CASABLANCA, June 2, 2010—Forty African companies, the “African challengers,” have been rapidly expanding , competing in the global economy, and highlighting the vitality of a continent whose economic accomplishments rarely receive attention, according to a report published today by The Boston Consulting Group (BCG).
The 40 African challengers range in size from $350 million to $80 billion in annual sales and represent most of the major industry sectors. They all display strong growth, an international footprint, and ambitious plans to further expand overseas. Most of the companies are based in South Africa (with 18 companies), Egypt (with 7), and Morocco (with 6). The nine remaining players come from Algeria, Angola, Nigeria, Togo, and Tunisia. These eight countries represent 70 percent of Africa’s GDP, according to The African Challengers: Global Competitors Emerge from the Overlooked Continent.
There are, of course, many more than 40 noteworthy African companies. The list focuses on those with global ambitions. Since 2003, export growth has expanded by 24 percent annually among these 40 companies. These companies have also significantly increased their level of cross-border mergers and acquisitions.
International expansion has helped the African challengers grow more swiftly than established players in developed markets. Between 2003 and 2008, the annual revenues of the group rose by 24 percent, compared with 11 percent for S&P 500 companies, 9 percent for Nikkei 225 companies, and 10 percent for DAX 30 companies.
The African challengers are also more profitable, with an average operating margin of 20 percent, compared with 15 percent for the S&P 500 and 10 percent for both the Nikkei 225 and the DAX 30. A $100 investment in November 2000 in a hypothetical African challengers index would have grown by 25 percent per year and have been worth more than $900 in November 2009, compared with $303 for a similar investment in the MSCI Emerging Market index and $92 for an S&P 500 investment.
While the challenges of Africa are well known, the strength of the African economy is frequently underestimated. The African Challengers aims to set the record straight. “The African economy is much more vibrant and entrepreneurial than most casual observers understand,” says Patrick Dupoux, a partner and managing director in BCG’s Casablanca office.
Several countries— the African Lions—are outperforming and growing at similar rates to the so-called BRIC nations of Brazil, Russia, India, and China. The African Lions consist of Algeria, Botswana, Egypt, Libya, Mauritius, Morocco, South Africa, and Tunisia. Their GDP per capita in 2008 was $10,000 compared with $8,800 for the BRIC nations. All but five of the African challengers come from these nations. “Few people recognize that a new breed of African companies is poised to make a big splash on the global stage,” Dupoux observes. “These companies are following the same path as the global challengers from the BRIC nations.”
While the Great Recession shrank most economies, Africa was able to grow. In 2009, the continent’s GDP expanded by 2 percent, while GDP dropped 4 percent in the United States, 2.8 percent in the European Union, and 1.5 percent in Latin America.
“While the 40 African challengers have grown very fast in recent years, only a few of them can already be considered truly global. We are confident that they can reach this next frontier if they achieve excellence in operations, broaden their footprint through selected cross-border acquisitions, build a global workforce, and acquire global brands,” says Dupoux.
Methodology for Selecting the 2010 African Challengers
To compile the list of 40 African challengers, BCG examined almost 600 companies covering all economic sectors. As a first cut, companies had to meet the following minimum threshold: $300 million in annual revenues for banks and $500 million in annual revenues for all other companies. In addition, companies with less than $1 billion in sales had to show double-digit revenue growth over the past five years. Subsidiaries that had never been freestanding indigenous companies were excluded.
About 70 companies met these requirements and were examined on the basis of: revenue; one-, five-, and ten-year growth rates; cash flow; leverage ratio; and level of globalization as defined by exports, foreign-based employees, foreign assets, and foreign acquisitions and partnerships. The companies chosen as challengers were those with the most dynamic international presence. When there were two strong companies from the same country within a single sector, only the leader was selected, in order to increase the list’s diversity.
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