South Africa's Fleet Market Conditions in 2014

The corporate fleet market in South Africa is estimated at 1.2 million vehicles. Figures by the Southern African Vehicle Rental and Leasing Association (SAVRALA) and the National Association of Automobile Manufacturers of South Africa (NAAMSA) indicate that approximately 600,000 of these are either leased or rented, or an external provider manages the vehicle maintenance on behalf of the client.

The leasing/rental market has remained fairly flat in the last decade. According to SAVRALA, the leasing/rental market remains at approximately 600,000 units combined; however, it has recently seen some slight growth as companies that have traditionally purchased fleets with cash now consider leasing due to economic pressures.

The main service providers in South Africa are ABSA Vehicle Management, Avis Fleet Services, Bidvest, Daimler Fleet Management, Eqstra Fleet Management, Fleet Africa, Imperial Fleet Services, Liquid Capital, Standard Bank, and Wesbank. Imperial Fleet (previously a formation of Eqstra) recently re-entered the market and is offering fleet finance and management services after having previously divested its movable asset base.

According to SAVRALA, there are 29 brands in the market, with the top five brands being Toyota, Volkswagen, Nissan, Ford, and Mitsubishi. Manufacturers are starting to focus on “green efficiencies” with more than 100 vehicles currently available with emissions below the 100g/km CO2 mark. Manufacturers are also offering fully inclusive service plans in an effort to secure a larger stake of the overall fleet spend.

Changing Focus

There has been a clear shift in the South African fleet industry from price to total solutions and service delivery, with more companies now looking to outsource some or all of their fleet management processes to realize economies of scale and cost efficiencies.

Where the focus during the past decade was purely on finance costs, most companies are now considering the total cost of ownership of their fleet and developing cross-functional strategies to reduce overall fleet expenditures.

The industry has remained fairly stable during the past decade; however, due to growing financial pressures some companies that traditionally purchased their fleets are turning to leasing to free up operating cash and remove assets from the balance sheets.

Lease accounting changes have been proposed by the Investment Analysts Society (IAS), which, if passed, would require a portion of the finance charges for leases to appear on clients’ balance sheets.

There also has been a clear shift by the South African Revenue Service (SARS) in how business travel is being taxed/treated, with SARS looking to create parity between company cars and travel allowances. A current draft by SARS also indicates a possible shift in how company vehicles will be taxed, with taxes to be levied on lease costs rather than the purchase cost of the vehicle.

Large corporations are starting to focus more on risk management issues, including a duty of care and the reliant risk associated to business travel. While there is currently no proposed legislation dealing with these issues, indications are that South Africa could adopt a similar approach to that followed in the European Union (EU), where the employer is held more accountable for injuries related to business-related travel. If legislation to this effect is eventually adopted, employers will have to take a more active role in vehicle safety and vehicle roadworthiness.

Reducing Costs

All of these changes in the industry are driven by companies looking to reduce costs related to business travel, with most companies now actively reviewing their fleet strategies in an effort to find not just operational, but also financial and tax benefits related to fleet.

An electronic toll system (e-toll) went live in February 2013 and was piloted first in Gauteng. Traffic fines are being redirected to traffic offenders and accompanied by the offender’s identity document. Also, the Roads Authority is considering a points system, similar to the United Kingdom (UK) model.