Africa's most valuable brands
AFRICA VS. THE DEVELOPED WORLD
Most notably, it shows that although the recession dented the value of African companies, with the percentage of intangible assets having moved from 65% in 2007 to 57% in 2008 and 54% in 2009, enterprise values (EV) have not dropped as dramatically in Africa as in the developed world. The value of intangible assets did not drop as precipitously in 2008 and has remained stable in 2009, and tangible asset investment continues apace to build infrastructure. In the developed world, EVs and intangible asset values dropped dramatically and rebounded almost as dramatically once the recovery in sentiment took hold.
The difference in performance has several causes. 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. 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. Also, Africa starts from a low base, but economic growth is solid and continuing.
MOST VALUABLE AFRICAN BRANDS
Sadly, African domiciled brands contributed only $7 billion to the total brand value within the Global 500. This is 21% growth up on 2009, but still low. Only two South African brands made it into the BrandFinance® Global 500 2010 table and both were in the booming telecom sector.
Vodacom is a great African brand, covering five countries in Africa, and has reached a scale to enter the Global 500 table. It is now a full subsidiary of Vodafone and may be migrated to the Vodafone master brand to achieve global synergies.
Vodacom has struggled to keep up with the rapid expansion of rival MTN in Africa and the Middle East. MTN is the most valuable brand in the African region with a brand value double that of Vodacom. In order to become the largest African telecom company, MTN is apparently keen to merge with Zain, a Kuwaiti mobile operator. Could MTN become another SAB, which is now technically domiciled in the UK?
Interestingly, the two most valuable African brands are from South Africa, reflecting the scale and sophistication of the South African telecoms sector; a pattern also reflected in the performance of South African banking brands.
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. Nigeria and North African bank brands also fare well, but South Africa is the clear leader in brand value creation. No doubt this year’s FIFA World Cup will help to create more South African brands on the global stage.
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. The dilemma for African governments is that most major brands in most major categories are foreign. The top 10 brands by African ‘footprint’ of revenues illustrate this point.
Billionaire Kumar Birla Champions Regional Supply Chains
As the head of the Aditya Birla Group, a US$46bn firm that operates in 36 countries, Kumar Mangalam Birla is no stranger to splashy strategic moves. Yet his recent announcement that he no longer wants to acquire globally distributed supply chains stood out. While many companies have struggled to cope with shipping backlogs, his firm has chosen to pivot and focus on regional networks. Said Birla: ‘We wouldn’t look at a company or a business where you source in one corner of the world and sell in another’.
He cited protectionism, the pandemic, and the limited movement of products and people around the world as ABG’s primary causes of lost profits. And they aren’t alone. Over the past year, 900 of the U.S. and Europe’s biggest IT, defence, and financial services firms have lost an average of US$184mn apiece.
An Era of Global Disruption
Over the past few decades, low shipping rates and rapid delivery times have lulled multinational firms into a false sense of security. In the early 2000s, companies chose to take on significant global supply chain risks in exchange for increased profits. First, it made sense to manufacture higher-value goods, such as electronics, in low-cost regions throughout Southeast Asia, India, and Africa. Second, first-tier suppliers started to outsource the manufacturing of specific components to second-, third-, and even fourth-tiers—leaving supply chains with extremely limited visibility.
So when COVID-19 disruptions struck certain regions, companies were caught unprepared. Usually, these events come few and far between. But over the past ten years, we’ve seen a number of ‘black swan’ events that have thrown the supply chain industry into chaos. Here’s a quick history of the most significant events in recent years, thanks to the MIT Sloan Management Review:
- 2010. China creates export quotas for rare earth elements.
- 2011. The Tōhoku Earthquake hits East Japan; flooding sweeps throughout Thailand.
- 2016-present. Trade wars between the U.S. and China hurt suppliers.
- 2020-present. COVID-19 pandemic shuts down international shipping ports.
Now, Kumar Birla is one of many who want to re-evaluate how we run our supply chains. Though his company has acquired 40+ companies in the last quarter decade, Birla intends to build up local hubs rather than expand operations.
Why Pursue Regionalisation?
Combine Chinese economic dominance, global supply chain vulnerabilities, and major government policy shifts around the world, and you have a storm brewing on the horizon for big multinational firms. As Brookings noted, ‘the biggest risk for trading opportunities in the developing world is growing protectionism in more advanced economies, often dressed up as national security protection’.
Altogether, from the U.S. to the European Union, governments are trying to protect their domestic supply chains, secure adequate stockpiles of materials, and build world-class local networks. Consider Biden’s recent executive order, which seeks to bring semiconductor manufacturing back to home soil, or Japan’s bid to open more memory chip fabrication factories near Tokyo. The Aditya Birla Group intends to react in kind. Said Birla: ‘We’re looking at regionalism as a very big theme’.
Will Others Follow Suit?
In the post-pandemic economy, global businesses must decide whether to expand or contract. On one hand, the Alibaba Group’s Cainiao Smart Logistics Network recently launched a direct flight between Hong Kong, China, and Lagos, Nigeria. On the other, the Japanese government is desperate to make its chip manufacturing domestic. Indeed, as two supply chain strategies diverge in a post-pandemic world, the one businesses take may make all the difference.
Yet Birla is confident that regionalisation is the right call. According to his words at the Qatar Economic Forum, even necessary cross-border transactions should be smaller in scope. And as the Bloomberg Billionaires Index now lists his net wealth at US$10.4bn, up 52% from 2020, he may have the cash to test his theories out. ‘Regional hubs, regional presence, regional employment, catering to regional demand’, he stated. ‘We’re a global company rooted in local economics’.