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Africa’s Top 250 Companies in 2020

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As international investors take fright, the total market capitalisation of the firms in this year’s survey is down 18% on last year. But there are glimmers of hope amid the gloom. Tom Minney takes stock of the fortunes of Africa’s Top 250 Companies

As African leaders slammed the brakes on economic activities and put their countries or cities into lockdown to block the spread of the coronavirus, businesses and jobs were collapsing into intensive care and could be among the biggest casualties of the health crisis.

This year’s Top 250 Companies survey highlights the overall carnage in African share valuations in the last few years and even more so in March 2020. The survey ranks African or Africa-focused companies listed on public securities exchanges according to their market valuation, also known as “market capitalisation”.

To view the full ranking of the Top 250 Companies, click here.

Total value for all 250 firms on the list this year is $597.7bn, down 20% from last year’s total of $748.2bn. But last year had seen a 16% fall compared to total market capitalisation of $887.1bn in March 2018 and this year’s total value is 37% below peak value of $948.3bn in 2015.

The market value of the 250th company – in other words the cut-off market capitalisation to join the Top 250 list – was $195m in 2020, compared to $394m in 2018.

It is too early to say what the damage the pandemic will cause to companies’ future profits, a key basis on which investors value securities and set the market capitalisation.

An early indicator of the scale of the cutback in Africa is the number of lost jobs. In mid-April, international consulting firm McKinsey estimated that in the formal sector, which employs around 110m people across Africa, between 9m and 18m jobs may be terminated and there could be pay cuts for another 30m-35m workers. But 100m jobs are thought to be “vulnerable” in the informal sector, which it estimates accounts for three-quarters of Africa’s 440m jobs.

GDP forecasts slashed

McKinsey also said that Africa’s GDP growth in 2020 could be reduced by three to eight percentage points. Its most optimistic scenario is 0.2% growth while the worst case scenario would be a contraction of 5.2%. The different scenarios depend on how many people fall sick in Africa and across the globe, but do not take into account the effects of fiscal stimulus packages, which McKinsey said could improve the situation.

Also in mid-April, the International Monetary Fund (IMF) in its Sub-Saharan Africa Regional Economic Outlook revised its previous growth forecast for sub-Saharan Africa, published in October 2019, down by 5.2 percentage points.

Abebe Aemro Selassie, Director of the IMF’s African Department, commented on Africa’s acute economic crisis from Covid-19 pandemic: “The region is facing plummeting global growth, tighter financial conditions, a sharp decline in key export prices, and severe disruptions to economic activity from the measures that have had to be adopted to limit the viral outbreak. 

“Consequently, we now project the region will shrink by 1.6% this year… This is the lowest growth number that we can find for the region going back at least to 1970.

“Shrinking incomes will worsen existing vulnerabilities, while containment measures and social distancing will inevitably jeopardise the livelihoods of countless people. Also, the pandemic is reaching the continent at a time when many countries have little room for manoeuvre in their budgets, making it more difficult for policymakers to respond.”

Oil price shock

Other global factors will worsen the woes caused by domestic measures. A sharp slowdown in the global economy has collapsed global oil prices – with Brent crude down to its lowest level in decades as this article went to press  – and other commodities are also falling. Many African countries were still adjusting to the effects of the 2014 commodity price shock.

The crisis means cuts in remittance cash from overseas as Africans abroad join the floods of newly unemployed across developed economies and can no longer afford to send as much money back to family in Africa. On 22 April the World Bank reported: “Due to the Covid-19 crisis, remittance flows to the [sub-Saharan Africa] region are expected to decline by 23.1% to reach $37bn in 2020, while a recovery of 4% is expected in 2021.”

Covid-19 adds to existing economic pressures such as fast-growing national debt – some governments were paying more to creditors than they were spending on health. And Africa is facing more than its usual burden of weather-related shocks, including severe drought in southern and eastern Africa, cyclones and the looming prospect of a second wave of severe locust swarms in several East African nation, eating everything that is green.

