South African firms still dominate our ranking of Africa’s top 250 companies by market capitalisation, but firms from the continent’s faster growing economies have increased their presence in the 2019 ranking, as Tom Minney reports
To read our 2020 survey of Africa’s Top 250 Companies click here.
Business in Africa is changing, highlighted by new companies in entertainment, health, construction and food entering the top continent’s top business ranking.
Although mining, financial services and telecoms still take most of the top spots in Africa’s Top 250 Companies 2019, measured by value, Africa’s biggest company is a forward-facing global media giant which just announced plans to spin off some holdings this year and create Europe’s largest listed consumer Internet company.
Another trend is that companies in several of the fast-growing African economies are eating into the number of South African firms in the top ranking, which although they are still dominant make up a little under half the companies featured.
Biggest gains go to Egyptian companies whose number in the top 250 ranking rises to 39, from 34 last year.
Zimbabwe has nine companies, up from five last year, and Kenya added two to total 14 companies.
A Mozambican brewery and a Malawian telco also joined the ranking.
Ranking in the Top 250 Companies report is according to the value of shares listed on a stock exchange (“market capitalisation”), expressed in US dollars at 31 March 2019, although many exchanges closed trading on Friday 29 March.
Fluctuations in national currency against the buoyant US dollar push rankings up or down.
South Africa’s rand has fallen more than 18% against the dollar, accounting for part of the lower rankings of some South African businesses.
In contrast, Egypt’s pound and Kenya’s shilling recorded small gains against the dollar, while the naira held steady.
Currencies such as the Ghanaian cedi, Tunisian dinar and Botswana pula took a hammering.
Overall market value of the top 250 companies was $748bn, down 16% from last year’s $887bn and continuing the overall declining trend seen since the $948bn high in 2015, despite last year’s spike.
Market capitalisation as a measure reflects investors’ views of the value of companies, based on their forecasts of how much they think an investment will pay compared to alternatives such as bonds or securities in other markets they can access.
Prospect of privatisations
The Top 250 ranking misses companies which are not listed, including some mining and oil groups such as Algeria’s state-owned oil and gas company Sonatrach (turnover $33bn in 2017), Angolan counterpart Sonangol (turnover $7.7bn in 2016), diamond miner Debswana in Botswana and South Africa’s troubled utility Eskom.
These parastatals would have high valuations, as we have seen recently when Saudi Arabia’s oil and gas giant, Aramco, opened its books to show profits of $111bn, more than Apple, Microsoft and Amazon combined.
Progress on the Angolan stock exchange and plans to introduce an Ethiopian exchange by 2020 with a wave of privatisations could widen the range of big listed companies in future surveys.
Market values can also be affected by whether trading is active, supply of companies needing to raise capital and demand from investors.
African pension funds and other institutions are a growing influence, but they predominantly “buy and hold” and often close down liquidity in local securities markets.
Foreign investors tend to be more active buyers and sellers, and the more liquid markets are generally more efficient at valuing companies.
The giant companies in the Top 250 ranking dominate most local securities exchanges indices, which measure overall performance of that market measured in local currency.
In the year to March 2019, the FTSE JSE Africa All Share Index, reflecting companies on the Johannesburg Stock Exchange, held steady.
The main stock indices of the Nigerian, Kenyan, Moroccan and Egyptian exchanges all registered declines in local currencies, after scoring strong and sometimes dramatic gains the previous year.
The Zimbabwe Stock Exchange Industrial Index has enjoyed two years of soaring gains as local institutions snap up shares in the face of currency concerns.
High prices for local listed companies reflect demand after years of bitter experience and longing for a return to the former stable and fast-growing economy, because Zimbabwean investors see shares as a partial haven against inflation, reportedly at 60% in March, and against currency turmoil.
The “RTGS dollar”, officially pegged at a 1:1 exchange rate with the US dollar, became legal tender on 20 February and saw an immediate 60% official devaluation.
By late March the official rate had been devalued to RTGS$3 to the dollar, while the black market price was reported at RTGS$4.20 to the dollar.
The rankings of Zimbabwean companies in the Top 250 list are based on official exchange rates and will change with further devaluations.
Naspers sheds weight
Naspers, once again far ahead at the top of the list with market capitalisation of $104bn (down from $107bn), continues with efforts to shed weight.
On 25 March it announced that it will bundle its international internet businesses and list them on Euronext Amsterdam Exchange in the second half of 2019, creating Europe’s largest listed consumer internet company by value.
