As the Covid-19 pandemic wreaks havoc on the global and domestic economies, South Africa’s top 50 most valuable brands could lose up to 15% of brand value cumulatively, a drop of more than R65-billion compared with the original valuation date of January 1, according to the latest 'South Africa 50' 2020 report from independent brand valuation consultancy Brand Finance.
Looking beyond South Africa, the value of the 500 most valuable brands in the world, ranked in the Brand Finance 'Global 500' 2020 league table, could fall by an estimated R15-trillion as a result of the Covid-19 pandemic.
Brand Finance has assessed the impact of Covid-19 based on the effect of the outbreak on enterprise value, compared to what it was at the beginning of January. Based on this impact on enterprise value, Brand Finance estimated the likely impact on brand value for each sector.
The industries have been classified into three categories – limited impact (minimal brand value loss or potential brand value growth), moderate impact (up to 10% brand value loss), and heavy impact (up to 20% brand value loss) – based on the level of brand value loss observed for each sector in the first quarter of the year.
Brand Finance Africa MD Jeremy Sampson says this year has marked yet another troubled year for the South African economy as it continues to contract at an alarming rate and the far-reaching and debilitating Covid-19 pandemic has exacerbated this deterioration further.
“Now, more than ever, the economy will rely on the strength of home-grown brands to support the nation’s efforts on home soil and abroad to try and pull South Africa out of the slump that has engulfed the nation for the last decade.”
Brand Finance CEO David Haigh says South Africa as a country and Africa as a continent remain huge opportunities for brand managers.
However, he says the next six months or so will be crucial. “Brands that survive these challenging times can expect a bright future.”
MTN ON TOP
According to the report, telecommunications company MTN has retained the title of South Africa’s most valuable brand despite recording a 2% brand value loss to R49.4-billion.
Over the past year, Africa’s largest mobile operator has celebrated solid profits and impressive subscriber growth, which currently stands at over 250-million across 23 countries.
Brand Finance also notes that, as with all big telecommunications companies globally, MTN is being squeezed from all sides as over-the-top messaging applications like WhatsApp are impacting voice and SMS revenue, and challenger brands offer comparable data services at below-market rates, leading to fierce price competition and decreasing margins.
However, Covid-19 may be an opportunity for telecommunications brands to reverse their fortunes, as Brand Finance predicts a limited overall impact to the sector and even potential for growth as demand surges.
Brand Finance reports that Life Healthcare has improved its performance by 29%, to R2.4-billion, simultaneously jumping five spots to become the fastest growing brand in the ranking.
Since its inception, Life Healthcare has undertaken numerous acquisitions and built several new hospitals to become the second-largest private hospital group in South Africa.
On the frontline of the global Covid-19 pandemic in South Africa, Life Healthcare and fellow hospital group brands Mediclinic (down 15% to R4.9-billion) and Netcare (down 50% to R1.6-billion) are expected to be some of the few brands to benefit as a result of increased demand.
Brand Finance notes that this has not been the case, however, with all three brands showing significant loss in revenue as non-essential elective procedures have been cancelled and due to the slump in general demand as people avoid hospitals due to fear of infection.
In addition to measuring overall brand value, Brand Finance also evaluates the relative strength of brands, based on factors such as marketing investment, customer familiarity, staff satisfaction, and corporate reputation.
According to these criteria, Vodacom (down 9% to R30.3-billion) is the strongest brand in South Africa, with a Brand Strength Index score of 89.5 out of 100 and a corresponding AAA brand strength rating.
Brand Finance’s global brand monitor study showcased a clear improvement in Vodacom’s brand investment metrics of place, price, products and promotion. All of which were considerably stronger than main rival MTN.