Trends in fleet maintenance and outsourcing, accident management and vehicle remarketing

It is a common misconception that Africa is a homogeneous market, which it is not – in fact, very far from one. But the gateway to Africa is through South Africa.

The global financial crisis did not affect South Africa until late 2008, and in January 2009 the lights went out when there were widespread layoffs, particularly in the mining industry – the largest employment sector in South Africa.

Banks became excessively selective in lending, the availability of funds was scarce and the cost of funding increased. Growth in credit reached its lowest level in five years due to the increased cost of funds, decreased liquidity, rise in bad debts, and limited available capital.

This ripple effect throughout the economy has affected the fleet management market severely where, traditionally in South Africa and likewise the rest of Africa, there has been a strong preference to ownership over leasing, which accounts for only about 8% of the South African market.

However, an increasing number of companies are now more receptive to cost reduction and risk transfer by paying for use as an operating expense rather than capital expenditure.

Fleet maintenance and outsourcing

Vehicle maintenance presents a key challenge in fleet management throughout South Africa and the rest of Africa due to the high levels of corruption and fraud in the vehicle maintenance industry. This is largely due to employees being undertrained and underpaid and therefore fraud and corruption is used to supplement incomes – resulting in high maintenance costs.

Another contributing factor to the high maintenance costs is the wear and tear caused by poor road conditions in Africa as a whole.

Then there is the challenge of driver management facing African fleets, in particular the lack of care of corporate assets. Employees will use the company vehicle as family and/or taxi transportation – even goats or sheep are loaded into these vehicles – and drivers do not have the same culture of looking after company-owned vehicles, which is demonstrated in more developed countries.

Outsourcing is a growing trend in South African fleet management and is still in its infancy compared with global leasing markets, but there has been a significant increase in outsourcing awareness among fleets in Africa – a direct result of credit pressure and the increased cost of funds.

The fleet market in sub-Saharan Africa faces similar challenges but, over and above this, there is the limited skills employment base and the risks of political instability.

To further complicate these issues, local governments in Africa insist that fleet management companies use local banks for financing, but they often do not have the capacity to provide the funding.

Accident management

There are more than 800 000 road accidents or incidents on South African roads per annum, which accounts for approximately 22 people killed or disabled per day; and driver behaviour is cited as the single biggest cause of accidents on South African roads.

However, South African fleets are becoming more pro-active in adopting the latest international offerings in accident management to change driver behaviour. This renewed emphasis to ensure fleet compliance is being made possible by systems such as Administrative Adjudication of Road Traffic Offences and the Road Transport Management System (RTMS), a self-regulatory accreditation system introduced in South Africa and soon to be piloted along the North-South Corridor.

These efforts are starting to pay off, with reductions of accidents of up to 30% in some South African fleets and RTMS having successfully reduced overloading significantly in the timber, coal and sugar industries.

Vehicle remarketing in Africa

The South African fleet resale market is multifaceted and includes retail and wholesale outlets, auctions, Internet sales, dealerships and driver sales.

However, Africa has become the ‘dumping ground’ for used vehicles exported from Asia and Europe, and their undesirable used vehicles are depressing residual values in Africa. As a result, some countries are saying enough is enough and are starting to close the door on this market.

Worldwide, carbon dioxide control is merely an illusion: When these dirty vehicles are being removed from Europe and Asia and sent to Africa, the problem has simply shifted from one continent to another.

On average, vehicles in Africa are in service for approximately 20 to 30 years.

Mike Fitzmaurice