The recent announcement by S&P that it has lowered the long-term foreign currency credit rating from BBB- to BB+ and is cutting the local currency rating from BBB to BBB-, together with Moody’s statement that its sovereign credit rating of Baa2 is under review, will place fleet operators under serious pressure to contain costs.
This is the view of Murray Price, managing director of Eqstra Fleet Management and Logistics, one of the leading fleet management companies in South Africa.
“As we are all well aware, our currency has come under severe pressure. Since the Cabinet reshuffle, it has depreciated by 12%,” he said. “This has serious implications on the price of new vehicles, vehicle parts, and inevitably on the cost of funding,” he added.
The South African automotive industry has been battling to remain competitive due to the low percentage (an average of 35%) of local content in the vehicles manufactured in the country. The weakening currency, together with the fact that South African automotive parts manufacturers have to factor in costs relating to the unreliability of rail transport, the high cost of road transport, and the various cost elements at South African ports are all contributing to rising prices of new vehicles and component parts.
“So not only will the price of new vehicles and parts increase, due to the downgrade and potential devaluation of the Rand, but also the price of insurance is impacted by higher vehicle values and replacement part costs and fuel which is largely imported. In addition there is likely to be pressure on local interest rates increasing the cost of funding the acquisition of new vehicles,” added Price.
The only way to contain costs in the near future is to ensure the fleets are managed efficiently and that the correct telematics solutions are utilized to enable the fleet manager to collate and review such elements as driver behaviour, efficient vehicle servicing and maintenance, fuel costs and insurance.
“Monitoring these aspects of fleet have become singularly important,” concluded Price. “Efficient fleet management reporting highlights areas that need review, and contributes to significant cost reduction. In the current uncertain economic climate, fleet operators will be well advised to review their reporting and management procedures to ensure they can contain escalating fleet operating costs.”
Eqstra Fleet Consulting advises all fleet managers to review their current procedures to promote efficiency and at the same time implement new processes and controls that increase vehicle fuel performance.