South Africa

Last modification: 6 aoû 19
Introduction: 

It is a challenging year for South Africa. The economy is facing a decline in exports and slower growth. The automotive industry was severely hit.

 

                                                                                                                                                                                                                                                                                                                                                                   With the contribution of Latitude Fleet Services 

Chapter 1: Economic and business environment

Demographics

55.91 million (2016)
Capital

Pretoria (executive capital) (2.059 m)
Cape Town (legislative capital) (3.66 m)
Bloemfontein (judicial capital) (463,064)
Major cities

Johannesburg (largest city) 9.399 m)
Durban (2.901 m)
Port Elizabeth (1.179 m)
Vereeniging (1.155 m)
Languages

IsiZulu (official) 22.7%, IsiXhosa (official) 16%, Afrikaans (official) 13.5%, English (official) 9.6%, Sepedi (official) 9.1%, Setswana (official) 8%, Sesotho (official) 7.6%, Xitsonga (official) 4.5%, siSwati (official) 2.5%, Tshivenda (official) 2.4%, isiNdebele (official) 2.1%, sign language 0.5%, other 1.6% (2011 est.)
GDP

$13,200 = 11,699 Euro (approx.) per capita
Unemployment rate

26.8% (2016)
Main industries

Mining (world’s largest producer of Platinum, Gold and Chromium), automotive assembly, metalworking, machinery, textiles, iron and steel, chemicals, fertilizer, foodstuffs, commercial ship repair.
Currency

South African Rand ($1=12.8ZAR) 
Interest rate

10,6%
Political key info

Parliamentary Republic 
Inflation

6.5% (2016)

Chapter 2 : Automotive market, segments & sales

Total Car park

12,027,860 (end of Feb 2017)
New vehicle registrations (Cars, LCV, Trucks)
  • The domestic new vehicles market is declining since 2013.
  • 48,113 in February 2017 alone (31,400 passenger/14,416 LCVs/2,297 commercial.
  • Predicted to rise by 1.74% on last year to 557,000 units by the end of 2017.

 

In July 2019, overall vehicle sales in South Africa declined by -3.7% compared to the same month last year. 

Passenger cars bore the brunt of that loss this July, figures released by the National Association of Automobile Manufacturers of South Africa (NAAMSA) show: -8.2% versus the same month last year, or a decline of 2,617 cars to just 29,477 units. 

That decline is in line with falling sales figures for the passenger car segment across the southern African region. 

However, LCV sales in South Africa were up significantly: 13,852 units sold, i.e. +2.9% compared to previous July. Truck sales were also up, both in the medium (+14.9%) and heavy (+21.4%) segments. 

Source: Global Fleet
Top 5 brands (total market)

Passenger cars: (July 2017)

  1. Volkswagen
  2. Toyota
  3. Ford
  4. Hyundai
  5. Renault

LCVs:

  1. Toyota (Hilux)
  2. Ford (Ranger)
  3. Nissan (Hardbody/NP200)
  4. Isuzu (KB)
  5. Chevrolet (Ute)
Model preference top 5 (total market)
  1. VW Vivo (3017 units in Feb 2017)
  2. VW Polo (2462 units in Feb 2017)
  3. Toyota Corolla/Auris/Quest (1717 units in Feb 2017)
  4. Toyota Etios (1233 units in Feb 2017)
  5. Toyota Fortuna (1092 units in Feb 2017)
  6. Ford Fiesta (1054 units in Feb 2017)
  7. Renault Sandero (681 units in Feb 2017)
Dealer network (including fleet dealer network)
  • South Africa is Africa’s leader in the automotive industry.
  • It imports and exports vehicles.
  • The country produces more than half a million vehicles annually – of all types.
  • It manufacturers trucks and military vehicles, domestically, and builds other vehicles under license to foreign brands including: BMW, Chrysler, GM, Fiat, Ford, Nissan, Toyota and VW.
  • SA has been assembling vehicles since 1920.
    The modern auto industry in SA began in 1995
Used car market/renewal cycle

The 2016 decline in new car sales and above the inflation price rises for new vehicles has resulted in a strengthening of the used car market in South Africa.

Ratio: 2:1 (used to new). Mainly a consumer market, is keeping resale values at a reasonable level.

Used vehicles cannot be imported.

Chapter 3: Company car market

Total Fleet Park (company cars)/Fleet penetration in total fleet sales
  • 3 million cars
  • 1.1 million pickups
  • 500,000 commercial vehicles (over 3 tonne) (Source: FleetCube, 2015 survey).
Evolution fleet sales (last 5 years)
  • The corporate fleet market accounts for approx. 65% of all new vehicle sales, which includes self-owned.
  • The higher the value of the vehicle, the higher the percentage goes. For example, 90% of LCVs and executive cars are within the corporate fleet.
  • Around 65% of the fleet park is financed on open-ended leases (straight financing and no services), the rest are cash purchases.
  • Open ended leases are provided primarily by the major 4 commercial banks.
  • Estimates for the number of closed end leases/full service leases (referred to in SA as Full Maintenance Rentals with services such as maintenance plans) are around 65,000 vehicles. These are provided by Fleet Leasing suppliers such as ; ABSA, Avis Fleet, Bidvest Bank, Eqstra, Fleet Africa, Standard Bank and WesBank
  • A small percentage of the above 65,000 vehicles are on Operating Leases.
  • The Self-owned fleet park (referred to as an Allowance in SA) is in excess of 600,000 vehicles (25% of total fleet park). Current fringe benefit tax rates are pushing companies (and individuals) to move to a company method of providing vehicles to employees.
Top 5 fleet brands (fleet market)
  1. VW
  2. Toyota
  3. Ford
  4. Nissan
  5. Hyundai/Kia

