Major African brands prove resilient

09 April 2010

JOHANNESBURG: Many African brands retained their intrinsic value as their global rivals struggled during the economic downturn, a new study has argued.

Brand Finance recently released its annual ranking of the 500 most valuable brands in the world, a list headed by Wal-Mart on $41.4bn (€31.0bn £27.2bn) and Google on $36.2bn.

The consultancy has since conducted a more in-depth analysis of how Africa compared with other regions across the globe.

It found that IBM, Barclays, Coca-Cola and Nike were among the multinational operators which boasted the largest "footprint" in this area at present.

On average, "intangible assets" – the term used by Brand Finance to describe the net worth of a brand to its parent company – contributed 54% to the overall "enterprise value" of the biggest African corporations.

This total had declined from the level of 57% recorded in 2008 and 65% posted in 2007, as the financial crisis exerted an impact on the local fiscal and consumer climate.

However, David Haigh, the chief executive of Brand Finance, argued that African companies had actually proved relatively resilient when measured against their counterparts elsewhere.

"The drop in value of over-leveraged and over-valued businesses in the developed world can be compared with the solid progress of down-to-earth African businesses," he said.

"The African economy is more dependent on basic industries like banking, mining and telecoms, so is less volatile. African banks in general didn't suffer the same devastating fall from grace as the US and UK."

"Also, Africa starts from a low base, but economic growth is solid and continuing."

Only two African brands made Brand Finance's top 500 in 2009, contributing a combined figure of less than $7bn to the cumulative net worth of this group, which reached $2.9trn.

The first of these organisations was MTN, the South African telecoms specialist, which crossed the 100 million subscriber mark in 2009, and had a brand value of $4.3bn.

Vodacom, which is based in the same country and sector, was worth $2.2bn on this measure, having built up a presence in five regional markets to date.

"A strong economy, political stability, a reliable legal system, an educated population and good regulation have created the right conditions for pan-African growth by South African brands," said Haigh.

The staging of the FIFA World Cup in the country in June and July 2010 could help promote these and other domestic companies to a wide audience, he added, but elsewhere the situation is less positive.

"Beyond the telecom and bank sectors, high-value African brands are in short supply, although there are clearly many small brands trying to make progress," said Haigh.

Data sourced from African Business Review; additional content by Warc staff