Valuing a Nation - Brand South Africa

You might be tempted to adapt famous economist J.K Galbraith’s cynical comment about his professional colleagues to: “Brand valuation is extremely useful as a form of employment for brand valuers.” Some think this might be the case. “Why,” they ask, “would you wish to value a country?” Why indeed?

Perhaps because it is possible. “Just as we thought,” shout the critics. But, the mere fact of “being possible” through the availability of a robust and tested brand valuation methodology, opens up a raft of new opportunities for marketing measurement. The remit of the International Marketing Council (IMC) is to market the South African brand internationally. Just how the success or otherwise of the Council’s efforts will be tracked is as hard to define as are the outcomes of most marketing briefs.

The valuation of our country’s external brand equity provides a single benchmark metric against which marketing achievement can be measured over time. It is based on South Africa’s foreign earnings from exports, tourism and foreign investment. The process incorporates several measures of risk to which these earnings are subjected. These include perceptions of how we compare with our peers in the global marketplace; the political, economic and social problems and pressures that are endemic to our Sub-Saharan African region; and, the role our nation brand plays in foreign investment decisions.

We compete in a tough world economy in which countries prosper or suffer at the hands of consumers just like conventional brands do. Brands gain in value if they win improved loyalty from users who will: pay a price premium; use more of the available range; and, who will tell their friends and colleagues what a wonderful brand it is. Country brands are not much different. That is why a country’s brand equity can be valued using a modified version of the BrandMetrics valuation approach.

The financial base

Our foreign earning represent one third of our Gross Domestic Product (GDP). We are reliant on the whims and fancies of people in foreign countries for a massive portion of our annual income. We need foreigners to invest in South Africa, not just because our commodities are available at a cheap price or because our goods are simply available on world markets, but because the country, and what it offers, appeals to them.

Table 1. Foreign earnings – 2002

Earnings from exports 253,6 billion
Earnings from tourism 13,3 billion
Earnings from foreign investment 60,0 billion
Total foreign earnings 326,9 billion
GDP 982,9 billion






Sources: SA Reserve Bank; DTI; Tourism SA

We conducted market research among a sample of 37 companies involved in export and import. We asked the respondents questions relating to the 33 sectors that the Department of Trade & Industry (DTI) has identified as our main exports. For each, they told us how important they thought the country of origin effect would be. Then they evaluated the extent to which they thought the South African brand was important in these decisions. We did a similar estimation for foreign investment and, working with Tourism SA, we calculated what proportion of our tourism related earnings are brand influenced as opposed to visitors who arrive here on business or to see family and friends.

These data told us that a mere 16% of the money we earn from foreign sources is influenced by the brand. Is this important information to know? Ask our Cape wine co-ops who twelve years ago were seduced by UK supermarket wine buyers to sell their wine in bulk. Had they sold branded wine, as we do today, they would not have been dumped when Chile suddenly became a better option for the retailers.

South Africa as a brand must endow our products and services with desirable attributes as powerful as beef from the Argentine, wine from France, motor cars from Germany, chocolates, watches and confidential banking from Switzerland. The attributes do not have to be tangible. Think of technology from Singapore; achievement from Australia; good value from Hong Kong and Dubai.

Sixteen percent of R326, 9 (Table 1) is R52, 3 billion. This is the base Brand Premium Profit (BPP) for the valuation calculation: the portion of our foreign earnings influenced by the brand. The value of the SA brand is the Present Value (PV) of a projection of this base value to a distant future horizon. The number of years in the projection is set by the strength of the brand’s equity, or Brand Knowledge Structure (BKS).

Brand Knowledge Structure

Just how strong is Brand SA? One measure, which has global credibility, is the one produced annually by the Swiss business school, IMD. The World Competitiveness Yearbook (WCY) ranks over fifty economies according to a large number of criteria including a bank of 116 attributes evaluated by way of an annual survey. With the permission of IMD, we used this as an input to the model (Table 2).

We are not the weakest economy on the list, but we are far from being the strongest. We have many perceived weaknesses. If we could correct these both in fact and perceptually we could improve our brand value. Practically, this means that we would increase the portion of our future earning’s steam that is directly influenced by out nation brand.


Table 2; Brand Knowledge Structure (BKS)

South Africa’s scores The highest scores: Dominant Brand (DB) The lowest scores: Marginal brand(MB)
Economic performance 50,0 75,4 24,3
Government efficiency 52,6 86,9 21,1
Business efficiency 53,9 86,4 29,6
Infrastructure 55,2 89.2 34,3
BKS score (sum of above /10) 21,2 33,9 10,9
Source: IMD World Competitiveness Yearbook (WCY) - 2002

Category expected life

While South Africa competes on the world stage, our category, for this valuation was defined as our geographical region: Sub-Saharan Africa. This is, after all, the environment that influences perceptions of our stability and defines the pressures with which we must contend in our efforts to compete.

To help define and understand our developing category (region) we borrowed from the work of Nobel prize winning economist, Amartya Sen . Sen’s five development freedoms (political freedoms, economic facilities, social opportunities, transparency guarantees, and, protective security), were given form by measures and indices from a variety of sources such as the United Nations Development Programme (UNDP), which provided us with the data we needed. We indexed the countries of the region against the thoroughly normal and developed economy of Norway.

This analysis is used in the model to set the number of years that form the framework for the Discounted Cash Flow projection, which, because of the mediocre rating that our region achieves, are severely limited.

The valuation

According to our calculations the SA brand is worth R379, 5 ($50,6) billion. This is the capitalised present value of the BPP grown at a projected real GDP rate of 3% p.a. for 27,7 years (growth phase and decay). The discount rate of 13,13% is based on the country’s 2003 national budget to which a risk premium has been added .

What does this mean? How should the value be judged? For what it is worth our country brand is worth $20 billion less than Coca Cola . But the value should not be compared with conventional brands. Other nations perhaps; but South Africa is not a fast moving consumer good (fmcg). This value should be used as a metric that will reflect the improvements we make in the way we are and the way the country is seen. Increments in the brand-influenced portion of our foreign earnings will boost the brand value significantly. Moving a few places up the WCY rankings by becoming more competitive makes us worth more. Reducing some of the more virulent horrors that plague our region will be mirrored in our brand value growth.

No attempt to value a country brand has been attempted before. This is the first. It is up to us now to understand what the valuation is telling us. It is also up to us, all 43 million (as Rugby World Cup captain, Francois Pienaar, made clear) of us; to make sure the value increases. If we do, it will be a sensitive reflection of our success in marketing our nation brand and in creating greater and more sustainable wealth for us all.