The launch of the London Stock Exchange’s Companies to Inspire Africa report shone a light on the level of SME activity in Africa and the growing interest being taken by international investors.
The London Stock Exchange (LSE) has launched a report designed to promote up-and-coming privately owned African small and medium-sized enterprises (SMEs) and encourage further investment in the continent.
Companies to Inspire Africa 2019 was unveiled on Wednesday 16 January at the London Stock Exchange by a line-up that included the chief executive of the London Stock Exchange Group (LSEG) and the United Kingdom’s International Development Secretary Penny Mordaunt.
Speaking at the event, LSEG’s chief executive David Schwimmer said the organisation is “dedicated to championing investment into African companies, adding his belief that “Africa possesses a prestigious entrepreneurial spirit”.
The report highlighted the scale of Africa’s potential. The continent’s GDP has tripled since 2000 and it will have 25% of the world’s population by 2050, while mobile phone usage grew by 344% between 2007 and 2016.
The companies featured in the report have been using these market conditions to good effect, achieving a compound annual growth rate (CAGR) of 46%. Criteria for inclusion in the report include the need to be privately owned and headquartered in Africa, with three years of growth and revenues that have been audited by one of the ‘Big Four’ accountancy firms or a nominated local affiliate.
LSEG was also keen to promote the increasing equality in African businesses, female executives made up 22.5% of the senior executives of this year’s companies, compared to 12% last year.
The report reflected the state of African industry and the popular areas of investment. Of the 360 companies listed in the report, 53 were in agriculture, 21 in renewables, 79 in customer services, 51 in technology and telecommunications, 48 in financial services, 31 in healthcare and 77 in industry.
East Africa was best-represented in the report, with 147 of the listed companies, while West Africa was not far behind with 130. There were 47 in Southern Africa, 26 in the north and six in Central Africa. The East African region was recently revealed to be the best on the continent for freedom of movement.
Speaking after ringing the bell to open the day’s trading on the LSE, Mordaunt praised the companies featured in the report, saying their success “will demonstrate globally the opportunities that are increasingly present in Africa”.
She described Africa as “a continent alive with opportunity”, noting that it has five of the world’s fastest-growing economies”.
The UK has been aggressively marketing itself as an African trade partner in the run up to its departure from the Europe Union, with Prime Minister Theresa May visiting Africa with a trade delegation, state-owned development finance institution CDC Group committing GBP 4.5 billion to African investment and London hosting events including last year’s Ghana Investment and Opportunities Summit and next year’s UK-Africa Investment Summit.
One of the companies in the report, agricultural operator Blue Skies, is the largest private sector company in Ghana and is backed by CDC Group. Mordaunt said: “We are committed to supporting innovative African companies to make it easier for finance to flow into and across the continent.”
She sounded an optimistic note for the year, saying “2019 is the year of significant opportunities to take those partnerships further”.
Among the report’s supporters was London-headquartered law firm Stephenson Harwood. Head of the firm’s Africa group, Kamal Shah, said in a statement that “securing investment to expand markets and create new ones will drive the transformation and diversification of economies across the African continent”.
Speaking to African Law & Business at the launch event, Wayne Hennessy-Barrett, chief executive of Mauritius-registered and Kenya-headquartered financial technology (fintech) provider 4G Capital Group says inclusion in the report offers a platform to promote the company and its clients.
He explains that the report is consistent with a stock market’s role in bringing people together. “This is a bourse, this is a marketplace for ideas, a marketplace for fair exchange of value, a marketplace for relationships. The LSE is one of the oldest in the world and the premier in its class of professional services, so bringing the LSEG brand to this kind of forum provides confidence in the first place and first-rate connections to make this happen.”
Despite the optimism, obstacles remain. Speaking at the event, both Tony Edwards, a corporate partner with Stephenson Harwood, and Rob Withagen, chief executive of corporate information service Asoko Insight, spoke of the need for better corporate governance if many African businesses are going to break through.
Elsewhere, despite some progress, international credit agency Moody’s has predicted another slow year for credit and financial growth across Africa, while the World Bank’s Doing Business 2019 report revealed that although the business climate is improving for SMEs, there is a long way to go before that progress spreads across the continent.
Hennessy-Barrett says potential investors should stop seeing Africa as a risk and engage with it. “Get on the front foot and visit. Stop seeing Africa as a big, scary, strange place and see it as an amazing land of opportunity, because it is the future of mankind.” It is through engagement with the local communities that the obstacles will be overcome, he argued: “There are huge problems to be solved, with local solutions, not western-imposed solutions. Western, developed, northern hemisphere investment can enable local solutions to local problems and that’s really what the name of the game is.”
In the meantime, Hennessy-Barrett notes that there is a “list is as long as your arm” of industries which offer opportunities, including agriculture, technology and life sciences, “as well as helping the needs of the emerging middle class and helping the working class transition to that better life”.