South African firms still dominate our ranking of Africa’s top 250 companies by market capitalisation, but firms from the continent’s faster growing economies have increased their presence in the 2019 ranking, as Tom Minney reports.
Although mining, financial services and telecoms still take most of the top spots in Africa’s Top 250 Companies 2019, measured by value, Africa’s biggest company is a forward-facing global media giant which just announced plans to spin off some holdings this year and create Europe’s largest listed consumer Internet company.
Another trend is that companies in several of the fast-growing African economies are eating into the number of South African firms in the top ranking, which although they are still dominant make up a little under half the companies featured.
Ranking in the Top 250 Companies report is according to the value of shares listed on a stock exchange (“market capitalisation”), expressed in US dollars at 31 March 2019, although many exchanges closed trading on Friday 29 March.
Fluctuations in national currency against the buoyant US dollar push rankings up or down.
In contrast, Egypt’s pound and Kenya’s shilling recorded small gains against the dollar, while the naira held steady.
Currencies such as the Ghanaian cedi, Tunisian dinar and Botswana pula took a hammering.
Market capitalisation as a measure reflects investors’ views of the value of companies, based on their forecasts of how much they think an investment will pay compared to alternatives such as bonds or securities in other markets they can access.
Prospect of privatisations
The Top 250 ranking misses companies which are not listed, including some mining and oil groups such as Algeria’s state-owned oil and gas company Sonatrach (turnover $33bn in 2017), Angolan counterpart Sonangol (turnover $7.7bn in 2016), diamond miner Debswana in Botswana and South Africa’s troubled utility Eskom.
These parastatals would have high valuations, as we have seen recently when Saudi Arabia’s oil and gas giant, Aramco, opened its books to show profits of $111bn, more than Apple, Microsoft and Amazon combined.
The main stock indices of the Nigerian, Kenyan, Moroccan and Egyptian exchanges all registered declines in local currencies, after scoring strong and sometimes dramatic gains the previous year.
The Zimbabwe Stock Exchange Industrial Index has enjoyed two years of soaring gains as local institutions snap up shares in the face of currency concerns.
High prices for local listed companies reflect demand after years of bitter experience and longing for a return to the former stable and fast-growing economy, because Zimbabwean investors see shares as a partial haven against inflation, reportedly at 60% in March, and against currency turmoil.
The “RTGS dollar”, officially pegged at a 1:1 exchange rate with the US dollar, became legal tender on 20 February and saw an immediate 60% official devaluation.
By late March the official rate had been devalued to RTGS$3 to the dollar, while the black market price was reported at RTGS$4.20 to the dollar.
On 25 March it announced that it will bundle its international internet businesses and list them on Euronext Amsterdam Exchange in the second half of 2019, creating Europe’s largest listed consumer internet company by value.
Naspers will sell 25% by offering shares to its existing shareholders, and the new company will include online classifi, food delivery, payments, online retail, travel, education, and social and internet platforms and global brands such as Tencent, mail.ru, OLX, Avito, letgo, PayU, iFood, Swiggy, DeliveryHero and Udemy.
Bob van Dijk, Naspers’ chief executive officer, says: “The listing will present an appealing new opportunity for international tech investors to have access to our unique portfolio of international internet assets.
“It will comprise some of the world’s leading and fastest-growing internet companies that are playing an increasingly important role in helping people improve their daily lives in some of the most exciting markets on the planet.”
Earlier in March, Naspers unbundled pay-TV Multichoice Group to shareholders. With an initial market capitalisation of $3.5bn which has since climbed strongly it is our top new entrant at #36 on our list.
It owns several of the world’s leading luxury goods companies, with particular strengths in jewellery, watches and writing instruments but its origins lie in South Africa’s Rembrandt Group, set up in the 1940s, and it is also listed on the JSE.
“Productivity improvements in the underlying operations and better than expected prices for many of our products” helped mining giant Anglo American climb from #4 last year to #3 this year, according to chief executive Mark Cutifani.
Operating profit soared 11% to $6bn and Cutifani’s pay packet more than doubled to £14.7m ($19m) as the share price gained.
Other mining companies to climb the ranks include Anglo American Platinum, whose market cap nearly doubled to $14.5bn, raising its ranking to #8, up from last year’s #27 after creating a shareholder return of 55% and boosting earnings from mines in South Africa and Zimbabwe.
Another high-flying miner is Kumba Iron Ore, also part of the Anglo American Group, which climbed from #25 last year to #16 as market cap rose 34% to $10.3bn.
