The Opening Bell ceremony at the London Stock Exchange Group (LSEG) located in Paternoster Square near St Paul’s Cathedral, London, U.K., on Wednesday, January 16, 2019, which marked the official publication of the exchange’s ‘Companies To Inspire Africa 2019’ report. (Source: LSEG).LSEG
The second edition of the London Stock Exchange’s Companies to Inspire Africa 2019 report, which lists 360 companies from 32 African nations, in identifying the “most dynamic” growth businesses across the continent has revealed that the average compound annual growth rate (CAGR) was 46% over three years – up from 16% in 2017.
David Schwimmer, CEO of the LSE and former investment banker at Goldman Sachs, who was joined by Penny Mordaunt, Britain’s International Development Secretary, at the exchange’s headquarters near St Paul’s yesterday to mark publication of the 148-page report, welcomed guests including the CEOs of featured companies, African government representatives, Africa-focused investors and trade groups.
Mordaunt, Conservative politician and MP for Portsmouth North, commenting said: “Africa is going through a period of enormous change. And, with five of the world’s fasting-growing economies are African and by 2050 a quarter of the world’s population will live there, this growth presents unique opportunities for us all.”
She added: “By combining African-led ambition with British expertise we can unlock investment and create more jobs for Africa and the U.K. This is a win for Africa and a win for the U.K.”
According to data from the OECD, Africa’s GDP tripled between 2000 and 2018. The 16thAfrican Economic Outlook (2017) study from the organization, which presented the continent’s state of affairs and forecasted the situation for the next two years, the continent’s average growth was expected to consolidate and expand to 4.3% (2017: 3.47%). But the picture is mixed depending on the region concerned.
Looking at some of the numbers and highlights of this year’s Companies to Inspire Africa report and those sectors fueling growth in Africa within the private sector, the average number of employees stands at 363 – with the average employee CAGR being 25% over three years.
The companies featured range from small entrepreneurial businesses (SMEs) through to well-established corporations.
Seven major sectors are represented. These spanned Agriculture (53 versus 46 in 2017), Financial Services (48 versus 66 in 2017), Industry (77 versus 81 in 2017), Technology and Telecoms (51 in 2018 – down from 56 last time), Consumer Services (79 – up from 49 in 2017), Renewable Energy (21 versus 29 before), and Healthcare and Education (31 today versus 19).
Agriculture remains an important sector for the continent as a whole with just shy of 15% of all the companies those featured.
A standout highlight was the number of companies led by women – up this year at 23% – given that it is almost double the proportion for 2017’s report. In particular, senior female executives are having a big impact are Healthcare & Education and Financial Services, with 39% and 31% being led by women CEOs, respectively. And in Ghana, 10 out of the 20 companies featured are led by women.
Sector Growth & Country Representation
The fastest growing sectors were found to be within Financial Services and Renewable Energy, which showed revenue growth rates of 70% and 66%, respectively.
Consumer Services is the most represented sector with 79 companies from 20 countries this year, which is reflecting the growth of sub-sectors such as Consumer Goods, Food & Beverages, Leisure & Tourism, Media and Retail, as well as the growing middle class in Africa.
Nigeria (97), with strong representation from the Industry and Technology & Telecom sectors, and Kenya (66) led the countries represented in the report this year. The East-West African axis dominates this year’s findings with 130 (c.36%) companies from nations in western Africa and 147 (c.41%) from eastern Africa.
Kenya’s Prospects
The President of Kenya, Uhuru Kenyatta, stated in a commentary accompanying the full report that: “Over sixty Kenyan companies – in sectors from agriculture to fintech are featured [here]. Together, they showcase the reach, the ambition and prospects for Kenya. But there is more to be done, both at home and abroad.”
Indeed, the country is not standing still. President Kenyatta pointed out that to help SMEs compete in the manufacturing sector: “…We have raised our SME Development Fund by $500 million, and added a number of supporting guarantee schemes.”
