Global shocks test Africa’s resilient spirit

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It has been common to view the economies of Africa as more vulnerable to shocks than other regions. The finances of governments, businesses and individual citizens have been battered by external shocks ranging from covid to food inflation stemming from the war in Ukraine to the altered global interest rate landscape. Bank loans to smaller African companies remain prohibitively expensive.

The Institute for Security Studies estimates that 30 million people fell 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, suggesting potential trouble ahead in other countries.

But another line of thinking says that despite the concerns, African economies, with their large informal sectors and family support networks, are more resilient than pessimists realize.

“The idea that, for all the problems in the world, Africa is the next victim is not necessarily so,” Donald Kaberuka, former president of the African Development Bank, said at a forum last month in Nairobi organized by the Mo Ibrahim Foundation.

One possible measure of that resilience is the entrepreneurial talent and the list of fast-growing companies that continue to emerge from the continent. He FT-Statista annual ranking 2023 of Africa’s fastest growing companies is an attempt to capture some of that dynamism.

The ranking, now in its second year, judges companies according to their compound annual growth rate of revenue between 2018 and 2021. Its methodology, which does not take into account the cost of acquiring customers or a company’s profitability, generally favors start-ups over more established businesses.

And this year’s results suggest that companies in sectors including fintech, renewable energy, healthcare, commodities and, to some extent, agriculture managed to grow while much of the world shut down.

Similar to the ranking’s inaugural year, Covid appears to have accelerated a move online, with companies providing digital services in finance, payments, trade facilitation and healthcare all moving forward.

It also seems to have been the time when investors in Silicon Valley, as well as those in Asia and Europe, saw potential in the African start-up scene, particularly in the tech hubs of Lagos, Cape Town, Johannesburg, Nairobi and El Cairo.

“A lot of my friends. . . in Silicon Valley they 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 mainland, going in and out, and driving up valuations.” Beck notes that figures from Paris-based technology and digital investment platform Partech show that African tech startups raised $5.2 billion in 2021, three times more than the previous year.

That boosted valuations, attracting even more capital, although there are signs the market has cooled considerably this year, a period not covered in the ranking, partly as a result of the run. Silicon Valley Bank.

Two Nigerian companies top the latest list. Abuja-based AFEX Commodities Exchange, which provides brokerage and trade finance services for commodities such as maize, sorghum, cocoa and rice, ranks No. 1, with a three-year compound annual growth rate of more than 500 percent. .

Moniepoint, a Lagos-based company that provides banking services for small businesses, comes in second. Novastar was one of the first funders.

The third is Kenya sokowatchwhich topped the list the previous year. Based in Nairobi, the e-commerce company helps small merchants access inventory through more efficient supply chains in seven African countries. It has recently opened an office in Zanzibar, which is looking to attract start-ups.

About a third of Africa’s fastest-growing companies, according to the new ranking, are in South Africa, which remains the continent’s most sophisticated economy, despite low growth and persistent energy shortages. Mining and metals companies dominate, but other South African companies on the list are in the renewable energy, software and healthcare sectors.

As in the inaugural year, startups have a strong presence, but they don’t monopolize. The most established companies in the mining sector, driven largely by demand for the metals needed for the energy transition, as well as in telecommunications and construction are also among the top 100. Outside of mining, there is a shortage of exporters, particularly of value-added products. , on the list.

Kaberuka says that making the 2018 African Continental Free Trade Area agreement work is key to strengthening the environment for companies that make and export goods: “Integration is never easy,” he says. “Ask the Europeans. But it’s a problem we have to work on.”

Hafou Touré, the founder of Abidjan-based HTS partners, which advises small and medium-sized companies on growth strategies, says another big problem for start-ups with regional ambitions is access to capital. Investment priorities are skewed by foreign investors, he says.

“We really don’t have love-money capital. When you look at the capital coming into startups, you’ll see that the money is coming from abroad,” she says. “We also need local capital.”

The Fintech and IT & Software sectors dominate the ranking, but one characteristic of the top 100 is the variety of corporate activity. The fastest growing companies include a Namibian winery, a Kenyan fish farm, a South African company that conducts remote hearing 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 early-stage investor in African companies, questions the methodology of a list that can include both large established companies and start-ups, where rapid growth from low income levels is critical. . 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 Statista, a research company, is a rough exercise and does not claim to be definitive. But the selection process, which requires senior executives to approve submitted figures, should mean that the ranking offers useful guidance for companies and industries that are managing to do business in a complex and rapidly changing environment.