Analysis
17 May 21

The challenges and opportunities in Middle East and Africa

The Global Fleet Conference highlighted that Africa and Middle East (AME) present both challenges and opportunities for multinational fleet and leasing companies.

Go to the Global Fleet Conference website to watch the Global Fleet Live Sessions and Regional Streams about Africa and the Middle East on-demand

Finding the right balance between innovation, safety and efficiency

The MEA region is divided into three distinct areas: the Middle East, in which innovation is beginning to take hold; Northern and South Africa, where vehicle fleet management and leasing have reached a certain maturity; and Central Africa where implementing best practice, as in other regions like Europe and North America, is extremely difficult.

Conference speakers included Thierry Domballe, Director Fleet & Leasing, Loxea - Avis Fleet and Sandrine Garcia, General Manager AMI Sales, Nissan Motor Corporation and a walk in by Huub Smeets, Global Procurement Manager, Fleet and Travel, at Philip Morris International.

Africa – a mecca for used cars

Introducing the AME market facts and stats, Sahand Malek, Fleet Europe Expert, described Africa as vibrant but that it’s also one of the most challenging markets for fleet and leasing. A continent of 1.3bn inhabitants (16% of the world’s population), 60% of whom are under the age of 25. Of the 1.17m vehicles registered in the region in 2019, only 10% of those that were imported were new. Africa is one of the largest markets in the world for second-hand vehicles, with the average age of those on the road being over 12 years old. In some countries, such as Uganda, that number can rise to 20 years. Thousands of used vehicles are exported from North America, Europe and elsewhere into African countries every year. Although this provides cheap cars for citizens, it also contributes to high levels of pollution and safety issues  and the continent is often treated as something of a “dumping ground” for the worlds used cars.

Barriers to market in Africa

Strong enabling policies, tax incentives and subsidies required to build the infrastructure that supports clean, modern transport systems is missing in Africa. There are too many competing priorities for limited government funding.

A lack of connectivity and digitisation is also a barrier. Although the continent’s population is young and receptive to technology, only 24% of it has access to mobile internet.

A third barrier is the automotive industry itself, which is still under-developed with only a small number of OEMs present and an even smaller number of local car manufacturing brands.

Opportunities for growth in African mobility

Africa has access to many resources, such as solar energy, which makes it a positive place for PV charging stations and electric vehicles. It’s also leading the way in innovative uses for second-life batteries. Rapid urbanisation has resulted in an increased demand for vehicles with people opting to own a car rather than use public transport. Consumer acceptance is high because of the continent’s young generation, willing to embrace technology and digitisation. Mobility and fleet management demand is following these developments.

In Nigeria and Ghana, the urban population is large and demand for new mobility products is growing. Egypt, Morocco and South Africa have mature leasing and fleet markets, which are expanding. The National Climate Change Action Plan in emerging countries like Kenya, have prioritised electric mobility. The leasing and fleet management markets are still in their infancy with only ALD Automotive and Arval active in northern and south African regions. But this lack of global players provides an opportunity for local companies to offer leasing products.

In Ethiopia, with a lower number of cars per 1000 inhabitants, car rental is on the rise. South Africa has the most mature fleet and telematics market. Global players such as Cartrack, MiX Telematics, Netstar and Ctrack offer services like theft prevention, vehicle tracking and fuel monitoring.

Middle East – play by the rules

Richard Sikkel, CEO of Massar Solutions, underlined that the Middle East is a strategically important market but don’t expect to find everything from one leasing provider.

With 246m inhabitants in 15 countries and a young population, the demand for new passenger cars is high and there were 2.12 million purchased in 2019. Turkey and Iran have vehicle production units and the region owns or controls 64.5% of the world’s oil reserves.

Rapid urbanisation, however, has caused challenges like traffic congestion and transport safety issues (the number of road traffic deaths is one of the highest in the world). Public transport is largely unavailable and high. But with oil prices low, people prefer to use their own private cars. Environmental consideration is not a priority as the regional economies rely on oil. That said, many countries are trying to diversify their economies so they are not so dependent on oil. Saudi Arabia and the UAE are leading the way with smart mobility.

In 2020, Turkey invested $5.7 bn in developing transportation and infrastructure, despite the global pandemic. Turkey has a growing number of fleet management service providers and global leasing companies. Israel has a mature fleet and leasing market comprised of tech-driven players. Jordan has its share of electric mobility projects and Egypt’s 2030 plan is to increase the quality and capacity of public transport in cities. Saudi Arabia has one of the largest state-owned fleets and its ‘Vision2030’ is an ambitious plan to further develop transport infrastructure. Iran has the largest number of mobile users, which means there are apps for last-mile deliveries, ride-hailing and bike sharing.

Car dealerships rule

The UAE has an advanced car rental and leasing market and the most well developed public transport infrastructure. Dubai and the UAE have both publicly stated their ambition to have 25% of vehicles autonomous by 2030.

Car dealerships are the primary source of contact for fleet customers for leasing deals and telematics offerings. But leasing is not standardised in the region because banks must offer Sharia-compliant finance products. There’s a sense of pride in car ownership and cars are seen as status symbols, so it’s hard for people to understand the benefits of leasing.

In conclusion

Global leasing companies can fast-track their way to market by partnering with local players in the MEA regions. Africa, for example, can be seen as the final frontier in the fleet and leasing industry and is ready to embrace emerging trends of mobility and alternative energy solutions. For the Middle East, the advice is to think global and act local, respond to opportunity with solutions but with flexibility – bend to the way of the market, don’t expect it to bend to you.

Go to the Global Fleet Conference website to watch the Global Fleet Live Sessions and Regional Streams about Africa and the Middle East on-demand

Authored by: Alison Pittaway