· Total brand value in the table increases 3% year-on-year to R395 billion
· Capitec, the fastest growing bank brand, is up 25% in value to R5 billion
· The retail industry shows signs of recovery, recording 9% growth overall
· MTN remains the nation’s most valuable brand with a value of R40.8 billion
Every year, leading brand and branded business valuation consultancy, Brand Finance puts thousands of the top brands to test. These brands are valued to determine the most powerful and the most valuable brands by country, by industry, and against all other brands worldwide.
Despite being plagued with a recession, political instability and a higher unemployment rate, the total value of brands in the table has increased 3% year-on-year from R384 billion in 2016 to R395 billion in 2017. Jeremy Sampson, Director of Brand Finance Africa, states, “South Africa is in many ways typical of an emerging market with an economy founded on natural resources and mining, underpinned by banking and telcos. However, when a country is struggling to grow at 1% whilst its brands grow by 3% it says much about the future potential if not interfered with.”
The banking sector – comprised of nine brands, outperforms all others, with a total brand value of R100 billion, making up nearly 25% of the total brand value of the table. Telecoms follows in second with R73 billion and retail in third with a total value of R49 billion. According to Lafferty’s 2017 Global Bank Quality benchmarking study, it ranked South African banks as the most sound in the world, reaffirming the potency of the industry.
Capitec is not only the nation’s fastest growing bank brand, but the fastest growing brand overall. Its brand value is up 25% to R5 billion, with a Brand Strength rating of AAA-, claiming the title as one of strongest South African brands in the table overall. Capitec’s customer base continues to grow, with over 120,000 new customers added every month, putting the bank closer to 8.4 million customers at the end of 2016. The bank attributes its success to its simplified and affordable product offering, providing a competitive advantage over the often complex products offered by competitors. At the end of February 2017, Capitec enjoyed headline earnings of R3.8 billion. It also scores highly on customer satisfaction – the bank emerged as the best in South Africa, garnering a score of 83.3% on the South African Customer Satisfaction Index (SAcsi) in April 2016.
Like Capitec, First National Bank boasts a AAA- rating making it one of the nation’s strongest brands. The bank launched its own-branded smartphones as it expands into the mobile banking space. Mobile banking in Africa has blossomed as banks sense new opportunities that arise from an increased digital presence. Dr. KLM Makhubela, CEO of Brand South Africa, comments, “South African commercial brands help to fly the country’s flag high – domestically and internationally. In today’s market, it is crucial that we stand apart from the crowd. The competition is no longer only on a local stage, organisations now compete on the global stage.” FNB have truly embraced this mentality. It is the first financial services firm in South Africa to launch its own smartphone; the company is already a pioneer nationally and it may well be that the technological advancement is to gear it up to compete on an international level.
Like the banking sector, there are nine retail brands in the table, with a total value of R48.6 billion. Recently, retail spend has recovered but it remains fragile as a result of the weakening value of the rand, severe droughts, and rising interest rates to name a few. Despite this, grocery retailers demonstrated resilience and positive performance in 2016, registering 9% growth overall, slightly stronger than the 8% from the previous year. Spar is the fastest growing retail brand, up 15% in value to R10.4 billion and Shoprite, the most valuable retail brand, is up 2% to R11.1 billion; and Clicks is up 7% to R3.4 billion. However, the tough trading environment in South Africa is likely to persist especially in light of the political uncertainty undermining consumer confidence. As a result, the long-term outlook of the retail industry remains to be seen; retailers will have to differentiate themselves in order to remain competitive in a challenging environment.
MTN remains the nation’s most valuable brand, with a value of R40.8 billion, up 10%. The company’s financial results for 2016 reflect the most challenging year in the company’s 22-year history, fuelled by regulatory, macro-economic and political challenges. In spite of these conditions, MTN continues to strive for growth. MTN invested R4.6 billion to improve its network, working towards its aim of unlocking value in the digital-and data-adoption space for future growth. Data revenue contributed 20% to its revenue in the quarter ending March 2017. Having said that, MTN’s brand value is nearly 30% lower than it was at its peak in 2014, illustrating a downward trend for the brand despite its growth. Vodacom, the nation’s second most valuable brand with a value of R24.3 billion, is closing the gap. Should MTN continue its regressive trend, it may be that Vodacom closes the gap and usurps MTN as South Africa’s most valuable brand in the near future.
