Managing Director & Partner
The African economy is overshadowed by Asia to the east and, to a lesser degree, by South America to the west. Over the last decade, however, Africa has begun to emerge. Hidden in plain view, scores of African companies have been competing and rapidly expanding in the global economy. Their ambitions may be larger than their revenues, but collectively they are making a mark.
To spotlight the economic awakening of Africa, we have identified 40 fast-growing African companies with global aspirations—the African challengers. There are certainly many more than 40 noteworthy African companies, but we wanted to highlight a relatively small number in order to understand their specific strategies and challenges and the evolution of African capitalism.
The conventional view is that Africa—with 20 percent of the world’s land and 15 percent of its population, but just 4 percent of global GDP—has been down so long it will be hard for it to ever rebound. This view is understandable—but out of date. Between 2000 and 2008, Africa’s annual GDP grew by 5.3 percent (adjusted for purchasing power parity), compared with 4 percent globally. The rise in commodity prices partly explains this performance, but exports and local demand also played strong roles. Over that same period, most African equity markets also outperformed global indexes, sometimes by wide margins. Egypt’s market, for example, returned 39 percent annually, compared with 2 percent for the MSCI World index.
While the Great Recession shrank most economies, Africa’s 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.
Averages are always suspect, but they are especially misleading in Africa. Five countries (Algeria, Egypt, Morocco, Nigeria, and South Africa) account for 60 percent of the continent’s GDP. GDP per capita ranges from $330 in the Democratic Republic of the Congo to almost $15,000 in Botswana. During the past decade, the GDP of many countries, such as the Central African Republic, Côte d’Ivoire, and Guinea-Bissau, remained flat, while Angola’s expanded by 13 percent annually. These contrasts reflect the realities of a continent that is rich in natural resources but also rife with poverty, health problems, geopolitical risk, and the lingering effects of colonialism.
But despite these challenges, the top African economies—which we call the African Lions—are doing relatively well.1 Notes: 1 The Lions were selected on the basis of socioeconomic factors, including GDP per capita, standard of living, ease of doing business, political stability, and public investment in a safety net. The Lions comprise Algeria, Botswana, Egypt, Libya, Mauritius, Morocco, South Africa, and Tunisia, and their GDP per capita exceeds that of the so-called BRIC nations of Brazil, Russia, India, and China. In 2008, the GPD per capita of these two groups was $10,000 and $8,800, respectively. Great diversity exists among both the African Lions and the BRIC nations. But the development model for all of them rests on similar pillars: political stability, rule of law, property rights, access to capital, and public investment in education, health, and social services.
In terms of life expectancy, literacy, education, and standard of living, the African Lions are comparable to the BRIC countries and the Asian Tigers (Indonesia, the Philippines, Thailand, and Vietnam) as measured by the International Monetary Fund’s human development index. The political stability of the Lions is on a par with that of the BRIC nations and is much greater than that of the Asian Tigers, while the ease of doing business is roughly similar in all three groups of countries, according to the Economist Intelligence Unit.
African companies have been able to take advantage of these positive trends. Since 1998, the revenues of the 500 largest African companies outside of the banking sector have grown by 8.3 percent annually. Exports have helped power this increase, surging from 3 percent annual growth during the 1990s to 18 percent annual growth since 2000. This expansion is similar to rates in China, India, and Russia and is greater than that of Brazil. African companies have also started to invest abroad. Direct foreign investments by African companies have risen by 81 percent annually since 2002, more than double the growth rates for Latin America and Asia.