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Africa poised for tech take-off as continent’s leading TMT companies outperform other sectors over past decade

Africa poised for tech take-off as continent’s leading TMT companies outperform other sectors over past decade

Africa’s leading listed technology, media and telecoms (TMT) companies have outperformed their peers in other sectors over the past ten years, delivering annualized returns of 19% since 2004 compared with more modest returns of 11% across the MSCI Emerging Frontier Markets (EFM) Africa index within the same period.

The analysis*, undertaken by international law firm Freshfields Bruckhaus Deringer, suggests that African TMT companies may continue to experience above-average growth in the next ten years.

African TMT companies also delivered a stronger performance than alternatives popular with international investors. The African oil and gas sector saw annualized returns of almost 6% compared with the TMT sector returns of 19%. 

Commenting on the findings, Natasha Good, a corporate partner in the firm’s TMT sector group, says, ‘The traditional narrative about investment opportunities in Africa has been all about oil and extractives but TMT has also proved a real growth story in the past decade.’

‘Africa represents a tremendous opportunity for an industry facing slowing revenue growth, market saturation, new technology challenges and declining profitability in mature economies. It is a market being taken very seriously by Silicon Valley for many reasons, including Africa’s tech-acquisitive and growing middle class. Many of the world’s major technology companies say that they are aiming for multi-billion dollar revenues in Africa by 2015.’

Notable examples of international interest in the continent include Emirates Telecommunications’ (Etisalat) acquisition of Vivendi’s controlling stake in Maroc Telecom for $5.7 billion in 2013. The deal was the Middle East’s largest takeover of a phone carrier.

Jonathan Kewley, a corporate senior associate in the firm’s TMT sector group, adds, ‘International investors, including both private equity firms and technology-focused investors, have already staked claims across the continent and are backing new companies. Private equity firms have been active in the market for years, but tech investors have also recently joined the fray. ’

‘The tremendous growth in the African TMT sector could signal the start of a "Silicon Africa" – provided infrastructure and the regulatory environment can keep pace with the continent's high-tech ambitions.’

Notes for editors

*Freshfields looked at the 10-year (Q12004-Q42013) market capitalisation development of TMT companies among the 500 top African listed companies. It comprised nine media companies, 15 telecoms companies and 16 technology companies listed in Burkina Faso, Egypt, Kenya, Malawi, Morocco, Senegal, South Africa, Sudan, Tunisia, Uganda, Zimbabwe. The firm then compared the TMT portfolio returns with the market capitalisation development of the standard Morgan Stanley index for Africa, the MSCI EFM Africa.

For more details on Freshfields' tech capabilities, see: http://www.freshfields.com/digital/

The Freshfields team was led by: