Member Article

The release of Brand Finance South Africa 50 2018, a report on South Africa’s top brands (many of which are advised by ENSafrica’s IP team), gives all of us involved in brands and branding a chance to consider the commercial importance of our field.

The report was produced by the company Brand Finance and mentions that over the past year, the value of South African brands grew by an impressive 8% to ZAR426-billion. The future looks bright: “The potential for South Africa going forward is huge, especially as new brands such as Capitec emerge.” 

The report starts with some useful definitions. A brand is 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 benefits.” Brand value is equal to a net economic benefit that a brand owner would achieve by licensing the brand. Brand strength is used to determine what proportion of a business’ revenue is contributed by the brand.

So, how is brand value calculated? Brand Finance uses the royalty relief approach, which it says “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’ as a net economic benefit that a brand owner would achieve by licensing the brand in the open market.”

The report shows that MTN (also advised by ENSafrica’s IP team) is South Africa’s most valuable brand, with the brand having grown in value by 8% over the past year to ZAR44.2-billion. The reason for the growth is that MTN’s customers are spending more on data services, a trend that is occurring throughout the world. MTN’s data revenue grew 34.2%, whereas its overall revenue grew 7.2%. This growth didn’t come easy – MTN has invested heavily in improving data quality and capacity. The growth didn’t come without challenges either – the Cameroonian government introduced a three-month data network shutdown in the country in 2017. MTN is, of course, very much a global company, with a presence in 22 countries in Africa and the Middle East. 

Brand Finance CEO David Haig has this to say about South Africa’s most valuable brand: “MTN is South Africa’s most valuable brand because of their industry leadership... they are increasingly recognised throughout Africa by their customers as providing high-quality service, because their brand image is deeply rooted on more than just marketing campaigns.”

Other interesting findings include First National Bank’s brand value rose 17% making it South Africa’s third most valuable brand; Outsurance and Cell C also achieved impressive growth; Capitec Bank has performed very well and is now South Africa’s strongest brand (remember, brand strength is different from brand value, but is seen as a valuable driver of brand value). 

The top 10 most valuable brands in South Africa are: MTN, Vodacom, FNB, ABSA, Standard Bank, Woolworths, Sasol, Investec, Nedbank and Multichoice. 

One thing that is striking is the total dominance of what are sometimes referred to as “service trade marks”, and this says much about the South African economy. The first “goods trade mark” on the list is Castle, which comes in at number 11.

The report provides some interesting reminders about the importance of brands: “The strength, or otherwise, of a country’s economy can be measured by its brands... not only do they generate money, they pay taxes, create jobs and act as ambassadors.”

The report reminds us how precarious brands can be: “Brands and reputational issues have never been more important as has been seen so clearly in South Africa over the last year. Whether it be the nefarious activities of the Gupta family and their acolytes which impacted such companies as Bell Pottinger, Eskom, McKinsey and KPMG, or the problems experienced by the likes of Steinhoff”. 

The report reminds us how brands form part of a much bigger picture: “South Africa under the new leadership of President Cyril Ramaphosa now has the opportunity to leave behind the last decade of little or no growth and move ahead. The world will not wait for South Africa. One way to turbo-charge the economy, as demonstrated by China, is by developing and investing in home grown brands and also either acquiring or buying into international brands.”

Surveys like this do, of course, also reinforce the importance of the legal aspects of branding. Trade marks must be cleared by way of searching before they are used. Trade marks need to be protected through trade mark registrations. Trade mark registrations need to be maintained. Changes affecting trade mark registrations (for example, ownership) need to be recorded on the Trade Marks Register. Trade marks that are registered need to be used in order to avoid non-use attacks for cancellation. If a trade mark is licensed, the arrangement must be covered in a comprehensive agreement and the transaction may need to be officially recorded on the Trade Marks Register. The marketplace must be monitored and trade mark registrations need to be enforced against copycats and counterfeiters. 

At the end of the day, it’s simply common sense – if a company has something that’s very valuable, it must be taken care of.