By Antony Mutunga
Since the period of the pandemic, companies around the world are yet to return to the norm. Despite recovery being underway, companies continue to struggle to hit the numbers they recorded pre-pandemic. The situation in Africa is similar as many companies look to several avenues to increase their revenues and recover. From diversification to integrating new technology to attract more customers, those to have survived the period of the pandemic in Africa have been on the offensive to bounce back.
According to Africa’s Top 250 Companies in 2023 report by African Business, the combined market capitalization of the top 250 African companies has managed to decrease from Sh96.04 trillion ($701 billion) as at the end of March 2022 to Sh76.86 trillion ($561 billion) in the same period in 2023. As in previous years, the region of Southern Africa has continued to dominate the list, as most companies hail from South Africa. Of the total 250 companies, 96 organizations are from the southern country.
As a result, the continued weak economic growth experienced in the country has been one of the major reasons for the decline in the combined market value. Faced with a weakening rand against the dollar, decreased investment in energy and transport infrastructure, unrest in the country due to the weak economy, and a major decrease in stock values at their bourses, corporations have not only suffered, but a number have been forced to close down.
The number of corporations from the country on the list has fallen from 133 last year, seeing their combined market capitalization drop to Sh51.41 trillion ($375 billion) from Sh66.90 trillion ($488 billion) in last year’s report. However, despite the fall, South Africa alone still holds 67% of the total combined market capitalization of the entire list, as the Southern African region holds 71%. In fact, in the top ten, nine corporations are from South Africa.
The other African regions continue to be underrepresented as they make up the rest of the 33%, with North Africa accounting for 14.3% and West Africa at 11.4%. East Africa holds up only a tiny share of the pie at 3.3%. Central Africa has no representation, as many organizations from the Democratic Republic of Congo (DRC) are mostly foreign-owned mining companies.
It was a challenging year for many companies in Africa. In fact, of the top ten companies, apart from three corporations, the rest recorded a decline in their market value in the year. South African internet and multimedia company Naspers were at the top of the list with a market capitalization of Sh11.09 trillion ($80.87 billion), despite the struggles in the country. It was one of the companies to enjoy an increase in market value from Sh6.80 trillion ($49.62 billion) last year. The others included MTN Nigeria, whose market value increased from Sh1.44 trillion ($10.47 billion) to Sh1.45 trillion ($10.60 billion), and AngloGold Ashanti, from Sh1.38 trillion ($10.03 billion) to Sh1.40 trillion ($10.20 billion).
With Nigeria, the only country to have a company in the top ten, others such as Morocco, Egypt, and Kenya join the fray in the top thirty list. Nigeria has three companies, Morocco (2), Egypt (1), and Kenya (1) in the top thirty, showing the true dominance of South Africa.
Kenya’s combined market capitalization has declined from 2.7% last year to 2.2% this year. This has mainly been due to a decrease in the value of Kenya’s and East Africa’s leading company, Safaricom. The company recorded a drop in market value from Sh1.83 trillion ($13.20 billion) in 2021 to Sh1.55 trillion ($11.20 billion) in 2022. This is attributed largely to the company’s move to enter the Ethiopian market in 2021. However, deemed a worthwhile investment, the decision has cost the company much, with returns expected in the long run.
The increase in taxes on the mobile sector also affected the company’s revenues. According to Peter Ndegwa, Safaricom’s chief executive, reviewing mobile termination rates (MTR) and introducing additional taxes on SIM cards and mobile phones slowed the growth momentum for Safaricom and the whole telecom sector. As a result of these challenges, the group’s share price reached a two-year low at the end of 2022.
With other Kenyan companies recording lower values as well, it was the reason for the country’s low combined market value compared to South Africa (67%), Nigeria (9.3%), Morocco (8.8%), and Egypt (4.7%). It was also a major contributor to the decline of East Africa’s share in Africa, from 3.52% last year, due to the country having the highest number of companies (11) in the region.
Despite diversification starting to take root in most African countries, reliance on various sectors remains, per the report. The finance, telecommunication, consumer, non-cyclical, and non-energy materials sectors are where the big corporations invest. They account for 89% of the total value from the list. However, it is crucial to note that the report does not include state-backed companies and privately held corporations. Hence, the omission of most Ethiopian and Algerian companies, such as Ethio Telecom and Sonatrach, is state-owned.
The top 250 African companies are far from the record high value of Sh129.97 trillion ($948 billion) in 2015. However, they have managed to record some recovery from the low of Sh76.23 trillion ($556 billion) recorded in 2020. With a long way to go to hit the highs, African companies should focus more on diversification and new avenues for boosting their revenues.
Email your news TIPS to Editor@nairobilawmonthly.com, and to advertise with us, call +254715061658 anytime of the day