The Kenyan President added: “We have also combined six major government funds to create the Biashara Bank, which will provide SMEs with low interest loans to increase their existing production capacity. And, finally to support the nation’s increasing global competiveness, we have set a target for 2022 to support 10,000 SMEs to meet global export standards.”
Today in Kenya, high growth companies and SMEs employ over 75% of the nation’s working population and contributed the major share of its GDP.
Kenya’s President Uhuru Kenyatta shakes hands with U.S. President Donald Trump during a bilateral meeting at the White House in Washington, D.C., on August 27, 2018. Kenyatta said his country and the U.S. had signed two agreements that will allow American firms to invest $238 million for projects in the African nation. (Photo: Olivier Douliery/Bloomberg Finance).© 2018 Bloomberg Finance LP
The LSE’s Schwimmer remarked in the wake of this latest report: “These high growth companies have the potential to transform the African economy and become tomorrow’s job creators. At the LSE, we are committed to helping companies realize that potential and we are pleased to highlight and celebrate the company success stories behind one of the world’s fastest growing markets.”
The executive at the exchange noted that the growth rates and sector diversity of the firms featured “highlight their potential to transform Africa and the wider economy and become the big global job creators of the tomorrow.” Some of the companies showcased in last year’s report have initiated IPOs.
The LSE Group clearly wants to further embed its credential and footprint in the African market and has been paving the way forward in recent years. To that end, more than 100 companies and nearly 40 African bonds are currently listed on the London markets.
Currently there are 30 African sovereign bonds listed in London, from eight issuers based in countries including Egypt, Nigeria, Kenya and Angola, with $35.8 billion having been raised.
African companies listed or trading on the LSE number 110, which is more than on any other international stock exchange. In aggregate these companies have a total market capitalization of over $175 billion, and in the last 10 years have raised more than $19.5 billion in equity capital on the exchange’s markets.
Schwimmer noted: “In 2018, we saw issuances from Nigeria, Kenya, Egypt, Angola and Ghana as well as corporates such as Absa Bank, FirstRand Bank and Seplat [Nigerian oil company].”
Last year also witnessed the launch of Vivo Energy, which is distributes and markets Shell-branded fuels and lubricants to retail and commercial customers in Africa (with over 1,800 service stations in 15 countries), and was the largest IPO in London for a decade and the first company from the Companies to Inspire Africa report to float on the LSE.
The LSE Group’s market infrastructure technology is deployed today in more twelve African markets, including the Botswana Stock Exchange, Casablanca Stock Exchange and Johannesburg Stock Exchange (JSE). LSEG’s FTSE Russell benchmarking business has long-standing relationships in Africa, having worked with the JSE to calculate domestic indexes since 2002.
More recently, FTSE Russell has collaborated with the Nairobi Securities Exchange (2011) and Namibian Stock Exchange (2016) to launch country-focused Index Series.
Also in attendance at the event in London were official partners to the report who helped produce it. These included the African Development Bank, Asoko Insight, which provides data on sub-Saharan African private and public companies, CDC Group and PwC (who helped produce the report), together with sponsors Instinctif Partners, an international business communications consultancy, and law firm Stephenson Harwood.
With over seventy years’ experience investing for growth in Africa, CDC Group has amongst other investments in its portfolio invested $180 million in the continent’s largest independent fibre and cloud provider, Liquid Telecom, who will deliver broadband connectivity to support SMEs from Cairo to Cape Town.
Nick O’Donohoe, CDC Group’s CEO and previously a senior advisor to the Bill and Melinda Gates Foundation, revealed that: “With a further £3.5 billion (c.$4.5 billion) to invest across Africa over the next three years, we plan to partner with many more strong management teams to help drive growth and prosperity through socially responsible business.”
As regards the methodology behind this latest Africa edition, financial data was used whereby companies had to be active and privately held, with headquarters or their primary operations being run out of Africa.
Entities had to have shown growth over the past three years – in terms of revenues, employee numbers, operational output or geographic expansion. And, as regards size, the independent company or annual group revenue must not exceed $1 billion over the period 2015 to 2017.
For a comprehensive searchable database of the 2019 report, along with a downloadable PDF of the publication see this link.