Africa’s Top Companies

Specialized container-handling outfit Alexandria Container and Cargo Handling Company became the best-performing company in Africa for the second year in a row, thanks to improved profit margins and growing assets. Regionally, South Africa and Egypt were tied, with each contributing six companies to the list Global Finance editors derive each year from data supplied by Bureau van Dijk.

However, South Africa’s position has deteriorated from 2018 and 2017, when it contributed nine and 14 companies, respectively. “The picture is not very positive in South Africa, due to weak growth and high unemployment,” says John Ashbourne, a senior emerging-markets economist at Capital Economics. “It is hard to see that changing over the short or medium term.” The economy has been hurt by a decline in mining and manufacturing, and a 29% unemployment rate.

With 0.6% projected 2019 GDP growth, the focus is now on new President Cyril Ramaphosa to “implement significant reforms” amid rising social tensions, says Kevin Lings, chief economist at South Africa–based wealth manager Stanlib. These include the need to “reduce the fiscal deficit [and] reverse the ongoing increase in public debt,” according to a June 3 press release by the International Monetary Fund. Even with prompt reforms, the economy is unlikely to turn around for the next three to five years, added Lings.

Sluggish growth has knocked several sectors in South Africa off our list of top companies, including the construction sector and all but one IT-services company. Construction has become “the worst sector to be in,” as the completion of large projects has contributed to an oversupply of office and retail space in major cities, while demand for new infrastructure has fallen due to government spending cutbacks, says Lings. IT services, meanwhile, has been affected by a lack of technology investment after the government decided not to renew expiring contracts with various vendors, and the private sector has also held off on investing, says Lings.

Retail has been one sector that has “held up better because of the resilience in consumers’ income,” says Lings. Still, Italtile Limited is the only remaining retail company on our list. The home-furnishings specialist has been performing better than its clothing counterparts, and Italtile’s website credits the “proud homeowners” of South Africa, “who invest significantly in this primary asset.” The government’s housing programs also helped, says Lings.

Egypt’s economy, meanwhile, is gathering strength on the back of austerity measures implemented over the past few years, according to Jason Tuvey, a senior emerging-markets economist at Capital Economics, a London-based independent research firm. Egypt’s economy is projected to grow 5.5% this year, up from 5.3% in 2018, according to the International Monetary Fund (IMF), while inflation is expected to drop to 14.5%, from 20.8% in 2018.

Despite these positive developments, Egypt still needs to implement structural reforms “to improve the business environment, access to land and finance, [and] strengthen competition,” according to a July 24 IMF report. Access to land, in particular, is a sore topic for Africa’s second-most populous country. It uses only 4% of its territory, concentrated alongside the Nile River, according to the United States Agency for International Development (USAID) and Tuvey. Most of the land is owned by the military, which restricts access, says Tuvey. That is unlikely to change in the near future, hindering foreign direct investment (FDI), he adds.

Elsewhere on the continent, Kenya, Cote D’Ivoire and Ethiopia are among Africa’s rising stars, says Philippe de Pontet, an independent consultant specializing in sub-Saharan Africa. Ethiopia’s economy is poised to grow 7.7% this year due to “an incipient privatization initiative, new leadership under Prime Minister Abiy Ahmed and the 2018 peace agreement with neighboring Eritrea,” says de Pontet. In Kenya, the situation is more nuanced; while growth is robust, “business and retail prospects have weakened relative to other markets,” according to a 2019 Nielsen Africa Prospects study. 

Footnote: All data from reporting year 2018.