Are we living in brand cloud cuckoo land South Africa?

Someone to whom I gave her first job in marketing and branding, based her MBA thesis at USB on the book Alice’s Adventures in Wonderland. Going on to become one of South Africa’s top marketers on the world stage, I wonder how she feels about business today.

The Mad Hatter’s tea party is in full swing. So many things going on in politics, labour and business beggar belief. Internationally, people look at South Africa and say ‘surely that cannot be happening’? Why, we even have the secretary general of a political party lecturing the Springbok rugby coach on how to do his job. In what has been termed by brand consultancy Interbrand ‘The Age of You’, we all have an opinion, but not all opinions may be relevant.

Recent mergers and acquisitions activity saw: a 75 year old Brazilian living in Switzerland Jorge Paulo Lemann and an 84 year old American Warren Buffett stitching together two household names with a trolley full of brands Heinz and Kraft, a deal worth around $100 billion; the world’s second largest oil and gas company Shell has just laid out nearly $70 billion to acquire BG, taking advantage of the depressed price of oil stocks but still paying a 50% premium; General Electric is to refocus on its industrial roots, selling off its financial arm, GE Capital, a company that represented three quarters of its capital assets. We know that brands are often the major assets of companies, can be bought and sold, can generate huge premiums, create jobs, ensure consistency through building a loyal consumer base, don’t we?

Obviously not! Last month, a book focusing on the workings of South Africa, was launched by a local think tank with great fanfare at business schools and universities around the land, and given huge media exposure. Very learned and heavily endorsed, it claims to plot the way to growth and job creation. Yet it totally ignores the impact brands and marketing can make on a country and its economy, an impact relating to revenues, taxes, jobs and national pride. Are they stuck in the past, old fashioned, out of touch, losing their relevancy? Consider Nokia, only a decade ago the leading mobile phone global brand, the pride and joy of Finland. Today, a subsidiary of Microsoft, no longer in production, and the over 20,000 jobs they provided at the beginning of the century in Finland alone, now less than 1,000. And then there is Blackberry in Canada and HTC in Taiwan, both brands on death row.

In a recent McKinsey Quarterly, the American consultancy argues that we are entering ‘The dawn of marketing’s new golden age” as with the greater adoption of technology: ‘marketers are boosting their precision, broadening their scope, moving more quickly and telling better stories’. There is a need for the greater use of analytics. It is acknowledged that a positive reputation, strong energetic brands and a marketing effort in sync with the business plan are all critical levers in building top-line growth and shareholder value.

Another thought: globally, on average, the market capitalisation of companies is made up of one third tangible assets, one third brand value and one third other intangible assets such as patents, copyrights etc., figures established by US banking giant JP Morgan over a decade ago and confirmed by others. Figures will vary according to market sector, but we know that with IT sector related companies, invariably the tangible percentage is much lower than one third. Arguably, therefore, only one third of the total value of the Johannesburg Stock Exchange is of tangible value. People can squabble and write copious op-eds about the BEE component at the JSE, totally ignoring the sum of the parts, and the real drivers of value, the intangible. All the more surprising that many companies have little or no idea of the value and potential value of their IP. Worse, some do not seem to understand the concept.

In most countries of substance, their economy is a major priority, as it should be. In the UK, it is estimated by consultancy BrandFinance that 64% of the total value of listed companies is intangible, ranking the UK 8th out of The World’s Most Intangible Economies Index. To drive up shareholder value, it, therefore, becomes a priority to focus on the intangible element (reputation, brands, patents and other intellectual property).

The other weekend saw the annual adfest known as the Loeries where the average age of those joining in the fun was 35 going on 25. Interesting then to note that the average ages of the three white males heading up the three biggest groups in the world, WPP, Omnicom and Publicis, is nearly 69. The best paid took home in ‘compensation’ for the year £42.98 million thanks in no small part to a nifty LTIP (to those who don’t know that’s a ‘Long Term Incentive Plan’).

Talking of age, it is fascinating how many people of considerable influence are over the age of 60, even 70, yet 60 remains the mandatory age of retirement in many companies. A good friend who has been a top marketer for top companies for many years has just reached that point in his career. To be sure, there are some who are just marking time until they retire, but that figure is decreasing as we live longer. - 70 is the new 50. Remember the words of Dr Anton Rupert, to many the father of branding in South Africa: ‘It takes ten years to become a good financial expert, twenty years to become a good engineer but an entire lifetime to become a brand expert – and when such experts finally understand … they retire and their expertise is lost’.

We then have the anti-branders and those in government who seem to think business is a charity, there for their benefit: providing jobs, sweetheart deals for minority shareholders, handouts for junkets all to curry favour. Business leaders speaking out despite the fear of reprisals. A national plan not activated. Legislation not enforced. The idea now is to promulgate yet more legislation, firstly, banning alcohol advertising, and, secondly, introducing plain packaging for tobacco. Has no one spelt out the law of unintended consequences? They have? Oh well, that means no one is listening! Just some of those consequences: destroying intellectual property worth millions of rands and driving it offshore, playing into the hands of the fakesters, counterfeiters and smugglers, and destroying private sector jobs, when the number one objective should be to create them.

Lastly, we come to Brand South Africa. Locally, the international ratings agencies have reduced much of South Africa to junk status, yet the government does nothing to change this perception, if anything, adding fuel to the fire. Eskom cannot keep the lights on. The South African economy is now classified as one of the ‘Fragile Five’. Alarm bells should be ringing. The rand is in dramatic decline making all the items we have to import to stay relevant that much more expensive. This, of course, provides mouth-watering opportunities to global giants looking to expand into Africa. The main deterrent to inward investment and job creation is a ruling government (the tripartite ANC, SACP, Cosatu) that bumbles along, totally inept, in another world.

However, we have an organisation named Brand SA, with a budget of R173 million, employing 57 people, whose first job, I would suggest, is to persuade their bosses to be brand ambassadors and not brand saboteurs. A copy of Alice’s Adventures in Wonderland to all members of the cabinet.

Author: Jeremy Sampson is the Founder and Group Executive Chairman (retired) of Interbrand Sampson. This article was first published in the Sunday Times on 27 August 2015.

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