Gauteng is the economic hub of South Africa. So does that mean this is where all the advertising money is spent? Alain de Jongh gives his view.
The experts say that despite the apparent euphoria of 2012, these are still tough economic times and they require resilience, perseverance and flexibility. Even though the world seems to be moving out of the recession, uncertainty still looms in the background. It is this uncertainty that is causing advertisers to be more vigilant than ever before.
Even though ad spend is at a record high – with Unilever as our first billion rand spender, according to AC Nielsen – advertisers are looking to ensure maximum return on investments. New and alternative media types, for example interactive outdoor and mobile, are increasing on a daily basis. Digital is showing double-digit growth year-on-year, all of this due to the vigour of modern day advertisers and their exceedingly challenging audiences.
Companies are jumping on the advertising bandwagon with most of them looking to make a quick buck. This is particularly true of the print and out of home sectors, which are infested with fly-by-night companies.
But it’s always been a set rule in advertising to fish where the fish are. Looking at the geo-demographical breakdown in South Africa, 21% of all people aged 15 plus reside in KwaZulu-Natal (KZN), followed by 20% in Gauteng and only 10% in the Western Cape. However, considering that a large percentage of the population in KZN is rural, versus the mainly urban literate population in Gauteng and the Western Cape, then it is clear why Gauteng and the Western Cape still have the economic upper hand in South Africa.
Observing the two economic poles individually, the Western Cape with an estimated population of 5.2 million still trails Gauteng with its 11 million inhabitants and contributes 14% to national gross domestic product (GDP) versus the 33% by Gauteng. Both provinces have had more than 3% growth year-on-year in GDP. Linked to this is the ad spend growth where we have had more than a 10% increase over the last three years, year-on-year. It is easy to understand that the majority of this spend will follow the economic infrastructure, which happens to be in Gauteng, the Western Cape and, lastly, KZN.
Ad spend is driven by demand and with more than one in five South Africans residing in Gauteng, it is no surprise that the biggest demand for advertising will come from this province. In order to satisfy this demand, companies are jumping on the advertising bandwagon, with most of them looking to make a quick buck. This is particularly true of the print and out of home sectors, which are infested with fly-by-night companies. Established media, for example press and radio in Gauteng, are key beneficiaries of this growing demand.
Three out of the top five radio stations by revenue are located in Gauteng, including Highveld Stereo, 702 and Jacaranda FM. Even though more than half of Jacaranda’s footprint falls outside Gauteng, the rate card for this province still accounts for more than 75% of the rates. These three stations play a major role in the escalation of advertising inflation within the country. The Star and Beeld are predominantly Gauteng-based newspapers and are also respectively South Africa’s number one and number five newspapers in term of revenue.
Also, the majority of media and advertising agencies are based in Gauteng – as are most of the clients. Indirectly, the fact that both agencies and clients are based in Gauteng could be the driving force behind many of the higher income media types in the province. We have all heard the statement before, “I have to place the advert on 702 because my client listens to 702 on the way to work.”
Due to the irrepressible demand in Gauteng for advertising space, local government has been more indulgent in terms of awarding outdoor agreements to media owners in particular. This has been the motivating force behind the highly cluttered roadways in in the Gauteng province. Out of home media has showed a 4% increase annually for the last three years attributed to the increase in spend in Gauteng.
Ultimately, ad spend follows demand and the greatest demand is in Gauteng. So, Gauteng is and, for the foreseeable future, will remain in the driving seat when it comes to ad spend. Only a major economical shift will change that outlook. n
Alain de Jongh is a media strategist at The MediaShop Sandton
This story was first published in the May 2012 issue of The Media magazine.
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