Valuations plummet as investors rush for exit

Adding to the economic and profits woes underlying the falling valuations, global investors have been rushing out of perceived “risky” investments. According to the IMF report, “Investors have pulled out over $90bn from emerging markets since the beginning of the crisis, the largest capital outflow on record.”

Giant capital outflows from Africa’s frontier and emerging markets have crushed market valuations for many of the listed Top 250 Companies. Companies and governments have also stopped issuing bonds as premiums soar on risky debt.

South Africa is one of the world’s most liquid emerging markets and investors running for “safe” US dollar assets tend to sell their South African securities fastest. It has seen massive investor outflows which have caused the South African rand and the Namibiam dollar, which is pegged to it, to slide lower against the resurgent US dollar. The rand is down 19% over 12 months.

This affects the market value of companies when stated in US dollars compared with Egyptian companies, as the Egyptian pound is nearly 10% stronger against the US dollar after climbing steadily from January 2019 to February 2020.

Structural changes

In 2019 the top three sectors – Media #1, Banks #2 and Metals & Mining #3 – were all fairly equal with about 14% each of the total market capitalisation. The spinning out of the new technology giant Prosus from Naspers, which was classed as a media company, has upended that. Now the Technology sector, formed of just one company, has 19.9% of the total market capitalisation.

A streamlining of sectors sees Finance (a combination of the former Banks and Diversified Financial Services sectors but not Insurance) in second place with 15% of total market capitalisation, but gold and platinum miners are the main growth stocks.

The Metals & Mining sector companies now have a combined market capitalisation of 14.7% of the $598bn total. Media, still dominated by Naspers, is down to 10.8%. Telecommunications are still the fifth sector, with 7.7% of the total, and Luxury Goods have climbed to sixth place, displacing Insurance, which is down to eighth-ranked sector, behind Retail.

The change in structure also highlights the potential for double counting, where some of the largest companies are major shareholders in other large companies. Examples could include MTN Group on the JSE (#20, valued at $5.3bn), which is 80% owner of MTN Nigeria (a new entrant at #23, value $4.8bn, after its listing in May 2019).

Share of total market capitalisation by sector

Which companies has the pandemic hit hardest?

Hardest-hit economic sectors include retail and wholesale. According to McKinsey, “In South Africa, for instance, retail sales declined by two-thirds in the first two days of its lockdown.”

In addition, a recent McKinsey survey found that two-thirds of consumers in Nigeria and South Africa were cutting back their spending. Many informal sector day-to-day livelihoods from sales and services are left gasping – mostly for food to feed desperate and hungry families.

The IMF reports: “Less diversified economies will be hit the hardest, reflecting the impact of lower commodity prices and containment efforts.

“Among the non-resource-intensive countries, those that depend on tourism are expected to witness a severe contraction because of extensive travel restrictions, while emerging market and frontier economies will face the consequences of large capital outflows and tightening financial conditions.”

The forecast is for a fall in GDP of 5.1% in 2020 across countries that depend on tourism.

Manufacturing and construction are also badly affected. However, farming is less badly affected by the health crisis, including subsistence farming which provides most informal sector “jobs”. However, the drought in southern Africa was already causing widespread food shortages across the region, including famine emergencies, most notably in Zimbabwe.

Golden lining

Photos of beautiful African sunsets and new dawns show the clouds with golden lining, and gold has been consoling many investors in a time of coronavirus. Gold-mining shares have been soaring, as the world gold price climbed from $1,298 per ounce in April 2019 to $1,600 by February 2020. A brief tick down in March and since then it seems to be moving steadily skyward and passed $1,700 as we went to press in late April.

Since the crisis exploded, the gold price is being stoked as investors guess that governments across the world will first run up giant debts to stabilise personal incomes and save businesses during the crisis and then use inflation to run down the value of the debts. Some analysts suggest the gold price may rise when there is inflation and when interest rates are lower than inflation.

Shares in gold mining companies can be a leveraged bet on gold prices. Gold miners are among the biggest gainers in the Top 250 Companies ranking and the valuations reflect calculations on future earnings from rising gold prices, not the last set of annual reports, many often which showed lacklustre earnings.

