Junk status increases pressure on operators

The announcement by S&P that it has lowered SA’s long-term foreign currency credit rating and is cutting the local currency rating, together with Moody’s statement that its sovereign credit rating is under review, will place fleet operators under serious pressure to contain costs.

This is the view of Murray Price, MD of Eqstra Fleet Management and Logistics. “Our currency has come under severe pressure, depreciating by 12% since the cabinet reshuffle. This has serious implications for the pricing of new vehicles, vehicle parts and on the cost of funding.

“The SA automotive industry has been battling to remain competitive because of the low percentage (an average of 35%) of local content in 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.

“Not only will the price of new vehicles and parts increase, because of the downgrade and potential devaluation of the rand, but 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.

“The only way to contain costs in the near future is to ensure that fleets are managed efficiently and that the correct telematics solutions are used 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 fleet aspects has become singularly important. 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.”