Note to Editors
Brand values on Brandirectory are reported in USD. For conversions into local currency, please consult the hover over the ‘i’ button on the web version of the table and select.
Brand Finance is the world’s leading brand valuation consultancy. Bridging the gap between marketing and finance, Brand Finance evaluates the strength of brands and quantifies their financial value to help organisations of all kinds make strategic decisions.
Headquartered in London, Brand Finance has offices in over 20 countries, offering services on all continents. Every year, Brand Finance conducts more than 5,000 brand valuations, supported by original market research, and publishes nearly 100 reports which rank brands across all sectors and countries.
Brand Finance is a regulated accountancy firm, leading the standardisation of the brand valuation industry. Brand Finance was the first to be certified by independent auditors as compliant with both ISO 10668 and ISO 20671, and has received the official endorsement of the Marketing Accountability Standards Board (MASB) in the United States.
Brand is defined as a marketing-related intangible asset including, but not limited to, names, terms, signs, symbols, logos, and designs, intended to identify goods, services, or entities, creating distinctive images and associations in the minds of stakeholders, thereby generating economic benefits.
Brand strength is the efficacy of a brand’s performance on intangible measures relative to its competitors. Brand Finance evaluates brand strength in a process compliant with ISO 20671, looking at Marketing Investment, Stakeholder Equity, and the impact of those on Business Performance. The data used is derived from Brand Finance’s proprietary market research programme and from publicly available sources.
Each brand is assigned a Brand Strength Index (BSI) score out of 100, which feeds into the brand value calculation. Based on the score, each brand is assigned a corresponding Brand Rating up to AAA+ in a format similar to a credit rating.
Brand Finance calculates the values of brands in its rankings using the Royalty Relief approach – a brand valuation method compliant with the industry standards set in ISO 10668. It involves estimating the likely future revenues that are attributable to a brand by calculating a royalty rate that would be charged for its use, to arrive at a ‘brand value’ understood as a net economic benefit that a brand owner would achieve by licensing the brand in the open market.
The steps in this process are as follows:
1 Calculate brand strength using a balanced scorecard of metrics assessing Marketing Investment, Stakeholder Equity, and Business Performance. Brand strength is expressed as a Brand Strength Index (BSI) score on a scale of 0 to 100.
2 Determine royalty range for each industry, reflecting the importance of brand to purchasing decisions. In luxury, the maximum percentage is high, while in extractive industry, where goods are often commoditised, it is lower. This is done by reviewing comparable licensing agreements sourced from Brand Finance’s extensive database.
3 Calculate royalty rate. The BSI score is applied to the royalty range to arrive at a royalty rate. For example, if the royalty range in a sector is 0-5% and a brand has a BSI score of 80 out of 100, then an appropriate royalty rate for the use of this brand in the given sector will be 4%.
4 Determine brand-specific revenues by estimating a proportion of parent company revenues attributable to a brand.
5 Determine forecast revenues using a function of historic revenues, equity analyst forecasts, and economic growth rates.
6 Apply the royalty rate to the forecast revenues to derive brand revenues.
7 Discount post-tax brand revenues to a net present value which equals the brand value.
Brand Finance has produced this study with an independent and unbiased analysis. The values derived and opinions presented in this study are based on publicly available information and certain assumptions that Brand Finance used where such data was deficient or unclear. Brand Finance accepts no responsibility and will not be liable in the event that the publicly available information relied upon is subsequently found to be inaccurate. The opinions and financial analysis expressed in the study are not to be construed as providing investment or business advice. Brand Finance does not intend the study to be relied upon for any reason and excludes all liability to any body, government, or organisation.
The data presented in this study form part of Brand Finance's proprietary database, are provided for the benefit of the media, and are not to be used in part or in full for any commercial or technical purpose without written permission from Brand Finance.