Rising stars among the big JSE-listed gold miners include the world’s third biggest gold producer, Anglogold Ashanti, up from #29 to #11 with market capitalisation up 61% to $8.8bn, after falling back hard the previous year. It is listed in New York, Australia, JSE and Ghana Stock Exchange.

Johannesburg-based Gold Fields, the world’s eighth biggest gold producer, is up from #50 to #19 with value up 78% to $5.5bn for its New York and JSE listings. Sibanye-Stillwater a gold producer and the world’s largest primary producer of platinum, renamed from Sibanye Gold after a $2.2bn deal in 2017 to buy Stillwater Mining in the USA, is #22, up from #63 with market cap up 97% to $4.9bn.

Canada’s B2Gold, dual-listed on the Namibian Stock Exchange and mining in Namibia and Mali, is up from #58 to #30 with market cap up 38%.

Calling the telcos

The technology ranking sees more of irresistible rise of the telecommunications firms. Both usage of digital services and mobile money are major beneficiaries from the crisis in Africa and worldwide.

World-beating telco Safaricom in Kenya (#10, up from #14 on the list with marketcap of $10.0bn and dominant on the Nairobi Securities Exchange) and Nigeria’s Paga were among mobile money firms that took a hit to earnings when they removed fees on low-value transfers to move customers away from using cash. But that is only accelerating an underlying trend towards mobile money and analysts expect that activity will pick up strongly after the crisis.

Other top-ranking telecom firms are Vodacom Group (#7 at $12.5bn, same as last year) and Maroc Telecom (#8, up two places). MTN Group in South Africa is down to #20 but MTN Nigeria is the second highest new entrant, joining the ranking at #23 valued at $4.8bn after its May 2019 listing on the Nigerian Stock Exchange.

Airtel Africa was another high-flying new entrant at #37, after its $750m initial public offer on the London Stock Exchange and dual-listed in Nigeria in July 2019.

Airtel has primary listing in London and dual listing in Nigeria and its market capitalisation in London is $1.8bn, but the dual-listed counter on the NSE is priced 57% higher when the price is converted at official FX rates and reflecting domestic investment pressure, creating a larger market capitalisation for the same number of shares listed.

But just how African are the companies with dual listings on African stock exchanges? To read more about dual listings, click here.

Banks still feeling the strain

Earnings in the rest of Africa outside South Africa seems to be the main driver of good news for Africa’s biggest banks, according to analysis by the Banking and Capital Markets team at PwC Africa. In South Africa, where the giants are based, they have been feeling the strain of pressure in the domestic economy and less client activity, plus increasing digital and other competition for customer deposits in South Africa.

South Africa’s Firstrand is down from #4 to #6 in the ranking with market capitalisation down 51% to $12.6bn and Standard Bank Group is at #9, down from #5, with value of $10.1bn, down 54% on last year. Morocco’s Attijariwafa Bank is up from #17 to #15 with market cap down 24% to $7bn.

Back to growth

Governments across the continent were starting to experiment with steps to emerge from lockdowns and restart economic activity in late April.

One of the most positive long-term business prospects for many companies on the list could be more cross-border trading and investment through the African Continental Free Trade Area (AfCFTA), the world’s biggest trading bloc by number of countries, which came into force in May 2019. As the world puts up more trade barriers and shortens supply chains, Africa will start to remove continental tariffs and barriers from July this year.

Looking a year ahead, the IMF forecasts that if African governments and businesses take the right steps now and there is support from the international community, Africa can hope for a strong recovery. In April the fund revised the forecast for 2021 up 0.3 percentage points compared to the forecast published in October, and now anticipates 4% economic growth in 2021. 

For more on Africa’s Top 250 Companies read

Africa’s Top 250 Companies by region in 2020

A note on methodology

The top 250 listed companies are ranked by market capitalisation converted into US dollars at 9 April 2020. Some of Africa’s largest companies are not included because they are not listed on an exchange, such as Commercial Bank of Ethiopia and Angola’s Sonangol. Companies which are based in Africa and operate internationally or international companies with a large proportion of their income from Africa are included, even if the headquarters or main listing is in London (and other countries) provided they have African dual-listings. Real estate companies are excluded unless they actually develop property.

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