The largest companies in the US by revenue represent about two-thirds of America’s GDP. Apart from having a combined $12 trillion in revenues, the Fortune 500 companies have one thing in common; it is their appetite for growth and a clear trend of establishing presence in Middle East Africa (MEA) region. A new report released by Infomineo, a global business research company specialising in Africa and the Middle East, showed that these companies show preference for Casablanca and Nairobi in their choice of international headquarters.
In 2016, 196 Fortune 500 companies had established a dedicated regional headquarters in the MEA region, the report stated. In the Middle-East, Dubai is the most popular choice with 138 companies establishing a dedicated entity in the city. There has also been a marked uptick in companies deciding to cover MEA from outside of the region – 38 companies up from 22 have established a regional headquarters in areas such as London, Brussels and Paris. The leading regional destinations on the Fortune 500 list include Dubai, Johannesburg, Casablanca, Nairobi, Lagos, and Cairo. Egypt remains behind the leaders due to political instability, however, it has seen a 250% increase in Fortune 500 investment since 2015. Germany and France are leading in terms of coverage rate. Although, Chinese investments in Africa has risen above that of most Western countries, China still has the lowest presence in the MEA region, according to the report.
As would be expected, the Fortune 500 companies are strategic in their expansion, with industry type playing a pivotal role in the selection of city and country. Financial services are more likely to base MEA coverage from London, while technology companies are more inclined towards Casablanca or Lagos, the report says. Lagos remains the top choice for organisations looking to manage their operations across Western Africa with 12 Fortune 500 companies already established in the city. Automotive and Healthcare tend to have a presence in both Africa and the Middle East, while Technology is more inclined to having a presence from the outside.
Nairobi, in Kenya, is the leading destination for the FMCG companies and tends to be the top choice for organisations looking to service Eastern Africa. Dubai and Johannesburg are the most popular hubs overall, but both Casablanca and Nairobi are rapidly gaining traction and international awareness.
Casablanca has the highest growth rate overall, while Dubai has the highest count. The same can be said for London, which has tripled its number of regional HQs serving the region, acting as an MEA hub. Given the geographical proximity and the talent pool present in the city, it could be that London is playing the role of a first step into the MEA region, especially for Japanese and North American companies.
There are numerous factors which impact on the organisation’s selection of a specific city. These include the local market potential, maturity of the industry, existing competitors, political stability and the quality of the employment market, among others. Determining the attractiveness of a location along these clear lines assures the Fortune 500 companies of a stable and profitable investment and significantly mitigates risk. The most attractive cities are Dubai, Johannesburg, Casablanca and Nairobi, and at the lower end of the spectrum, Cairo, Paris, Algiers and Cape Town.