Banking group Firstrand took fourth place, tipped from #3 by Anglo American. Its market cap fell 19% to $26bn.
Although the South African economy remains sluggish, the group has boosted cross-selling at its retail arm First National Bank, where a banking mobile app can also buy insurance and even locate a plumber.
FNB contributes 63% of earnings, while corporate and investment banking arm RMB Holdings, which is also listed and has boosted its Top 250 Companies ranking from #23 to #21 for market capitalisation of $7.8bn and contributes 23% of Firstrand earnings.
RMB had a good year in 2018 with gains from realising private equity holdings, but is unlikely to repeat in coming months.
The bank, 20% owned by Industrial Commercial Bank of China, has been the most-Africa facing of the South African banks, and in March CEO Sim Tshabalala reported that the share of the Africa regions’ contribution to banking headline earnings grew to 31% from 28% in 2017, including Angola, Ghana, Mozambique, Nigeria and Uganda as top contributors.
The other non-SA firms in the top 20 ranking are Kenyan telco Safaricom, up from #17 last year to #14 this year ($11.2bn), Morocco’s Attijariwafa Bank at #17 up from #19 ($9.2bn) and Nigeria’s Dangote Cement at #19, down one place, with market cap down to $9.1bn.
It is skilful at collecting cash in difficult economies and commissions programmes in 17 languages.
High data costs are holding back growth in streaming video directly to mobile phones and tablets. Heshu sees big potential, with Multichoice’s DSTV Now and Showmax channels set to benefit as penetration grows from the current 0.1% towards the 41% level seen in the US.
Another new entrant to the top 250 is troubled Tanzanian miner Acacia Mining, listed in London and Dar es Salaam, which joined the list at #110, although temporary difficulties may have been the reason it was not on the list last year.
Acacia has been locked in a dispute over royalties with the government of Tanzania, and a ban on exports in 2017 collapsed the share price.
Parent company Barrick Gold Corporation has been negotiating with the government and in February 2019 announced progress towards a resolution, but three employees are under investigation by the corruption bureau.
The market seems to take the dilution in its stride, although the share price has fallen by 37% since its July peak, after 18 previous months of strong gains.
It is Egypt’s largest private hospital group by number of hospital b and holds majority stakes in four leading hospitals in Greater Cairo.
Results to December 2018, published in March, show revenues up 29% on the previous year to $84m and net profit up 167% to $17m, for market capitalisation of $627m.
Other arrivals include Zambian Breweries, (market cap $536m), Cervejas de Mozambique ($392m), Zimbabwean food companies Padenga and National Foods and Egypt’s Citadel Capital. Telekom Networks Malawi says profits have risen well during 2018 and the share price has climbed sharply since March 2018, boosting it into the ranking with market capitalisation of $348m.
Growth sectors and 2019 prospects
“Over a third of the countries in the region are expected to grow above 5%.”
In January the African Development Bank forecast GDP growth of 4% for Africa in 2019, climbing to 4.1% in 2021, but warns that Africa ne to create 12m jobs a year to stop unemployment getting even worse.
In April the World Bank cut its forecast for regional growth in sub-Saharan Africa to 2.8% in 2019, citing the impact on African economies of macroeconomic instability and political and regulatory uncertainty alongside an uncertain global climate.
The International Monetary Fund (IMF) is gloomy on the world economy, with repeated downgrades to its growth forecast, but bullish on Africa, forecasting 3.5% growth in real GDP for sub-Saharan Africa.
According to the April 2019 World Economic Outlook forecast, Ghana is set for world-beating growth with an 8.8% increase in real GDP forecast.
South Sudan is at the same level from a low base, followed by Rwanda (7.8%), Ethiopia, which does not yet have a stock exchange (7.7%).
Share prices and thus market cap values are also affected by interest rates, including margins and earnings at top banks.
In 2018 rising interest rates in the US lured capital to the dollar and drew support from emerging and frontier shares. Stockbroker Exotix.
In January said domestic interest rates will fall in Uganda, Ghana, Nigeria, Egypt and Kenya and expects improvements in banks’ profit margins and earnings in Nigeria, Kenya and Zimbabwe, with a negative impact in Uganda.
Growth in the Nigerian economy and other oil exporters could mean more demand for products such as construction materials including cement.
However, it will mean a slower year for utilities such as electricity generators that depend on oil inputs.
There is also likely to be more growth in manufacturers of fertilisers and commodity chemicals including scope to increase selling prices without reducing demand from their customers.