A list of Africa’s fastest growing companies, dominated by Kenyan tech disruptors, South African platinum miners and Nigerian commodity traders, makes one thing clear: the companies thriving in the continent’s major economies are as diverse as possible.
This inaugural FT ranking, compiled with data firm Statista and based on the compound annual growth rate (CAGR) of revenue from 2017 to 2020, reflects broad themes across African markets, old and new.
Miners owe their place to a traditional tailwind for the growth of African businesses: the commodity boom. But their presence also reveals that African producers are at the forefront of new clean technologies around the world – the demand for catalytic converters for cars, for example, has contributed to the surge in platinum prices which has boosted revenues. these last years.
But the list is characterized much more by start-ups, such as the leader, Kenyan Wasoko, which are adapting the global disruption of internet business models to mainstream African sectors, such as informal commerce. In 2017, about a fifth of the population of sub-Saharan Africa was online. By 2020, that figure had risen to just under a third, according to the World Bank.
Although the ranking does not extend beyond revenue growth to cost of sales or profitability, African markets represent a more seasoned environment for fast-growing businesses than other regions.
When raising funds, founders of African start-ups often say they face greater pressure to lead the way to profit sooner than companies in other parts of the world because their markets are seen as less familiar to international investors.
And they are clearly doing so, as venture capitalists and other investors arrive in African markets with bigger checkbooks than ever before. Evidence suggests that more capital is finding its way to start-ups at later stages when they are already approaching significant scale.
The past year has seen an explosion in fintech funding, in particular. African start-ups raised around $5 billion in private markets, including venture capital, in 2021, according to data and estimates from the African Private Equity and Venture Capital Association (AVCA), a representative group of investors, and Briter Bridges, a research firm.
Although this is only a fraction of the $600 billion raised globally, it is more fundraising than had been achieved on the continent in the previous seven years combined, according to AVCA.
By number of transactions, the more than 600 transactions recorded by the body last year were nearly 10 times the total for 2014.
More than a dozen companies raised $100 million or more in 2021, up from three in 2019, supporting the idea that increasing amounts of capital are reaching start-ups as they already approach a noticeable scale.
Almost all of them could be categorized as fintech, and some, like Flutterwave and Opay, two Nigeria-based digital payment companies, have reached billion-dollar “unicorn” valuations with these funding rounds.
Wasoko, the first company in this ranking, almost joined them. It raised $125 million, for a valuation of $625 million (although the company was ranked on the CAGR through 2020). Opay’s $400 million funding round alone was larger than the fundraising of the entire African start-up market in 2017.
However, even with this recent increase in investment, “there remains too little capital and talent, compared to the strong demand for both from the many entrepreneurs who are building the next generation of world-class African businesses”, according to the AVCA.
One of the emerging talent bottlenecks for high-growth African start-ups is the number of professional software developers on the continent, which has been estimated by Google at around 716,000, almost half of them in Egypt. , Kenya, Nigeria and South Africa. The average age of these developers, at 29, is below the global average of 36. A third are under 25 years old.
At the current rate of venture capital deals, it’s a safe bet that next year’s list will feature many more tech groups. But the ranking also reflects how capital markets beyond Africa have been influenced by businesses on the continent. Naspers’ revenue growth in South Africa (number 37 on this list and the continent’s largest company by market capitalization) reflects its just under a third stake in China’s Tencent and other assets. international Internet sites which are now hosted in Prosus, its European investment vehicle which was created in 2019.
A few rungs up the list is IHS Towers, the continent’s largest independent mobile phone mast operator, benefiting from a boom in the infrastructure needed for growing internet use in Africa. IHS was listed in New York last year in the largest IPO of an African company in US markets.
Particularly striking is the strong representation of South African platinum group metal miners, of which the country is a major global supplier, including Northam, Royal Bafokeng and Anglo American Platinum.
This reflects the nature of a revenue-based growth ranking – miner sales in recent years have been boosted by soaring platinum prices and the depreciation of the South African rand, in which many costs are assessed, by against the US dollar.
It is a volatile mixture. In 2020, the last year used for this ranking, the average price of platinum was $885 per ounce, but that hid highs of around $1,070 and lows of around $605. Palladium prices were equally wild, ricocheting between $2,800 and $1,600 an ounce below a 2020 average of $2,200.
Even though analysts are pointing to signs of a maturing cycle, such as rising costs, mining executives insist that long-term platinum demand is here to stay, given the lack of supply and the requirement of metal in clean energy technologies – the production of fuel cells, for example.
“There is a systemic global primary supply problem, and it boils down to the scarcity of new mining projects to replace the depletion profiles of mature mines currently in operation,” Northam chief executive Paul Dunne said in March. .
The platinum mining boom also shows that, although the ranking methodology emphasizes that it is geared towards “primarily organic” growth, expansion through acquisitions is also important. Over the past few months, Northam has built a roughly one-third stake in Royal Bafokeng in a bid battle with Impala Platinum, another miner. Sibanye-Stillwater, a South African platinum miner not on this list, tripled its revenue from 2018 to last year by securing deals that included an entry into battery metals.
M&A-led growth could also become the lifeblood of Africa’s biggest fintech start-ups, both in and out of this ranking.
MFS Africa, a South Africa-based digital payment gateway, closed one of the deals raising more than $100 million last year. He has also been heavily involved in pan-African mergers and acquisitions, making two large acquisitions to expand in West and East Africa, as well as three minority investments, in 2020 and 2021.
Deals such as MFS’s “are critical building blocks for building an expansive fintech infrastructure business on the continent”, due to the importance of payment scale, Renaissance analysts said. Capital last month.
“We believe the trend of consolidations in the ecosystem is likely to continue, spurred by access to venture capital funding, with fintech companies leading the charge,” they added.
