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SA corporates expected to follow global fleet outsourcing trend

5th September 2014

By: Irma Venter

Creamer Media Senior Deputy Editor

  

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Compared with Europe, where more than 70% of corporates outsource the finance and management of their fleet, the South African market is well behind the global trend, says Eqstra Fleet Management (EFM) head of consulting Hein du Plessis.

Only 30% of companies in South Africa currently outsource their total fleet-related processes, which include finance, fuel, mainte-nance, telematics and accident management.

“The European trend is higher towards out-sourcing, and we believe that, as local fleet management companies start offering more inte- grated and transparent solutions, the corporate sector will follow suit in terms of out-sourcing their total fleet management process,” says EFM MD Murray Price.

EFM has just completed its second survey of the South African fleet market, with a response from 107 medium to large corporates providing an overview of how corporate travel is managed in South Africa.

The survey comprises responses from companies which collectively employ around 243 000 employees and operate 36 000 corporate vehicles. Responses were received from various sectors, including manufacturing, distribution, construc-tion, retail, wholesale, mining, healthcare and pharmaceuticals.

The survey found that 53% of corporates use their own cash reserves when financing their fleets, compared with only 40% in the 2013 survey.

“Interestingly, in South Africa, most fleet fund- ing decisions are still made by the finance depart-ment and, in this respect, South Africa lags behind global trends, where more companies use procurement departments for these decisions,” says Price.

The survey also indicates that there has been a big increase in companies offering employees a choice between a company car and a travel allowance, with a nearly 100% increase from the 2013 survey, to 29% of respondents.

This is largely due to tax legislation neutralising the impact of a company car or travel allowances on employees, says Du Plessis.

The study also indicates that companies would, in most cases, save costs by providing a company car as opposed to the current average travel and car allowance, indicates Price.

“In the case of senior managers, it is clear that the allowance being offered is much higher than what is actually required to attain the benchmark- level vehicle. “This means that the company is worse off and the employee likely to incur tax penalties if the allowance is not fully utilised for their vehicle.”

The survey also shows that there has been a sizeable shift in the number of companies that are starting to implement more stringent controls to limit fuel costs.

Fuel has become the single biggest expenditure in business travel, at more than 40% of all fleet-related costs, notes Du Plessis.

“The focus should be on fuel. The fuel price has gone up by 570% in the last 15 years.”

Compared with 2013 results, fewer companies are offering unlimited private mileage on company-provided fuel cards, he adds.

The survey also shows that only 38% of companies are reimbursing employees for Gauteng e-toll costs accrued by doing business mileage. This implies that 62% of companies expect their employees to fund the additional costs, says Du Plessis.

Edited by Martin Zhuwakinyu
Creamer Media Senior Deputy Editor

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