Where do African Multinationals Establish Subsidiaries?
March 27, 2024 – Have you ever stopped to ask yourself where African multinationals expand to?
According to research conducted by McKinsey, over 400 companies across Africa earn annual revenues of more than a billion dollars. Interestingly, around half of those businesses are local businesses, not subsidiaries of foreign companies.
In addition, another 700 companies across Africa have more than $500 million in annual revenues, which shows the transformation of Africa into an industrial powerhouse is underway. And the continent is nowhere near reaching its full potential!
That’s a lot of companies seeking opportunities for expansion beyond their home country.
The Investment Monitor has a handy little tool that explores where multinationals from around the globe expand to.
The most recent numbers are for 2022 where they looked at 6,186 companies headquartered across 77 different countries. Together these companies had 370,320 subsidiaries of which 27.5% were US-based and one-fifth China-based.
From Africa to the World
The research only considered five Sub Saharan African countries: Kenya, Mauritius, Nigeria, Senegal and South Africa.
It grouped its findings for North Africa (Egypt and Morocco) with the Middle East.
What’s striking about the Sub Saharan African companies is that they expand literally around the globe with Australia and the UK being the top countries for establishing subsidiaries; 123 and 100 respectively.
Why Go Global
Companies based in Africa, just like companies all over the world, solve problems, create products and services people like or need.
The problems African companies solve exist around the world – whether its moving money around via mobile phones or mass transit challenges. In addition, having grown their company in what is often a challenging environment, African companies are comfortable navigating these same risks in other emerging markets.
A great example is Nigerian-based MOOVE which has subsidiaries in 9 other African countries as well as India, the UAE and the UK. Moove recognized that ride-hailing companies like Uber have a huge challenge as they expand into more countries: car penetration is low because cars are expensive to buy. Moove’s solution? They loan drivers up to 95% of the value of a car, then helps them pay it off as they work on any ride-hailing platforms.
For some companies, African markets are small so finding new customers requires leaving the continent. Another reason African companies set up subsidiaries abroad is easier access to financing.
A final and exciting reason for global expansion outward from the Continent, is the growing global interest in Africa and her creative industries: from movies to music, sports, fashion and art, the world is finally taking note of the beauty, diversity and talent of Africa’s creatives.
More on Africa’s creative industry in an upcoming post…or actually posts. Need to make that plural as there is so much to write about Africa’s creatives!