Naspers will sell 25% by offering shares to its existing shareholders, and the new company will include online classifieds, food delivery, payments, online retail, travel, education, and social and internet platforms and global brands such as Tencent, mail.ru, OLX, Avito, letgo, PayU, iFood, Swiggy, DeliveryHero and Udemy.
Bob van Dijk, Naspers’ chief executive officer, says: “The listing will present an appealing new opportunity for international tech investors to have access to our unique portfolio of international internet assets.
“It will comprise some of the world’s leading and fastest-growing internet companies that are playing an increasingly important role in helping people improve their daily lives in some of the most exciting markets on the planet.”
The new company – whose name will be revealed soon – will also apply for dual-listing on the JSE and Naspers will retain 75% of the shares.
Earlier in March, Naspers unbundled pay-TV Multichoice Group to shareholders. With an initial market capitalisation of $3.5bn which has since climbed strongly it is our top new entrant at #36 on our list.
Naspers’ slimming efforts also included selling some of its valuable stake in China’s Tencent and exiting businesses including Flipkart.
Despite all these efforts, Naspers will still be the largest company by market capitalisation in the Top 250 list and on the JSE. It retains its South African assets Takealot and Media24.
Switzerland-based Richemont stays at #2 on the ranking.
It owns several of the world’s leading luxury goods companies, with particular strengths in jewellery, watches and writing instruments but its origins lie in South Africa’s Rembrandt Group, set up in the 1940s, and it is also listed on the JSE.
“Productivity improvements in the underlying operations and better than expected prices for many of our products” helped mining giant Anglo American climb from #4 last year to #3 this year, according to chief executive Mark Cutifani.
It mines gold, platinum, diamonds, coal and metals among other commodities. It operates in Africa, Europe, America and Australia.
Market cap rose 17% to $35bn, with global sales and a primary listing in London protecting it from the decline of the rand.
Operating profit soared 11% to $6bn and Cutifani’s pay packet more than doubled to £14.7m ($19m) as the share price gained.
Other mining companies to climb the ranks include Anglo American Platinum, whose market cap nearly doubled to $14.5bn, raising its ranking to #8, up from last year’s #27 after creating a shareholder return of 55% and boosting earnings from mines in South Africa and Zimbabwe.
Another high-flying miner is Kumba Iron Ore, also part of the Anglo American Group, which climbed from #25 last year to #16 as market cap rose 34% to $10.3bn.
Kumba mines iron ore in South Africa and supplies it to the global steel industry.
Banking group Firstrand took fourth place, tipped from #3 by Anglo American. Its market cap fell 19% to $26bn.
Although the South African economy remains sluggish, the group has boosted cross-selling at its retail arm First National Bank, where a banking mobile app can also buy insurance and even locate a plumber.
FNB contributes 63% of earnings, while corporate and investment banking arm RMB Holdings, which is also listed and has boosted its Top 250 Companies ranking from #23 to #21 for market capitalisation of $7.8bn and contributes 23% of Firstrand earnings.
RMB had a good year in 2018 with gains from realising private equity holdings, but is unlikely to repeat in coming months.
Arch rival Standard Bank holds #5 in the ranking, despite a market capitalisation of $21.9bn, considerably down on the 2018 figure.
The bank, 20% owned by Industrial & Commercial Bank of China, has been the most-Africa facing of the South African banks, and in March CEO Sim Tshabalala reported that the share of the Africa regions’ contribution to banking headline earnings grew to 31% from 28% in 2017, including Angola, Ghana, Mozambique, Nigeria and Uganda as top contributors.
Maroc Telecom is the top company from outside South Africa, ranked at #10, up from last year’s #11 with market cap down to $13.2bn.
The other non-SA firms in the top 20 ranking are Kenyan telco Safaricom, up from #17 last year to #14 this year ($11.2bn), Morocco’s Attijariwafa Bank at #17 up from #19 ($9.2bn) and Nigeria’s Dangote Cement at #19, down one place, with market cap down to $9.1bn.
Barclays Africa has rebranded as Absa Group and its ranking was down from last year’s #12 to #20.
Top new entrant is Multichoice Group, which was spun off as part of Naspers’ slimming campaign and listed on the JSE in early March.
Its main business is pay-TV with 13.9m customers across Africa, four times its nearest rival, the Chinese-owned Star Times.
It is skilful at collecting cash in difficult economies and commissions programmes in 17 languages.
Multichoice spokesperson Joe Heshu says: “Africa and Middle East are expected to grow four times the global average in pay-TV subscriptions between 2018 and 2022.”
