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Top South African Brands could lose over R65 billion from COVID-19

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Top 50 most valuable South African brands from Brand Finance South Africa 50 2020 ranking stand to lose over R65 billion of cumulative brand value following devastating COVID-19 pandemic

MTN retains title of nation’s most valuable brand, valued at R49.4 billion

Life Healthcare is South Africa’s fastest growing brand, up 29% and climbing 5 spots in ranking

Vodacom is nation’s strongest brand, Brand Strength Index (BSI) score 89.5 out of 100

THUR, JULY 09 2020-theG&BJournal-As the COVID-19 pandemic wreaks havoc on the global and national economy, South Africa’s top 50 most valuable brands could lose up to 15% of brand value cumulatively, a drop of over R65 billion compared to the original valuation date of 1st January 2020, according to the latest Brand Finance South Africa 50 2020 report.

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 Coronavirus outbreak.

Brand Finance has assessed the impact of COVID-19 based on the effect of the outbreak on enterprise value, compared to what it was on 1st January 2020. 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 2020.

Jeremy Sampson, Managing Director, Brand Finance Africa, commented: “2020 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.”

According to David Haigh, CEO of Brand Finance, “South Africa as a country and Africa as a continent remain huge opportunities for brand managers. However, the next six months or so will be crucial. With so much uncertainty in the world, and in particular concerns about the potential damage to both the populations and economies of emerging countries, we could be in for a rough ride before things improve. Brands that survive these challenging times can expect a bright future.”

MTN retains top spot

Telco giant 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 last year, Africa’s largest mobile operator has celebrated solid profits and impressive subscriber growth, which currently stands at over 250 million across 23 countries.

Despite being touted as one of South Africa’s greatest corporate success stories, the brand has been hitting the global headlines recently and has been placed under increased scrutiny following allegations that it paid bribes to militant Islamist groups in Afghanistan. This is not the first time the brand has come under the microscope – most notably its 2015 Nigerian fine – and MTN will, once again, rely on its strong brand and its far reaching market share to maintain its position as South Africa’s most valuable brand.

As with all big telcos globally, MTN is being squeezed from all sides as OTT messaging apps 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 telecoms brands to reverse their fortunes, as Brand Finance predicts a limited overall impact to the sector and even potential for growth as demand surges.

Life Healthcare up impressive 29%

Recording an impressive 29% brand value increase to R2.4 billion, and simultaneously jumping 5 spots, Life Healthcare is the fastest growing brand in the ranking. Since its inception, Life Healthcare has undertaken numerous acquisitions and constructed several new hospitals to become the second largest private hospital group in the nation, claiming over a quarter of the market share, with a portfolio that includes nearly 50 acute hospitals and over 900 beds.

The brand has successfully turned the tide on its fortunes following a turbulent couple of years negotiating the fallout from the Competition Commission’s Health Market Inquiry report, where the sector was placed under increased scrutiny for rising consumer costs and lack of transparency, both of which damaged brand values.

Life Healthcare has achieved solid results despite the contracting South African economy – which impacts the brand’s medical aid clients – and challenging trading environments in the majority of markets in which it operates. Life Healthcare has, however, been able to offset these difficulties through consistent demand caused by the nation’s high disease burden and aging population and plans to add 50 further beds to its South African operations this year alone.

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) were expected to be some of the few brands to benefit as a result of increased demand. 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.

Vodacom is nation’s strongest

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 (BSI) 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 – place, price, products and promotion. All of which were considerably stronger than main rival MTN. Vodacom has committed to a 34% price cut its in data services following an agreement with the Competition Commission, after criticism that it was exploiting its market dominance. This price cut is no doubt going to bolster the brand’s already burgeoning subscriber base, which is currently growing on average by a staggering 67,000 a day.

Vodacom is currently working with the nation’s health department to send COVID-19 alerts to its 44 million customers.

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