The global headquarters of 40 large firms with a combined $195 billion (R1.9 trillion) in annual revenue are based in Johannesburg, according to Urban World, a report released yesterday by the McKinsey Global Institute.
Cape Town hosts 14 headquarters with revenue worth $52bn, while Pretoria is home to seven, earning $20bn, and Durban six with $13bn. “South Africa is home to names ranging from energy and chemicals company Sasol, to the Bidvest Group distribution and food services company,” the report notes.
And it notes that many local firms were able to grow without foreign competition during the apartheid years, because sanctions meant few multinationals established large subsidiaries in the country.
Research is derived from a database of 8 000 companies that earn $1bn or more in global annual revenue and a combined $57 trillion – “equivalent to 90 percent of global gross domestic product”, according to the report. The report predicts the number of companies will grow to 15 000 by 2025 and earnings will rise to $130 trillion.
The report says: “At present the US, Canada, and western Europe account for 11 percent of the world’s population but are home to more than 50 percent of large company headquarters, which collectively account for almost 60 percent of large company revenue globally.
“In comparison, south Asia is home to 23 percent of the world’s population but only 2 percent of all large companies and their consolidated revenue.
“The strength of longstanding legacy advantages remains clear: 64 of the 150 western European companies in the 2012 Fortune Global 500, for example, were founded before 1900.”
However, the balance is shifting. While three out of four companies on the database are currently in developed regions, the institute predicts that seven out of 10 of the estimated 7 000 new entrants, by 2025, are likely to be based in emerging markets.
The report says that emerging markets are “giving rise to thousands of new companies that are quickly reaching significant scale, and changing competitive business dynamics around the world”.
It identifies major players such as the Chinese telecommunications networking giant Huawei, Brazilian aircraft manufacturer Embraer and India’s industrial conglomerate Aditya Birla Group.
And it says: “By 2025, some of the global leaders in many industries may be companies we have not yet heard of, and many are likely to be based in cities that we could not point to on a map.
“The proliferation of large companies is likely to usher in an era of heightened corporate competition for markets, resources, and talent. Companies based in emerging markets can be sources of low-cost innovation that could disrupt entire industries, and many will set their sights on international expansion.”
However, the shift is also creating challenges.
“In this more dispersed business landscape, companies may need to reconsider their traditional organisational structures and find new ways to optimise their sales forces.”