*Source : NAAMSA

GM, Chevrolet, Isuzu would normally be in the top 5 but GM has recently exited SA and it is as yet unclear how this will impact the market.
Fleet Model preference top 5 (fleet market)

Toyota Hilux
Nissan NP200
Chev Utility
VW Vivo/ Polo
Toyota Etios/Auris/Corolla/Quest

Chapter 4: Taxation & legislation

4.1. Car Taxation

·        Emissions tax is levied and is included in new vehicle price

4.2. Income tax – Taxable persons 4.3. Company car

·        Company Car or Car Allowance options

·        Company Car = taxable value of 2.5% of value vehicle per month

·        Car Allowance = taxed on allowance amount per month and individuals applicable rate

In both cases, the individual can claim back ‘business mileage’ at the applicable rate as published by the receiver of revenue

4.4. Income taxes – drivers’ personal taxation 4.5. Electric vehicles 4.6. Future developments 4.7. Legal background (import taxes)
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Chapter 5: Car policies

  • Company car entitlement
    • Appropriate job function or sufficiently senior level of job
  • Which sectors provide most fleet cars?
    • Manufacturer’s dealerships 
  • Which job functions often include a company car
    • Senior management
    • Sales Reps and Field Technicians
    • In SA, most employees opt for car allowance – companies prefer to be ‘hands off’
  • Which reference car(s) is given to:
    • Entry/junior sales level:  Small sedan / hatch (E.g. VW Polo / Toyota Etios / Hyundai I20)
    • Senior sales / management level:  Medium luxury (E.g. Audi A4, C-Class Mercedes)
    • Executive level èLarge Luxury (E.g. BMW 5 Series, Mercedes E-Class .. luxury SUVs are very popular e.g. Audi Q7, Range Rover, Toyota Prado)
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Chapter 6: Funding methods

  • Type of suppliers:  Funding provided by banks with some outright purchase by companies
  • Operating Lease finance provide by specialist fleet leasing companies and some banks
  • As specific information is difficult to source in SA, experts believe that funding is 50/50, in terms of funded in some way verses outright purchase. However, the outright purchase, in turn, is likely to be funded in some form (bank loan, company overdraft and so on).

6.1 Outright purchase:

  • Definition
    The company pays upfront for the vehicle and takes ownership immediately
  • Pro’s and con’s
    Pros = no finance obligation
    Cons = cash tied up in a depreciating asset, asset shown on balance sheet, logistics of managing the vehicle
  • Economic & legal ownership = buyer takes ownership immediately
6.2 Renting (Finance lease) :
  • Definition
    The company finances the vehicle through a lease and has the option to purchase at the end of the term by paying a pre-determined value
  • Pro’s and con’s
    Pros = Cash no tied up in a depreciating asset.  In certain instances, this can be taken off balance sheet. Option to keep vehicle or walk away
    Cons = Logistics of managing the vehicle
  • Economic & legal ownership = ownership remains with the funder until paid in full
6.3 Full service leasing (operational leasing)
  • Definition – in SA, this is referred to as ‘Full Maintenance  Leasing'
  • Companies that provide FML in SA also provide a wide range of stand-alone Fleet Management Services.
  • The company enters into an FML lease, which includes vehicle maintenance and other related services such as licence renewals etc. at cost and risk to the supplier.
  • Operating Leases (OPL) which exclude maintenance are also available. These are also based on pre-agreed Time and Kilometre allowances.
  • Pro’s and con’s
    Pros = Fully managed vehicle, all risks underwritten. Can be taken off balance sheet
    Cons = Lease obligations,
  • Economic & legal ownership = ownership remains with the supplier
  • Business practices
    Fleet Leasing suppliers include; ABSA, Avis Fleet, Bidvest Bank, Eqstra, Fleet Africa, Standard Bank and WesBank
6.4 Fleet Management
  • Definition
    Fleet management in South Africa refers to the financing and operational management of vehicles (passenger, commercial and specialised equipment)
  • Certain stand-alone fleet management services are provided by the Full Maintenance leasing and rental companies. These services include: buying and selling, vehicle insurance, maintenance plans, fuel management, maintenance management, accident management, vehicle relicensing, fines management, road toll management and roadside assistance.
  • Additionally there are a number of specialist companies proving services such as Tracking / Telematics, Fuel card systems, Fleet management Information Systems, consultancy, driver training, toll management and roadside assistance.
  • Many of the South African leasing and fleet management companies provide a wide range of services to companies in Southern Africa.
  • Although the international leasing and fleet management companies are not present in South Africa some are represented by some of the local fleet leasing companies.Pro’s and con’s
  • Pros = outsource to experts
    Cons = fees, perceived loss of control
6.5 Short term rental
  • Definition
    Short term daily rentals of passenger cars and commercial vehicles.
  • Daily rentals to meet travel and ad hoc needs are available throughout South Africa at airports and downtown locations from organisations with international names and links.
  • Daily hire of commercial vehicles and specialised equipment are available throughout South Africa.
  • Pro’s and con’s
    Short term daily rentals to meet travel and ad hoc needs
  • Economic & legal ownership = no ownership
6.6 Other funding methods


