Top performer Capitec is a highly niched, low-income banking services provider. It came from outside the top 200 companies straight into number one spot. It's rare for any company to do that and it happened because this year it made its first appearance in the FM's Top Companies rankings.

Capitec was founded in 2001 by well-known financial services guru Jannie Mouton, who was chairman until March 2007. Mouton's company PSG still holds a 12% stake in Capitec, which uses technology to provide cheap, convenient and easy access to client funds. Earnings growth may ease off in the current year as costs increase due to compliance with the new National Credit Act.

Capitec's five-year internal rate of return (IRR) of 124,3% is outstanding and it's easy to see how it happened. Listed in 2002 at 100c, it hit a low of 80c that year. It's currently trading at R40, giving a compound annual growth rate of 109%.

Dawn (Distribution & Warehouse Network) occupies a niched position in the construction/DIY market. The group is listed in the construction & materials - building materials & fixtures sector of the JSE, and its strategy centres on the manufacturing and wholesale distribution of local and international quality branded hardware, sanitaryware, plumbing, kitchen, engineering and civil products through a national branch network and in selected African countries.

Dawn's strategy is built on its distribution model. It occupies a position and demonstrates competence in the centre of the distribution channel that adds value to both supplier and retailer. Products are sourced from a mainly locally-based manufacturing supply base, allowing those businesses to focus on their core competences. This supply stream is then channelled to the market on a break-bulk basis via the retail trade.

Through the acquisition of significant shareholdings in selected brands and suppliers, Dawn has been able to bring together a brand-based competitive strategy. Having the distribution infrastructure and the brand in one stable brings synergies and economies of scale.

Last year's top performer, Petra Mining (Petmin) fell to number 3 this year, but its five-year IRR is still impressive at 116,2%. Petmin's investments are involved in the mining and marketing of metallurgical and flat-glass grades of silica.

Hosken Consolidated Investments (HCI) shot up the rankings from 26 to 4th this year. HCI is a miniconglomerate, whose most notable asset is its effective 74,7% stake in Tsogo Investment Holdings (TIH), which in turn holds 51% of gaming and hotel group Tsogo Sun.

HCI owns this stake directly and indirectly via its controlling stake in the passive Johnnic Holdings. Other well-known HCI controlled entities are Midi TV (e.tv), Golden Arrow Bus Service, and Mettle. It also has a 45% stake in Clover, 50% of Johnson Crane Hire and 49% of Noah Financial Innovation, a black-owned stockbroking firm.

Old favourite Scharrig Mining (Schamin) not only managed to hold on to 5th position but increased its five-year IRR from 94,6% to 112,3%. Listed on the JSE since 1992, Schamin is involved in opencast mining and rehabilitation. It is one of the major suppliers of outsourced mining and rehabilitation in the SA coal-mining industry. Its principal clients are BHP Billiton, Ingwe Collieries and Eyesizwe Coal.

Afgold, 6th, which came out of Aflease (Afrikander Lease), is a junior mining company with a long history of mining gold. Owned by Toronto-listed sxr Uranium One, Afgold is currently developing its Modder East mine, which should be up and running in about two years' time. Given the nature of the company, it's still in a loss-making position but that hasn't deterred investors, who see great potential in the project. Its five-year IRR has risen from 85% to 105,7%.

Pinnacle, manufacturer and distributor of the Proline range of personal computers, fell back from 3rd to 7th position.

Simmer & Jack Mines (Simmers) is an old-established mining company that was on the verge of extinction a few years ago but which has come roaring back to prominence in the past three years. It was reconstituted as a viable business when new management and shareholders were injected in November 2004.

Since then, it has been among the top-performing resource stocks on the JSE for two years running, with the share price increasing almost fivefold in 2006. It has gold operations in the North West and Mpumalanga provinces and has a 67,2% stake in Toronto Stock Exchange-listed First Uranium.

The improvement in the dollar gold price coupled with some rand weakness last year obviously worked to the benefit of all gold producers, especially marginal mines like Simmers', where a noticeable leverage effect occurs when the rand price of gold shoots up. Its five-year IRR almost doubled, from 53,3% to 94,5%, catapulting the share from 51 last year to 8th this year.

Brimstone, in 9th spot, is an empowered conglomerate with no apparent specific focus. This diversity hasn't hindered Brimstone as regards its share price growth - its five-year IRR rose from 78,5% to 94,3%, pushing it from 16th last year to 9th this year. It owns 100% of House of Monatic, an old established menswear manufacturer, as well as 39% of short-term insurer Lion of Africa, 25% of Lenco and meaningful stakes in Oceana, Sea Harvest and a host of other investments.

Edcon stayed in 10th place with an impressive 87,8% IRR. Unfortunately Edcon won't be in next year's Top Performers, as it will have delisted from the JSE by then. It was bought out by a consortium headed by Bain Capital, a private equity firm. This is a pity, as Edcon has been a consistently great performer in Top Companies in the past few years, its performance closely mirroring its outstanding earnings recovery that started five years ago.

There were some huge rises just outside the top 10. Quyn screamed up from 233 to 11, Bonatla came from outside the top 200 to 31, Cape Empowerment Trust from 167 to 25 and Transpaco from 112 to 41.

There were notable sector-related improvements during the year.

In media, AME went from 111 to 21, Naspers from 101 to 33 and Johncom from 146 to 68.

The construction sector, which has been in favour for some time because of infrastructural spending, also saw strong upward movements. Howden rose from 54 to 14, Basil Read from 20 to 12, Aveng from 136 to 94, Group 5 from 27 to 17 and Murray & Roberts from 74 to 57. Only WBHO fell back, from 23 to 34.

Leisure stocks Sun International (SI) and The Don Group did well. SI went from 135 to 78 and The Don from 84 to 42. The Don's share price almost doubled in 2006, after more than doubling the previous year. This helped propel the share up the rankings. Don't be surprised to see The Don doing well again this year, as it should start to benefit materially from the lead-up to the Fifa World Cup in 2010.

Other notable gainers were MTN, up from 139 to 77, UCS from 169 to 93 and Comair from 226 to 115. Comair has been listed for almost 10 years but did little until the past year or so. The main reason for its improved earnings and share price improvement is the explosion in demand for low-fare air travel. Comair's subsidiary kulula.com is the leader in this segment of the market.

JD Group was one of the few retailers to show any marked improvement. It moved up from 176 to 92 - ironic given its current relatively poor earnings performance. Its share price was boosted recently by the announcement that Steinhoff was looking to merge with/acquire JD Group, though it has subsequently declined.

There were some notable falls. Cashbuild fell from 2 last year to 20, due mainly to a temporary hiccup in earnings growth in 2006. But it appears to be back on a strong earnings growth path again and should soon be back among the contenders in Top Performers.

KG Media fell from 4 to 48 and Mittal fell from 9 to 53. Pals slumped from 12 to 187, Buildmax from 19 to 80, Jasco from 30 to 109 and Bowler Metcalf from 65 to 160. Aspen, a firm favourite of the JSE, fell from 38 to 107, even though its five-year IRR is still a respectable 40,6%.