According to a recent report released by a global business research company specialising in Africa and the Middle East, Infomineo, Lagos has become one of the leading African destinations on the Fortune 500 list. This comes over a month after Lagos became one of the 100 Resilient Cities in the world.
The Infomineo analysis includes the regional footprint of multinationals in the Middle East and Africa (MEA) region, the most commonly chosen cities, and the factors which influence the selection of the region, country, and city. Each element reveals the dynamic growth patterns within the region and a clear trend of Fortune 500 companies establishing some kind of presence in MEA.
From the report, there was a 17 percent increase in the number of companies in MEA in 2016 compared to 2015, with Johannesburg being the leading destination for Africa. In 2016, 196 Fortune 500 companies had established a dedicated regional headquarters in the MEA region. 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 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 percent increase in Fortune 500 investment since 2015. Germany and France are leading in terms of coverage rate while China has the lowest presence in the region. In Africa, each of the four regions is led by one hub, Casablanca for North Africa, Lagos for Western Africa, Nairobi for East Africa, and Johannesburg for Southern Africa.
Financial services are more likely to base MEA coverage from London, while technology companies are more inclined towards Casablanca or Lagos. Lagos is also the premier location for organisations looking to manage their operations across Western Africa with 12 Fortune 500 companies already established in the region. 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 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 in 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.
The factors responsible for selecting specific city 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.
Through this analysis, organisations gain a thorough understanding of markets and factors, which ensure a steady base of operations from which organisations can expand into the growing MEA market, and establish brand and identity within the growing middle classes.
As Lagos prepares to celebrate ‘Lagos @ 50’, these recent admissions into the 100 Resilient Cities and Fortune 500 list are indications that the Lagos State Government is really on the right track on making Lagos state a mega city. It also shows that the international communities are beginning to recognise the development in Lagos in terms of infrastructure and investment. It also confirms that Lagos is not only the financial hub of Nigeria but also the technology hub.