- Private lease These concepts are rare in SA. There are few vehicles under such schemes. The ones that there are exists within large corporate companies.

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Chapter 7: Fuel

  • Fuel type segmentation: ULP (93 & 98 octane - unleaded Petrol), LRP (Lead Replacement Petrol) and Diesel are the primary types of fuel available in SA.
  • The fuel price varies across the country largely due to transportation costs. From a fleet point of view petrol is a fixed price and diesel can be discounted. Currently July 2017 Petrol price in Johannesburg is ZAR 12.82 litre (93 octane) and Diesel ZAR 11.27 litre. (1USD = 13.00 ZAR)
  • Local Fuel price has not seen the full benefit of reduced oil prices due to the devaluation of the local currency and taxes, and has increased by 16% since January 2015.
  • Fuel card solution: fleet fuel cards are provided by the four major banks and can be used anywhere in the country across all fuel supplier networks. Fuel, services, maintenance and tolls can be paid for. There are in the region of 650,000 cards in use currently, mainly used by corporate fleets.
  • Most cards are post-paid but high volume users are required to lodge deposits
  • Fuel card systems are sophisticated and online expenditure downloads and analysis reporting is available.
  • The abuse of the fuel card system by drivers is a problem. Although the Banks have stringent controls, specialist suppliers are analysing expenditure and consumption to improve management.
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Chapter 8 : TCO components

Most important cost factors in TCO

  • The TC calculation for vehicle selection has become increasingly important over the last few years. The figures (based on 30000 Kms per annum) are typically: depreciation = 22% , interest = 15% ,  fuel = 44%, maintenance = 10 %.and insurance 9%,
  • Vehicle prices in South Africa are increasing above local inflation rates due to the devaluation of the local currency (ZAR). This similarly affects parts and fuel pricing.
  • Resale prices are sustained by the above average increases in new car prices.
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Chapter 9: Safety, insurance and telematics

  • Tracking / Telematics systems in South Africa are widely used by fleets and are supplied by well established companies, who in many instances provide world-wide services. Suppliers include; - Altech Netstar, Car Track, CTrack, Mix Telematics and Tracker.
  • The main use of tracking was initially stolen vehicle recovery but in line with world trends utilisation management is gaining increasing focus.
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Chapter 10: Environment

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Chapter 11: Mobility

Traffic conditions

  • As a large as dispersed country, traffic conditions outside of major centres are not a problem. However, within major cities, specifically Johannesburg, Cape Town and Durban traffic congestion is a problem in rush hour.
  • Mobility solutions (car sharing, taxi, Uber, car pooling…)
    Uber is available in South African cities and is gaining traction as a service to companies. Poor public transport, distances to work, costs and a culture of vehicle ownership will inhibit an accelerated shift to alternative transport methods for company use.
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Chapter 12: Key trends to watch

Future of fleet management

  • The scope of fleet financing and management services in South Africa matches that of Europe and the USA due to a strong banking sector and quality fleet management companies. It is inhibited by a small market that has not given due recognition to the costs of operating a vehicle fleet.
  • There was a significant shift away from Company Cars to a Car Allowance system due to taxation, companies not wanting to manage fleets and the need of driver to own their own vehicles. Additionally, companies have in recent years outsourced their logistics requirements to industry specialists, further reducing company fleets.
  • However, vehicle and operating costs continue to rise above inflation and this continues to be the opportunity for fleet management services if they can achieve can savings.
  • The use of telematics to measure driver behaviour (scoring system) is being utilised by local vehicle insurers to set insurance rates. Insurers are promoting the concept of improving driver scores to reduce insurance costs. It is gaining traction.

Safety

  • Safety including driver training is focussed on company fleets. Multinationals are imposing their international standards and norms on their local subsidiaries but the volume is insufficient to drive national changes.
  • Unlike Europe there have not yet been published cases where the liability of driver behaviour and accidents etc. has been passed to the company / employer.

Mobility

  • The public transport system in South Africa is poor.
  • Uber has a presence which is reaching companies. However, it is early days.

Driver behaviour

  • South Africa has a very high road accident rate, largely as a consequence of driver behaviour & poor discipline, a high number of poorly maintained private vehicles and distances. The Government does not appear to be making progress in solving this serious problem.
  •  Country development
  • Development within the country is focused around cities, which is giving rise to increased car populations and rush hour congestion.

Road infrastructure on the national roads is good and well maintained. Less so on provincial and country roads to the point where the condition is often poor.

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