The Financial Times (FT) index of Africa’s fastest growing companies in 2022, compiled in partnership with data tech company Statista, provides strong evidence for the sometimes contested claim that the continent’s future growth hinges on tech-enabled disruption.

The index consists of 75 companies ranked by compound annual growth rate (CAGR) over the four years 2017 to 2020. It lists only genuine African firms, excluding local subsidiaries of international companies, and thus captures a significant picture of indigenous entrepreneurial trends on the continent. Qualifying companies have to have a turnover of at least US$1.5 million in 2020 and have expanded through organic growth (not mergers and acquisitions).

The FT admits somewhat apologetically that the list is not perfect as it was not possible to obtain information on every company of interest. The methodology note reveals that revenue figures have been certified by a senior company executive in every case, which demonstrates that someone worked extremely hard. In the end the index is a considerable achievement which clearly shows the areas which are attracting investment in Africa.

Most indices rank companies by criteria far easier to measure than CAGR. The FT’s partner in this exercise, Statista already produces an index of top companies in Africa by market capitalisation, or, in plain speak, ‘size’. The well-known Fortune 500 index ranks US companies by gross revenue. These indices have their place but the FT’s initiative, by revealing insights into profitability in Africa, throws up a whole range of new insights.

A number of these insights stand out.

First, the returns for identifying a previously underdeveloped market and then designing and, most difficult of all, actually implementing, a viable business model, can be extraordinary. The top two companies on the list are both Kenyan. Top company, Wasoko (previously Sokowatch), has a GAGR of 346 percent per year over the four-year period. The CAGR for the second company, Flocash, it is 275 percent. Third is Nigeria’s AFEX Commodities Exchange with a CAGR of 253 percent.

The top seven companies all have CAGRs of over 100 percent and the next 13 CAGRs of over 50 percent. The 75th ranked Hightech Payment Systems of Morocco had an annual CAGR of eight percent. When the compounding effect is spelled out, the top figures are even more dramatic. Fastest growing company, Sokowatch, grew revenue by over 8 700 percent over four years, from a turnover of US$300 000 for 2017 to US$27.4 million for 2020.

Second, the geographic spread of the 75 companies provides some insight into profitable locations and opportunities in Africa. 24 of the companies are based in South Africa, 20 in Nigeria, nine in Kenya, six in Egypt and four in Ghana. But when the types of business and their ages are overlaid on the geography of profit, a somewhat different story emerges.

The fastest growing South African company is an established mining firm, Northam Platinum, ranked at no. 10, followed closely by Royal Bafokeng Platinum at 14. In fact, of the South African companies on the list, six are miners and at least two others, Sea Harvest (37) and Naspers (38) are well-established firms with their original roots in the ‘old’ brick and mortar economy. While there are South African firms on the list who have made innovative use of digital technology (Yoco at 18 and Transaction Capital at 63, for instance), there does appear to be a greater concentration of new economy innovation in Nigeria and Kenya.

The most interesting areas of growth are in what the International Finance Corporation called, in 2016, ‘the unseen sector’. This is the informal, or at best semi-formal, economy in which most of Africa’s population live and work (85.4 percent of the continent’s workforce, according to the International Labour Organisation). Many of the companies on the FT’s list are seeking to tap this previously underserved or ignored markets.

Nine of the FT’s most profitable 20 companies are listed as FinTech, Technology or e-commerce. But the process of categorisation tends to under-emphasise the impact of digital technology. Many of the other top companies operate digitally-enabled business models. 7th ranked Lori Systems, for instance, is categorised as ‘transport’ although it is essentially an e-logistics company based on proprietary software.

Table-topping firm Wasoko essentially uses an e-platform to deliver goods and credit more efficiently to informal retailers. Previously, the owner-operator of a spaza shop would have to travel to a wholesaler (an act which in itself might be fraught with difficulty), pay cash for what goods they were able to carry and then return to their shop to sell their new stock. End retail in Africa tends to be a hand-to-mouth way of doing business because the traditional spaza shop operators cannot carry much inventory, offer much of a range of products or get (or offer) credit.

Now, in Kenya, they can subscribe to Wasoko’s business-to-business platform, order online and have stock delivered to their outlet. This deals directly with the well-known problem of ‘last mile’ distribution in Africa’s burgeoning informal urban settlements.

In South Africa, Yoco (ranked no. 18 in the FT index) offers a similar service. By aggregating demand, these companies allow spaza shop operators to order by mobile phone, carry more diverse stock and offer it more cheaply to customers because Wasoko and Yoco, the ‘aggregators’, can eliminate a whole chain of intermediary rake-offs (middlemen) and other inefficiencies.

Perhaps most important, from a developmental perspective, is that companies like Wasoko and Yoco keep records which allows their customers to build a credit profile. ‘This is a very powerful method of financing because it’s highly de-risked … it’s embedded within us as their existing trusted supplier’, says Wasoko’s founder and CEO Daniel Yu.

A final point stands out. While fintech and e-commerce start-ups deliver developmental benefits well beyond profits (better deals for consumers, for instance), the big employers on the list are ‘old economy’ type companies. Among the top nine companies on the FT index, the biggest employer is Nigerian financial services company ZedCrest (no. 5) with 455 employees. But the 10th company on the list, Northam Platinum, employs 18 288 people, ten times the total employment offered by the nine fast-growers listed ahead of it. Although the pattern is repeated across the index, perhaps not too much should be made of it. It is the direction of innovation – making inroads into ‘the wealth at the bottom of the pyramid‘ – and the scaleability of the solutions that impresses.

The FT has promised that the ranking will be repeated annually. The next iteration will include the impact of the bounce-back from the Covid-19 shuts downs. It will make for further fascinating reading.