Our survey of Africa’s Top 250 Companies highlights the progress being made by dozens of ambitious firms spread across the face of the continent.
This is already apparent from the rapid growth made by most African stock exchanges in 2012 and 2013. The pan-African MSCI Africa index, which excludes South Africa, increased by 38% in 2012 and 18% in 2013, although most analysts suggest that similarly fast growth is unlikely this year.
There seems no obvious reason for a big fall in prices but much will depend on international interest in African stocks. Equity funds focused on sub-Saharan Africa attracted more than $3bn in 2012 but this figure fell to just $1bn last year.
However, Razia Khan, the head of Africa Research at Standard Chartered, says that the prospect of smaller stimulus programmes in North America and Europe is not a great danger, adding: “It’s more about the growth story locally. The Africa growth story is consistent, the impact will still be positive.”
Some of this local investment has come from pension funds. The value of assets under pension fund management in Nigeria has increased from $11bn in 2006 to $24bn this year and is likely to emerge more strongly in most other markets.
There are no clear trends in terms of profitability. Profit levels vary from company to company, and sector to sector, and will be discussed more fully in our sector and regional analysis on the following pages. The overall trend is positive, however, with steady recovery from the setbacks of the global economic crisis. Yet access to finance remains patchy and is improving only gradually. An annual statement would report that progress has been satisfactory but with plenty of room for improvement.
Economic growth in most parts of the continent is steady or strong rather than spectacular, but Tanzania, Mozambique, Angola and Ghana are just a handful of the countries that are enjoying historically remarkable levels of growth. The IMF estimates that economic growth in sub-Saharan Africa as a whole will increase from an estimated 5% in 2013 to 6% this year.
However, the nature of that growth is likely to subtly change over the coming years. Most sources agree that consumption is going to become a much more important factor in African economic activity in the medium term.
Despite the boom in information and communication technologies, energy consumption remains a reliable indicator of economic growth. It is generally expected that sub-Saharan Africa will experience faster growing energy demand than any other region over the next 20 years, partly because of population growth but also as a result of commercial development.
Many investors expect the continent to experience strong economic growth over this period. GDP calculations are very complicated but the methodology of generating economic growth is very simple. Either the average economic output of individuals must increase, or the size of the population must grow, or both.
Greater investment in technology should make many African workers more efficient over the next two decades, while a larger proportion of the population is likely to enter the formal economy. In addition, while population growth rates are falling, they are still higher than in any other part of the world. Africa’s 1bn people currently account for 15% of the global population but their numbers are expected to grow to 1.8bn by 2035, equivalent to 21% of the global total.
In short, the continental economy is set to expand but the big question as far as this report is concerned is the extent to which African companies, rather than firms based outside the continent will benefit from this growth.