Africa's largest businesses show strong growth.

Author:Minney, Tom
Position:Top 250 African Companies

The total market capitalisation of Africa's Top 250 companies has risen 21% in our annual survey, reflecting greater investor confidence and currencies that are more buoyant against the dollar. Tom Minney examines the figures.

Africa's largest businesses have been showing strong growth, and buoyant currencies across much of the continent mean that international investors are sharing the joy. The survey of Africa's top 250 companies focuses on the largest companies listed on securities exchanges. Their total value, measured by market capitalisation expressed in US dollars, was $887bn at 31 March 2018, up 21% compared to the 2017 survey.

Domestic and international institutional investors normally target the largest and most liquid companies on each exchange, and their valuations are also an indicator of investors' views on broader economic health. The increased market capitalisation (total value of all shares listed) reflects both good rises in African stock exchange indices as well as currencies that are buoyant against the dollar.

Over recent years, the total value of the top 250 companies list has been volatile, adjusting as giant companies left the list through mergers and acquisitions or splits, and because of currency and world investment trends. The high point was 2015, with total market capitalisation of $948bn, which fell dramatically to $764bn by 2016. The total value fell again to $732bn for the 2017 survey, but this included removal of the top company, giant SAB Miller, which was taken over for $103bn by Anheuser-Busch InBev to create the world's biggest brewing company, so last year's survey already showed gains for many companies.

Rapidly improving political situations have helped drive value growth, particularly in South Africa, where poor governance, hallmark of the presidency of Jacob Zuma, had been hurting sentiment and business performance. In November 2017 the power balance shifted strongly towards Cyril Ramaphosa, buoying the value of the rand dramatically against the dollar. He took over the presidency in February 2018 after Zuma resigned under pressure from his African National Congress party. The country's financial and economic leadership team is rapidly being replaced with competent and respected figures and the rand has climbed by 13.5% against the US dollar compared to last year's rate, while the stockmarket index has stayed steady, climbing 2% over the same period. International credit rating downgrades have been put on hold, pending developments.

Politics were stable in other key economies during 2017 and the first quarter of 2018. In Kenya, President Uhuru Kenyatta and opposition leader Raila Odinga broke a political impasse and sealed a truce in March 2018, pushing the shilling to a two-year high in mid-April. The peace is luring foreign investors, particularly to high-interest local debt issues, spurring business investors and leading to upgraded growth forecasts.

Others to benefit from improved stability include Nigeria, which has forecasts for modest growth after two years of shrinkage but needs to resolve foreign exchange issues, interest rates, political insecurity in the Niger Delta and the problem of Boko Haram militants in the North. The $66-$70 oil price further buoys confidence, foreign exchange reserves and the government's ability to spend. The Kingdom of Morocco has remained stable and forward-facing for business. Strong-arm tactics in Egypt have also brought stability for business growth.

By contrast, Tanzania's President John Magufuli has been tackling several international miners with devastating effects on the share prices of some companies listed on international exchanges with key interests in Tanzania. Mozambique also seems unable to escape the political doldrums, holding back oil, gas and other investment and harming regional prospects.

In several countries pent-up growth has started to boost valuations. Most dramatic have been the gains in shares listed on the Nigerian Stock Exchange, where the main index has climbed over 62% in local currency, more than offsetting a fall in the naira by nearly 14% against the dollar. At the start of 2018 the Nigerian index was beating nine-year highs. Also in local currencies, Kenya's key stockmarket index climbed 40% and Egypt by 34% while their currencies were stable and slightly stronger compared to the dollar.

As in previous years, South African companies continued to dominate the table, making up 30 of the top 34 companies in 2018. But top contenders from north of the Limpopo River are edging higher, with Nigeria's Dangote Cement up from #20 to #16...

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