Managing costs and increased efficiency are essential for survival

Despite the continued global economic uncertainty, South Africa’s commercial asset industry has taken a positive turn, says Marcel de Klerk, Absa Retail and Business Bank’s Head of Business Markets.

De Klerk says there is sufficient evidence suggesting that the sector has turned for the better and these include:

• An increase in capital expenditure for the vehicle and asset manufacturing industry.

• Increased employment levels in the sector.

• Growth in export sales.

• Domestic commercial vehicle sales showing good growth in excess of 15% year on year.

• And capital goods sales showing positive signs of growth in the Agricultural sector.

However, although there are positive signs of growth in the industry, De Klerk also cautions that proper business fundamentals should be used to survive the current economic conditions. He says that key business fundamentals should include cost and efficiency, management of replacement cycles and the use of technology.

“Subsequent to the economic downturn, transport operators have refocused their attention to managing costs, especially operational (e.g. fuel), as well as increased asset and operational efficiency. This is set to continue into the foreseeable future on the back of an uncertain economic recovery as margin pressure necessitates revisiting business fundamentals,” says De Klerk.

“The transport environment is asset intensive. Therefore, fleet management systems will need to be in place to manage costs and increase efficiencies. Track and trace technology is common practice and replacement cycles need to be determined to optimise cash flows.”

On the positive side, De Klerk, expects a rise in agriculture, manufacturing and mining activity for 2012. This will reflect normalisation in growth and will apply equally to road transporters. He adds that the agricultural sector could facilitate higher job creation and production rates in 2012.

De Klerk explains that road transportation is the preferred mode of transportation between mining and manufacturing operations and ports owing to the increased operational flexibility that is enjoyed by road transporters. In addition, rail’s operational challenges also made road transportation preferable.

“With new and widened freeways to be tolled in Gauteng and general toll fees almost certainly to be increased throughout South Africa next year, city distribution will require careful vehicle selection and fleet management,” states De Klerk.

“Proper vehicle selection to keep operating costs down, including fuel, maintenance and toll fees therefore remains a critical factor for distributors,” he adds.

De Klerk also points out that Absa has a team of professionals who can help fleet owners manage the variable portion of their fleet costs more tightly, and help them select the right vehicle fleet, especially with the objective of reducing carbon emission.

He notes that the trend towards lower carbon emissions and greener motoring was gathering increased momentum in South Africa. He adds that while companies were looking to go green in the interests of the environment and social responsibility benefits, they also stand to make tangible savings on costs through proper implementation.

“There is no better way to reduce fuel consumption than by burning the least amount of fuel. In future, there may also be a tax benefit for driving a green car," concludes De Klerk.