Seventy-five African companies are driving regional economic integration

01 May 2018 Authored by Consultancy.africa

As the growth of Africa’s business environment continues to be hindered by a lack of interconnectedness between countries, the Boston Consulting Group (BCG) has identified 75 African companies that are driving integration across the continent, more than 30 of which are based in South Africa, while 10 are based in Morocco.

Regional economic integration has proved beneficial to a number of countries, exemplified by Europe, in particular, as well as economies across South and Southeast Asia. Due to a lack of economic and political infrastructure, among a number of other factors, Africa remains far from achieving the desired level of economic integration.

Statistics published in a new report from BCG titled ‘Pioneering One Africa’ reveal that one of the primary barriers to integration is the sheer distance between the major urban centres in Africa. The average distance between prominent cities on the continent is 4,100 kilometres, and the average flight time between them is 12 hours, as compared to 1,300 kilometres and 3 hours in Europe, or 2,200 kilometres and 5 hours in North America.

Already burdened by severe fragmentation, the blow to the region’s economy from a dip in commodity prices was a further wake-up call, demonstrating the need to diversify beyond the trade of commodities as well as the need for integration among the far-flung markets.

Africa is geographically fragmented

Nevertheless, Africa is making gradual progress towards interconnectedness, which will be significantly aided by the fact that the continent is estimated to reach soaring levels of internet connectivity over the next four years. Other factors conducive to integration are also visible and, according to BCG, these factors have begun to manifest themselves.

The report uses four metrics to demonstrate increased integration in the region between 2006 and 2016, namely the increase in levels of foreign direct investment (FDI), the increase in the number of M&A deals, expansion of the goods trade, and the increase in the movement of people.

Since 2006, intra-African FDI increased from $4 billion to $10 billion, all of which were greenfield investments – which entail the establishment of operations from scratch. The number of intra-regional M&A deals increased from 238 to 418, while intra-African exports increased from $41 billion in 2006 to $65 billion in 2016. In terms of people, the number of African tourists visiting other African countries increased by more than 10 million over the ten-year period.

African economic integration over the last decade

As is evident from the metrics examined, businesses have had a huge role to play in regional integration. Earlier this month, Big Four professional services firm PwC conducted analysis of some of the most prominent companies on the continent, with an overall focus on growth over the last year. BCG’s analysis emphasises growth as well, but specifically expansion beyond national borders, to help gauge a company’s role in regional integration.

The report identifies 150 companies in total that have driven integration, 75 of which are based in Africa, while the other 75 are multinational corporations. South Africa, which is the second largest economy in Africa behind Nigeria, saw the largest representation in this list, accounting for 32 companies, including major banking institutions such as FirstRand and Standard Bank, as well as retail giants such as Steinhoff International and Woolworths. 

Morocco, which is increasingly becoming a business hub, accounted for the second largest number of companies with 10, including the BMCE Bank of Africa and Royal Air Maroc. Nigeria and Kenya were tied in third place with 6 companies each, including Globacom and United Bank of Africa in Nigeria, and Bidco and Equity Bank in Kenya.

75 African companies driving regional integration

Not surprisingly, financial institutions were the majority of companies on the list, given the continent’s thriving banking sector. Egypt accounted for four companies on the list, while Tunisia, Ethiopia, Zimbabwe and Tanzania also featured, although none with more than two companies. 

International firms that are actively driving integration hail from a host of countries, including prominent names such as Coca-Cola and IBM from the US, Toyota from Japan, Air France from France, Adidas and Allianz from Germany, Bharti Airtel from India, and a host of others.

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