The US$100M cutoff is chosen because it possible to capture almost all institutions with revenues above this. The sheer size and visibility of these organizations means information on their revenues is likely in the public domain.
So detailed was this research that if there is any enterprise in East Africa not in this group, there is a high possibility its revenues are below US$100M. All information in this list can be explained or corroborated.
The research includes state-owned institutions with the exception of the taxman and central bank of each country. To provide context, the list also includes 5 foreign-owned companies operating in the EAC.
See more detailed notes at the bottom of the list.
US$ Exchange Rates as at 31st March 2014
Additional Notes:
It is near impossible to find one measure that can adequately compare enterprises across different sectors. The 7 parameters often used to compare businesses are revenue, assets, capital, profit, market capitalization, number of employees and geographical footprint.
Using revenue also has obvious shortcomings. For instance, $1,000 in revenue for an oil marketer (e.g. KenolKobil or Oilcom) or retailer (e.g. Nakumatt Holdings or Capital Shoppers) is very different in significance from $1,000 revenue for a bank (e.g. Bank of Kigali or National Microfinance Bank). The profit margins are starkly different. While oil marketers or retailers often have profit margins of 2%-10% (in this case $20-$100), it is not unusual for banks to realize a 30%-40% margin (for this example, $300-$400). Two companies could therefore have identical revenue but with one having 10 times the profit.
Still, the amount of money clients are willing to pay for a product or service is perhaps as decent a measure as one can get of the organisation's relative impact on a country's or region's economy. That said, I have included all 7 parameters except capital and market capitalization for the top 50 where available in order to provide context to the numbers.
The focus on revenue though means some institutions that would definitely appear on any top 85 list by assets (e.g. NSSF Kenya [$1,319.59M], NSSF Tanzania [$1,359.83M], Exim Bank - [$699.99M]) or by profit (e.g. Centum [$46.42M]) have not made the cut.
State institutions have been included though it can be argued that the revenues for some (e.g. Communications Authority of Kenya) are based on mandatory statutory or regulatory payments. They can thus be looked at as agents of taxation along the same lines as the Tanzania Revenue Authority.
Where official financials are not available, I have used a number of factors to determine the revenue of companies:
- Multiplying production output with product wholesale price
- Inferring from counterparty's official financial results
- Market share statistics from industry regulator - This is particularly for oil marketers
- Benchmarking certain parameters (e.g. number of employees) with businesses in similar industry in the country or region
- Bank revenue = Interest Income + Commissions + Fees + Other Income
- Pension fund = Investment Income + Capital Gains + Other income. It excludes pension contributions.
- Insurance revenue = revenue (including premiums) + Other income + reinsurance premiums ceded
For certain state bodies, profit here refers to the 'surplus for the year'.
The results of the research may be surprising for some.
First, one may wonder how come companies associated with entrepreneurs Forbes has ranked as the region's wealthiest do not appear higher up on the list. The reason is simple - this is a ranking by revenue and not by net worth. An individual may have a high net worth but modest annual revenue. Certain forms of enterprise are pre-disposed to low revenue
For example, it will take a heck of a lot of real estate to generate US$100M in annual rental income. A real estate mogul with a net worth of US$1B could only be seeing US$20M in rental income per annum from his/her properties.
Second, there is a tendency for individuals/businesses to overstate their wealth/value in the absence of independently audited financial statements. Outside South Africa, most large businesses in Sub Saharan Africa are not publicly listed and therefore are under no obligation to publish their accounts.
In addition, recent news items covering Africa's wealthiest appear to either confuse business revenue/assets with net worth or exaggerate a company's value. There are several factors to consider when valuing a business including revenue, profit, assets and liabilities.
Perhaps the self-declared valuation is an attempt by the businesses to send feelers into the international markets in hopes of a takeover bid. Obviously the owner of a business has the discretion to set the price at which they can sell their company. However, this does not mean the market will share the same view. It is hard to see how a business selling a FMCG product with a turnover of US$500M and assets of US$300M can be valued at US$5B.
The market value of retailers, FMCGs and oil marketers is often much lower than their annual revenue. For banks, market value is usually much lower than the total assets. For instance, US banking giants Wells Fargo and Citigroup each have assets of more than US$1.5T. However, neither bank is valued at more than US$300B.
Where an enterprise self-declares revenue without providing financial statements, I have attempted to do a sanity check. In one instance (Lake Group), this has meant disregarding the self-declared estimate since this seemed inconsistent with other data sources e.g. official market share information.
Another observation is the emergence of East Africa's own chaebols especially in Tanzania and Uganda. Cue? 'Diversified Conglomerate'. Due to the relatively virgin economies in the region, successful family-owned businesses quickly discovered they had the capital to satisfy several other untapped opportunities in the marketplace.
For Tanzania and Uganda, this perhaps also has to do with the history of socialism and civil war respectively that saw the stunting of local (indigenous) private enterprise. When the doors finally opened, very few were technically or financially prepared to take advantage of the opportunities. Those that did are bordering on all-encompassing.
The conglomerates oversee hugely unrelated industries e.g. bank vs sugarcane farming, telecoms vs real estate, tyre manufacturing vs dairy farming. The size and reach of these conglomerates can be so expansive as to impact almost every major sectors of the economy. There is also the risk of potential conflict of interest where a bank lends money to a company in the same conglomerate without necessary due diligence.
Kenya too has its chaebols in part due to the debilitating impact the Moi dictatorship had on indigenous free enterprise. These are not as all encompassing though. The two largest conglomerates have a substantial (Sameer Group) or majority (Comcraft Group) of their business taking place outside Kenya. In addition, Kenya's private sector is the most diverse in the region with many companies choosing to specialize in one industry sector.
A number of enterprises would likely be on this list such as Midland Group, Tanzania Road & Haulage, MAC Group, New KCC, Simba Corporation, TSS Group, Multiple Hauliers Group, Bobmil Group, Apex Steel and Nairobi Hospital. They have been excluded due to unavailability of official revenue data and difficulty in calculating revenue estimates.
