40 fast-growing African companies highlight the continent's economic awakening, according to a recent report by the Boston Consulting Group (BCG).

Titled the 'African challengers' the report says the 40 African companies range in size from $350- million to $80-billion in annual sales and represent most of the major industry sectors. They all display strong growth, an international footprint, and ambitious plans to further expand overseas.

Most of the companies are based in South Africa (with 18 companies), Egypt (with 7), and Morocco (with 6). The nine remaining firms are based in Algeria, Angola, Nigeria, Togo, and Tunisia. These eight countries represent 70% of Africa's Gross Domestic Product (GDP).

International expansion has helped the African companies grow more swiftly than established players in developed markets. They are also more profitable, with an average operating margin of 20%.

'The African economy is much more vibrant and entrepreneurial than most casual observers understand,' says Patrick Dupoux, a partner and managing director in BCG's Casablanca office.

Keys to success

The African challengers share some characteristics that have allowed them to prosper:

1. They benefit from doing business in a place with many native advantages such as natural resources, cheap labour and fast growing consumer markets.

2. They enjoy a beneficial business environment that includes market de-regulation, national economic-development policies and rising commodity prices.

3. They recognise that a challenging economic environment is an opportunity to be creative and expand globally.

'Few people recognize that a new breed of African companies is poised to make a big splash on the global stage. These companies are following the same path as the global challengers from the BRIC nations,' says Dupoux.

Some Western companies have used their relationship with African companies to gain a better understanding of the African consumers and markets as French conglomerate Vivendi has done. French cement maker Larfarge acquired Egypt's Orascom Construction Industries in order to gain access to the Middle East and North Africa region.

BCG notes that some of these companies are, or will become major competitors against foreign companies, as displayed by South Africa's mobile operator MTN and paper maker Sappi.

South African companies expanding into Africa

South African companies have increasingly expanded operations into the rest of Africa. Some recent activity undertaken by South African firms include:

Zimbabwe

Engineering company TWP will build a gold plant at Pickstone. The plant will treat 20,000 tonnes of gold dump material per month.

Specialist investment manager Investec has bought a 7.47 % stake in OK Zimbabwe after underwriting the retail group's $15-million rights issue and providing a convertible loan of $5-million.

Uganda

Beverage maker SABMiller acquired water business Rwenzori Beverages Ltd, Uganda's leading bottled mineral water producer for $18-million, according to local newspaper New Vision. Rwenzori owns 70% of Uganda's bottled water market and exports to the DRC, Sudan and Rwanda.

Tanzania

A division of Law firm Deneys Reitz, Africa Legal, is now operating in Tanzania. Africa Legal established a joint venture with Tanzanian commercial law firm CRB Attorneys and will focus on the East African region.

Kenya

ICT firm Altech increased its stake in Kenya Data Networks (KDN) to 60.8% by investing $39.5-million. The investment will be used to roll-out KDN's fibre optic network in the country for the provision of broadband services. The company is also building a US$10m data centre in Kenya, which will be operational in September 2010.

Lesotho

Ster-Kinekor Theatres opened a new cinema complex in Maseru. The company also operates in Namibia, Zimbabwe and Zambia.

Mozambique

MCC Contracts, a subsidiary of Eqstra Holdings, has signed an open pit mining agreement with Australian coal-miner Riversdale Mining to mine at Benga coal mine in Mozambique in the first stage of development. The investment is worth $250 million.

The Boston Consulting Group selected the lions based on the basis of socio-economic factors including GDP per capita, standard of living, ease of doing business, political stability and public investment in a safety net.

Source: Frontier Advisory, Boston Consulting Group