It was common to see economies in Africa as more vulnerable to disruption than other regions. The finances of governments, businesses and individuals have been battered by external shocks from Covid to food inflation stemming from the war in Ukraine and a changed global interest rate environment. Bank loans to smaller African businesses remain disproportionately expensive.
The Institute for Security Studies estimates that 30 million people have fallen into extreme poverty – defined as living on less than $1.90 a day – as a result of the Covid pandemic. Zambia and Ghana have defaulted on debt, indicating potential problems ahead in other countries.
But another thought is that despite fears, African economies – with their vast informal sectors and family support networks – are more resilient than pessimists give them credit for.
“The idea that for every problem in the world Africa is the next victim is not necessarily true,” Donald Kaberuka, former president of the African Development Bank, told a forum in Nairobi last month that it organized Mo Ibrahim Foundation.
One possible measure of this resilience is the entrepreneurial talent and list of fast-growing companies that continue to emerge from the continent. The 2023 FT-Statista Annual Rankings of Africa’s fastest growing companies is an attempt to capture some of this momentum.
The ranking, now in its second year, judges companies based on their compound annual growth rate of revenue between 2018 and 2021. Its methodology, which does not take into account customer acquisition costs or company profitability, typically favors startups over more established businesses.
And this year’s results suggest businesses in sectors including fintech, renewable energy, healthcare, commodities and, to some extent, agriculture, have thrived while much of the world has been shut down.
As in the first year of the rankings, Covid appears to have accelerated the movement online, with companies providing digital services in finance, payments, trade facilitation and healthcare advancing.
It also seems to have been a time when investors from Silicon Valley, as well as those from Asia and Europe, discovered the potential in the African start-up scene, particularly in the tech hubs of Lagos, Cape Town, Johannesburg, Nairobi and Cairo.
“A lot of my friends . . . in Silicon Valley were getting FOMO [fear of missing out] about Africa,” says Steve Beck, co-founder of Novastar Ventures, a Nairobi-based venture capital firm. “They were starting to put money to work on the continent, flying in and out and pushing for higher valuations.” Beck notes that data from Paris-based technology and digital investment platform Partech shows that African tech start-ups will raise $5.2 billion in 2021 – three times the previous year.
That has boosted valuations and attracted even more capital, although there are signs the market has cooled considerably this year – a period not included in the rankings – partly as a result of the run on Silicon Valley Bank.
Two Nigerian companies topped the latest list. The Abuja-based AFEX Commodities Exchange, which provides brokerage and trade finance services for commodities such as maize, sorghum, cocoa and rice, ranks first with a three-year compound annual growth rate of over 500 percent.
Moniepoint, a Lagos-based small business banking company, ranks second. Novastar was the first sponsor.
The third is Kenya Sokowatchwhich was at the top of the list the previous year. The Nairobi-based e-commerce company is helping small traders access supplies through more efficient supply chains in seven African countries. It recently opened an office in Zanzibar, which aims to attract start-ups.
About a third of Africa’s fastest-growing companies are located in South Africa – still the continent’s most sophisticated economy, despite low growth and persistent energy shortages, according to a new ranking. Mining and metals companies dominate, but other South African companies that made the list are in the renewable energy, software and healthcare sectors.
As in the inaugural year, startups are making a strong showing, but they are not monopolizing. The top 100 also included more established companies in the mining sector – driven largely by demand for metals needed for the energy transformation – as well as in telecommunications and construction. Outside of mining, exporters, especially of value-added products, are missing from the list.
Kaberuka says the functioning of the 2018 African Continental Free Trade Area Agreement is key to strengthening the environment for companies that manufacture and export goods: “Integration is never easy,” he points out. “Ask the Europeans. But it’s a problem we have to work on.”
Hafou Touré, founder of Abidjan-based HTS partners, which advises small and medium-sized companies on growth strategies, says another big challenge for start-ups with regional ambitions is access to capital. According to her, investment priorities are distorted by foreign investors.
“We don’t really have the capital of love and money. If you look at the capital coming into start-ups, you will see that the money is coming from outside,” he says. “We also need local capital.”
The ranking is dominated by the fintech and IT and software sectors, but a feature of the top 100 is the diversity of corporate activities. Among the fastest growing companies are a Namibian winery, a Kenyan fish farm, a South African company that conducts remote tests, and renewable energy companies in the Democratic Republic of Congo and Sierra Leone.
However, Aubrey Hruby, co-founder of the Africa Expert Network and an investor in early-stage African companies, questions the methodology of the list, which can include both large established companies and start-ups where there is rapid growth from low revenue levels. easier. “You can’t compare mining companies to Moniepoint,” he argues, referring to Nigeria’s fintech business.
However, as in the inaugural year, the list, which was compiled with research company Statista, is only an exercise in approximation and does not claim to be definitive. However, the vetting process, which requires senior managers to sign off on submissions, should mean the ranking offers a useful guide to companies and sectors that are managing to do business in a complex and fast-changing environment.
