South African-based companies – MTN and Vodacom – are Africa’s most valuable and strongest business brands, respectively.

This is according to Brand Finance’s Africa 150 2020 report – an annual index which reveals the most powerful businesses on the continent.

The report notes MTN is Africa’s most valuable brand, with a value $3.3 billion (R55 billion), while Vodacom is the strongest, with a Brand Strength Index (BSI) score of 89.5 out of 100.

Other South African companies that made it to the top five are First National Bank, Absa and Old Mutual.

Brand Finance explains that brand value is understood as the net economic benefit that a brand owner would achieve by licensing the brand in the open market.

It adds that brand strength is the efficacy of a brand’s performance on intangible measures relative to its competitors.

“South Africa’s telco giant MTN has been crowned as the continent’s most valuable brand, despite recording a 1% brand value loss to $3.3 billion,” says Brand Finance.

It points out that over the last year, Africa’s largest mobile operator has celebrated solid profit and impressive subscriber growth, which currently stands at over 250 million across 23 countries.

Brand Finance notes that as with all big telcos globally, MTN is being squeezed from all sides, as over-the-top 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, it adds that 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.

Brand investment metrics

In addition to measuring overall brand value, Brand Finance 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 8% to $2.1 billion) is the strongest brand in Africa, with a BSI score of 89.5 out of 100 and a corresponding AAA brand strength rating.

Brand Finance’s global brand monitor study shows a clear improvement in Vodacom’s brand investment metrics – place, price, products and promotion – all of which were considerably stronger than main rival MTN.

However, it notes that as the COVID-19 pandemic wreaks havoc on the global economy, Africa’s top 150 most valuable brands could lose up to 12% of brand value cumulatively, a drop of $60 billion compared to the original valuation date of 1 January 2020.

Looking beyond Africa, it says 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 $1 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 1 January 2020.

Based on this impact on enterprise value, it 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.

African nations must connect

Declan Ahern, valuation director at Brand Finance London, comments: “It is no surprise that South Africa is by far the most represented economy in the ranking, with 87 brands featuring, which account for 76% of the total brand value.”

Behind SA, Nigeria’s 16 brands account for 7% of the total brand value in the ranking (cumulative brand value $3.2 billion) and Morocco’s nine brands account for 5% (cumulative brand value $2.2 billion).

Jeremy Sampson, MD of Brand Finance Africa, comments: “There is no denying that the African market remains immature and fragmented in comparison to its global counterparts.

“The lack of connectedness between nations across the continent means that brands’ growth is being stifled and they are unable to flourish beyond their home markets. This does pose, however, a great opportunity for African brands to develop in a market ripe for consolidation and mergers and acquisitions.”