THE DEFINITIVE TRUCKING SITE

June 2009

Three of South Africa’s leading vehicle tracking and fleet management companies claim the industry is under tremendous pressure due to the drop in vehicle sales and while amalgamations, takeovers and closures are well defined hallmarks of this sector, they are being exacerbated under the global economic tsunami writes Andrew Parker. 

DigiCore CEO, Nick Vlok, says just how significant this pressure is and what its effects are will only be seen over the next six to 12 months when companies release their next financial results. In the meantime, Vlok says new and small entrants into the SVR (stolen vehicle recovery) market will find it extremely difficult and will probably not survive the downturn. 

Regarding the state of play of the fleet management business, Vlok says the local market continued to provide DigiCore with growth during 2008 due to the still relatively high fuel price which, in turn, demanded operators enhance the monitoring and management of their vehicle fleets. 

Adding to this, Vlok says a large number of SVR players are trying their hand at the FM market but are finding it relatively challenging at the moment. 

Stating that while consolidations and amalgamations are a natural occurrence in tough economic times, Altech Netstar MD, Joel Stransky, says there is a limit to how much of the opposition the larger major players could absorb before the Competitions Commission stepped in. 

“This, in itself, can be quite frustrating but it is not a bad thing as it keeps the playing field level and competitive,” Stansky observes. 

Hannelie Snow, communications officer at MiX Telematics, says that smaller companies at this stage do not have the resources, financial stability, and sometimes the technology, to provide adequate services required by the market. 

The vehicle tracking and fleet management industry will continue to attract new entrants, many of which will not survive in the long term.  Joel Stransky Altech-Netstar MD

Future watch 

Looking ahead, Snow says the company is confident that, given time, the market will recover. “It is well documented that with proper fleet management a company can significantly reduce operating costs and, as such, there will always be a need for stolen vehicle recovery and fleet management. 

“Further to this, MiX Telematics is an international company and whatever developments take place locally, markets outside of South Africa will always be there. In fact, I would go so far as to say opportunities are there for the taking.” 

Reiterating that it is the smaller companies that pose the biggest challenge to the overall stability of this strategic industry sector, Snow says there are companies opening their doors without the necessary technology, experience, financial resources or customer service which means that within a year or two - at the most - the customer will sit without a service provider. 

“It’s all about technology,” Snow stresses. “Consumers are more educated than they were a couple of years ago and they realise some of the smaller companies don’t have the ability or the technology, even though they might be cheap, to ensure that the vehicle is recovered or that they are actually able to properly manage a fleet.” 

Snow is right on the button. A number of years ago there were over 100 companies in the local vehicle tracking industry. It was predicted at that time that of these, perhaps 20 would survive and less than ten would be able to provide a proper service with the right level of back up and customer service. 

“Smaller companies do not have the resources, financial stability or the technology, to provide adequate services required by the market”...Hannelie Snow, communications officer, MiX Telematics.

Although it has taken some time, these dire predictions are beginning to manifest themselves. DigiCore’s Vlok says that over the next 12 months, he will not be surprised to see no more than five or six viable players left in the local market. 

“Obviously at this point we need to warn users in the industry to stick with the larger, well established companies to ensure continuity in the supply of the necessary service and backup required for these types of information systems.” 

According to Vlok, customers are increasingly focused on the financial stability of suppliers as well as the nationwide branch support infrastructure suppliers have invested in to cater for quick, quality response. 

He cites DigiCore’s 22-year history in the market place coupled to the company’s long-standing track record of substantial investment in C-track and other technologies and software development. “Without this level of investment, many players will struggle to meet customers’ requirements in the future.” 

Like Snow, Vlok also believes customers are becoming more knowledgeable and the pressure will be on suppliers to increasingly develop products which easily integrate with 3rd party applications as well as into the customers’ current IT systems, to run their businesses more efficiently. 

“Casualties can be expected in the short to medium term”...DigiCore Holdings CEO, Nick Vlok.

Many will not survive

Although he wouldn’t commit himself to any numbers, Stransky says the vehicle tracking and fleet management industry will continue to attract new entrants many of which will not survive in the long term. 

“The barriers to entry are actually very low,” he says. “People come and go all the time which gives the entire industry a bad name and makes life difficult for those companies committed to a long term investment.” 

Stransky says major challenges for established players are maintaining adequate service levels and keeping their technology one step ahead of the criminals who he describes as extremely clever and well organised. Stransky says it takes a lot of time, effort and money to keep ahead of the syndicates and many new and smaller players are unable to do this effectively. 

Stransky says overall the biggest single challenge for all players in the industry is to improve and exceed customer expectations.  

“Altech Netstar, for example, constantly analyses how it goes about its business and examines its customer service levels and customer relationships to see where it can improve. We look at other players in the market both here and overseas and measure ourselves against the big names and ensure we are always on top of the game.” 

After many years of reporting on this sector, FleetWatch endorses the warnings being put out by these three players. They are not punting their beliefs so as to attract business. They are punting them to protect the market. You have been warned, so do your homework before putting your money down.