The third year of our now expanded ranking of Africa’s Fastest Growing Companies comes against a background in which many economies are struggling to recover from the Covid pandemic.
Economic growth in Africa, overall, in 2023 was 3.2 per cent, according to the IMF — lower than in Asia, which grew at nearly 5 per cent. Given the African continent’s fast population expansion, this underperformance is even starker in per capita terms. Rather than closing the gap with wealthier regions, on aggregate, Africa is falling further behind.
“It’s very difficult to sell an El Dorado story in Africa,” says Stéphane Bacquaert, managing partner at Adenia, a private equity firm specialising in Africa.
Yet the FT-Statista list, he says, reveals the type of companies that, even in hard times, have managed to grow.
The key, says Magdi Amin, co-founder and managing partner at venture capital firm African Renaissance Partners, is to provide answers, often by applying technology, to “legacy issues”. These include the poor electricity grid, lack of access to banking and high transaction costs.
“Frankly governments and other providers have really failed to deliver the services that the growing and rapidly urbanising population wants,” says Amin, adding that the ranking of 125 includes many companies seeking to meet those challenges.
Abebe Selassie, head of the IMF’s Africa department, echoes those sentiments. While the macro environment remains bad and poverty levels have increased, he says, many businesses have forged ahead: “Much of the private sector, particularly the private sector that’s not directly reliant on government business, has shown incredible resilience.”
Herholdt’s Group (32 in the ranking) provides solar equipment to homes and businesses in South Africa, a country bedevilled by power cuts. The company pivoted from legacy electrical equipment to renewable energy after a tussle between its family owners.
Adenia backed the younger generation and the business has taken off. “Anyone can tell you electricity is a huge problem in South Africa,” says Bacquaert. “So, if you solve that problem, you must have a winner.”
Again, it was a Nigerian company — this time Omniretail — that came top. As in previous years, the winning business is a B2B ecommerce platform that helps small retailers, kiosk owners, and market traders digitise their business.
Mauritian-domiciled Kyosk Digital (ranked 2) — which describes its business as “empowering traditional African retailers, farmers and their customers with a digital first and data-led distribution platform” — performs a similar role. Founded in Nairobi, it has since expanded to Tanzania, Uganda and Nigeria.
South Africa has 42 companies in the top 125, followed by Nigeria’s 25. Kenya tied third at 12, with Morocco. In last year’s list of 100, Morocco had just three winners.
African Renaissance Partners is betting that as the venture capital industry — not much more than a decade old in Africa — matures, start-up successes will spread beyond the big hubs of Egypt, Nigeria, Kenya and South Africa. It invests seed capital in companies in Ethiopia, Rwanda, Tanzania and Uganda. Amin predicts that, in five years, the FT ranking will include many more companies from these and other “non-hub” countries.
Still, there’s no disguising the fact that 2023 was “a rough year for the tech ecosystem”, according to Partech, an investment platform for tech and digital companies. Its annual survey of venture capital investment in Africa showed a 46 per cent drop from 2022, to $3.5bn, raised from 547 deals, which was also fewer than in recent years.
Lexi Novitske, general partner at Norrsken22, an Africa-focused tech growth fund, however, says there are signs the market has now bottomed out. Since November, venture capital firms have raised more than $650mn in funding for Africa, with Norskenn22 raising $205mn.
Novitske says valuations have become attractive again after an investment exodus last year. She prefers asset-light companies, especially those harnessing AI, some of which are capable of providing solutions to global problems. She highlights HearX (ranked 10), a South African-based company that uses AI to diagnose and treat hearing problems and now sells its products in the US.
“African companies are not only solving local or regional problems but global ones,” observes Aniko Szigetvari, a founding partner at Atlantica Ventures, a pan-African venture capital fund. “If you figure it out in Africa, you can take it to other markets.”
Szigetvari cites Lelapa AI, which transcribes chatbot messages into African languages such as isiZulu and Sesotho, as an example of a company with transferable technology. Another, from this year’s ranking (21) is Tymebank, a neobank that is taking its South African-developed model to the Philippines, Vietnam and Singapore.
Nevertheless, there are other big hurdles for companies, over and above the sluggish macro-environment. Businesses frequently mention currency and regulator risk, and negative investor sentiment as a result of political and security upheavals — including in the coup-prone Sahel.
For Valerie Labi, whose German-Ghanaian start-up Wahu is manufacturing e-bikes in Accra, the real problems can be more mundane. She blames bureaucracy in Ghana and in cross-border trade for hampering start-ups. African banks, she says, are reluctant to finance innovative start-ups like hers.
Bacquaert says some signs are evident of local pension fund investment at last finding its way to fast-growing start-ups, with Ghana, Kenya and South Africa leading the way. “This has opened up a pool of money,” he adds: “And you don’t have to pitch them on the African story, because they already understand it.”
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