going into renewable projects last year, on a par with the total invested in larger economies such as India ($7.4 billion) and Brazil ($7.6 billion).
Services please
But the key industry will remain the sprawling services sector, Downie adds, with financial services in particular “gaining in importance continent-wide given low levels of banking penetration. Trade services will also grow strongly due to import dependency and continued growth in disposable income. Telecom service providers are the other main key area of growth,” he added, driven by a continued rise in demand for mobile banking from both retail and corporate customers.
Indeed, the future of the banking sector looks rosier here than perhaps anywhere else on the planet. M-PESA changed the way banking was done here, by making it movable and simple, and allowing credit and capital to cross national boundaries at ease. At a stroke, this technology has turned borders porous and boosted revenues and profits at corporates of all sizes, from multinationals down to the smallest enterprise. According to data from the World Bank Group, more than 12% of adults across the region boast access to a mobile money account, compared to 2% of adults worldwide, helping boost trade, innovation and growth across the region.
