The lowering of South Africa’s foreign currency credit rating by S&P and Moody’s ratings agencies will place fleet operators under pressure in the next financial year according to Murray Price, managing director of Eqstra Fleet Management and Logistics.
The company is one of the country’s leading fleet management companies, offering solutions and consulting to industry players.
Price said that since President Jacob Zuma’s cabinet reshuffle, the recent depreciation of the rand has “serious implications on the price of new vehicles, vehicle parts, and inevitably on the cost of funding”.
With many vehicle parts still being imported into the country, the local market has experienced difficulty remaining competitive when it comes to manufacturing car components locally and the costs associated with this.
The downgrade is also predicted to affect the prices of diesel and petrol in the coming months. With majority of freight still being transported on road, the cost of transportation is also expected to increase.
South Africa’s ports also have different layers of costs attached to the importation, storage and transportation of new vehicles and component parts, which will contribute to rising costs as well.
Price said this will not only lead to a price increase of new vehicles and parts, but will also affect the price of insurance.
He also said it was likely that pressure on local interest rates could increase the cost of funding the acquisition of new vehicles.
Price explained that it has now become more important to manage fleets more efficiently by reviewing elements such as driver behaviour, efficient vehicle servicing and maintenance, fuel costs and insurance.
“Efficient fleet management reporting highlights areas that need review, and contributes to significant cost reduction,” Price said. “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.”