High data costs are holding back growth in streaming video directly to mobile phones and tablets. Heshu sees big potential, with Multichoice’s DSTV Now and Showmax channels set to benefit as penetration grows from the current 0.1% towards the 41% level seen in the US.
Another new entrant to the top 250 is troubled Tanzanian miner Acacia Mining, listed in London and Dar es Salaam, which joined the list at #110, although temporary difficulties may have been the reason it was not on the list last year.
Acacia has been locked in a dispute over royalties with the government of Tanzania, and a ban on exports in 2017 collapsed the share price.
Parent company Barrick Gold Corporation has been negotiating with the government and in February 2019 announced progress towards a resolution, but three employees are under investigation by the corruption bureau.
New entrant at #157 is Cement Co of Northern Nigeria (CCNN), which trades as Sokoto Cement and says it dominates northwestern Nigeria.
In December it finalised a merger with Kalambaina Cement by issuing and listing 11.9bn new CCNN shares, a huge change from the previous 1.26bn shares in issue.
The market seems to take the dilution in its stride, although the share price has fallen by 37% since its July peak, after 18 previous months of strong gains.
Egypt’s Cleopatra Hospital is another new Top 250 Company, entering the ranking at #161.
It is Egypt’s largest private hospital group by number of hospital beds and holds majority stakes in four leading hospitals in Greater Cairo.
Results to December 2018, published in March, show revenues up 29% on the previous year to $84m and net profit up 167% to $17m, for market capitalisation of $627m.
The company served 924,904 patients during 2018. The share price on the Egyptian Exchange has been climbing steadily since September 2018.
Other arrivals include Zambian Breweries, (market cap $536m), Cervejas de Mozambique ($392m), Zimbabwean food companies Padenga and National Foods and Egypt’s Citadel Capital. Telekom Networks Malawi says profits have risen well during 2018 and the share price has climbed sharply since March 2018, boosting it into the ranking with market capitalisation of $348m.
Growth sectors and 2019 prospects
Growth in many African countries will be good, says Standard Bank Group CEO Sim Tshabalala:
“Whilst not immune from global risks, prospects for sub-Saharan Africa overall are good with growth expected to accelerate from 2.9% in 2018 to 3.5% in 2019.
“Over a third of the countries in the region are expected to grow above 5%.”
In January the African Development Bank forecast GDP growth of 4% for Africa in 2019, climbing to 4.1% in 2021, but warns that Africa needs to create 12m jobs a year to stop unemployment getting even worse.
In April the World Bank cut its forecast for regional growth in sub-Saharan Africa to 2.8% in 2019, citing the impact on African economies of macroeconomic instability and political and regulatory uncertainty alongside an uncertain global climate.
The International Monetary Fund (IMF) is gloomy on the world economy, with repeated downgrades to its growth forecast, but bullish on Africa, forecasting 3.5% growth in real GDP for sub-Saharan Africa.
According to the April 2019 World Economic Outlook forecast, Ghana is set for world-beating growth with an 8.8% increase in real GDP forecast.
South Sudan is at the same level from a low base, followed by Rwanda (7.8%), Ethiopia, which does not yet have a stock exchange (7.7%).
Côte d’Ivoire (7.5%), and Senegal (6.9%), the last two of which share the Bourse Régionale des Valeurs Mobilières (BRVM) regional exchange so Top 250 company investors can benefit.
Share prices and thus market cap values are also affected by interest rates, including margins and earnings at top banks.
In 2018 rising interest rates in the US lured capital to the dollar and drew support from emerging and frontier shares. Stockbroker Exotix.
In January said domestic interest rates will fall in Uganda, Ghana, Nigeria, Egypt and Kenya and expects improvements in banks’ profit margins and earnings in Nigeria, Kenya and Zimbabwe, with a negative impact in Uganda.
A rising oil price in 2019 affects African economies positively if they export oil, such as Angola and Nigeria, or negatively if they are importers.
By sector, look for oil and gas exploration shares as well as oil and gas companies in the upstream end.
Growth in the Nigerian economy and other oil exporters could mean more demand for products such as construction materials including cement.
However, it will mean a slower year for utilities such as electricity generators that depend on oil inputs.
In Egypt the industrial companies look promising, particularly in a positive economic outlook.
There is also likely to be more growth in manufacturers of fertilisers and commodity chemicals including scope to increase selling prices without reducing demand from their customers.
Consumer companies have been scrambling to meet growing demand from customers.
A rise in interest rates would affect high-growth companies that are heavily leveraged with debt to repay and are competing through low profit margins but have not yet built strong brands.
Multinational companies should be less affected, as they borrow less from external sources, have built strong consumer brands and manage costs well.