x Abu Dhabi, UAE Thursday 20 July 2017

African companies grow globally

Africa's savvy, aggressive companies are forging their own paths to success in diverse sectors of global industry.

Once the playground of corporations, Africa is now creating home-grown companies of its own, many of which are rapidly growing into formidable global players.

Development advocates have long complained that African trade has never been particularly fair - shiploads of raw materials depart from its docks and a few months later, the same materials return, only now fashioned into high-priced goods such as mobile phones and cars.

But the emergence of companies that can take on foreign competitors not just in Africa, but in the tough world of global commerce, suggests that this is about to change.

The most visible of these, the 40 so-called 'African challengers', range in size from US$350 million to $80bn, according to US-based The Boston Consulting Group (BCG). These are companies that display strong growth, have an international footprint and are expanding aggressively beyond the borders of the continent.

They originate in a diversity of countries, from Egypt to Togo and Angola. They participate in industries ranging from pharmaceuticals, retail and telecommunications. Not surprisingly, South Africa, the continent's economic powerhouse, has the most, with 18 companies on the list.

SABMiller, for instance, is the world's second-largest brewer with operations on six continents, and is steadily swallowing up competitors from India to the US. With a market capitalisation of around $45 billion and a slot on the FTSE 100, it is one of the largest, and most visible African companies around.

Less flashy perhaps, but increasing its global profile rapidly, is El Sewedy Cables, from Egypt. It is the Arab world's largest listed producer of cables used in power transmission and telecoms, with substantial investments in wind energy. It owns a turbine plant in Spain and is geared to become one of the biggest suppliers of wind energy products globally. Already, more than 70 per cent of its business comes from outside Africa.

These are but two examples of corporations that are defying the myth that Africa produces only raw materials. Three major advantages give these companies an edge, and will likely see more beginning to emerge over the coming years.

First, cheap labour and proximity to abundant resources make Africa a great place to manufacture goods. Second, the regulatory environment itself has made tremendous progress in moving towards business-friendly practises. And last, a willingness to take risks. Already used to the overwhelming challenges of doing business in the developing world, many of these companies bring with them a street-smarts and aggression that gives them an edge over their more refined competitors.

With the world economy on its knees, the time for growth has never been better. Last year, the US saw GDP fall by four per cent, but Africa's grew a healthy two per cent.

The BCG also points out that a $100 invested in one of these African companies in 2000 would have grown by 25 per cent per annum, to reach $900 by last year; a similar investment in the S&P index would have been worth a miserable $92, by the end of 2009.

African companies also have the support of a financial sector which managed to escape the credit crisis relatively unscathed. Nigeria's United Bank for Africa, for instance, is openly targeting its direct competitors such as South Africa's Standard Bank, to become the continent's leading lender.

There are caveats to this picture, of course. Some African countries, such as Sudan and Somalia, have little to offer investors. Infrastructure, especially electricity provision, remain a severe impediment to expansion.

But the overall mood is that African companies are beginning to assert themselves. It may be a while yet before we bland business headlines replace the endless stories of suffering the continent generates. Yet these companies show that Africa can defy its stereotype and will eventually take its place on the world corporate stage.

 

business@thenational.ae