Africa is a continent of abundance, contrasts, and challenges.
It is the second largest and second most populous continent, and the youngest — the median age was 19.7 years in 2012, compared to the worldwide median age of 30.4.
Africa represents a large diversity of ethnicities, cultures, and languages. It is the most multilingual continent in the world; by some estimates, close to 2,000 languages are spoken there. Some speak multiple African languages and one or more European ones, as well.
The continent holds 12% of the world’s oil reserves and 40% of its gold, according to a 2013 report from the United Nations Conference on Trade and Development, as well as 60% of the world’s underutilized arable land. Yet together, African countries account for just 1% of global manufacturing, according to the report. The highest percentage of “least developed countries” is by far in Africa. Life expectancy is low and illiteracy rates are high.
It is not surprising then that car rental in Africa is the least developed of any continent. But does that portend opportunity?
From a Western viewpoint, Africa is divided by the Sahara Desert in North Africa, which is often viewed as part of the Arab world, and sub-Saharan Africa. When it comes to car rental — at least from a leisure standpoint — Africa can be viewed as South Africa, Morocco, and everywhere else.
“Car rentals on the continent of Africa are dominated by South Africa and Morocco, which between them accounted for more than 90% of CarTrawler’s African rentals in both 2015 and 2016,” says Julian Fleming, communications manager for CarTrawler, an online global car rental platform.
According to data from CarTrawler, South Africa accounted for approximately two-thirds of all African car rentals, and South Africa is predicted to grow by 26% in 2016, Fleming says.
With Africa’s most developed economy, road system, and long-standing ties to international commerce, South Africa enjoys a healthy mix of business and leisure travel, both domestic and inbound. Cars are rented for “self-drive”; renting a car with a chauffeur is available but less common. In addition to passenger vehicles, bakkies (pickup trucks, especially 4x4s) and campervans are popular.
“The (2010 FIFA) World Cup sparked a huge investment in infrastructure and created a large growth in car rental,” says Alison Lee, Bluebird Auto Rental System’s EMEA representative.
South Africa’s bordering countries — Namibia, Botswana, Zimbabwe, and Mozambique — have developed infrastructure and industries that approach South Africa’s. Car rental franchise territories typically extend from South Africa into those countries, says Richard Ault, director of franchise and business development for Global Car Rental.
Morocco is one of the most politically stable countries in Africa and less scathed by terrorism. Easily reachable from the European continent by sea or air, Morocco has a strong tourist industry, with the most international tourist arrivals on the African continent.
An August 2016 report by Euromonitor shows positive tourist growth for Morocco, with increasing state-sponsored marketing and foreign tourism investment. However, car rental faces increasing competition from private bus companies that have introduced new amenities such as Wi-Fi, the report states.
When it comes to both business and tourism interests, Africa is still seen to a certain extent by its countries’ colonial ties. CarTrawler data shows that inbound South African rentals are dominated by British residents, who pick up more than four times as many rental cars in the country than the second-most popular inbound market, Germany. Many of Morocco’s inbound corporate travelers come from France.
In other Saharan countries, political conflict and terrorism have had a devastating effect. In Egypt, Tunisia, and Libya, tourism is down more than 35% in 2016 and is only slowly recovering, as many airlines have cancelled flights, Lee says.
Two 2015 incidents stand out, according to Phil Jones of Bluebird: the bombing of Metrojet 9268 as it took off from Sharm el-Sheikh, a popular resort in Egypt’s Sinai Peninsula, and the mass shooting of 38 people at a seaside resort in Tunisia — 30 of whom were British.
“There are still long-term contractors in those countries, but a lot fewer are allowed to drive themselves,” says Lee. Therefore, “Many are forced to use secure transport provided by their companies. Car rental is really struggling in the region.”
Karsten Jaensch, who heads franchise operations for Sixt in the Middle East and Africa, says the Arab Spring — a wave of civil uprisings in 2010 — caused some of Sixt’s franchise partners in the region to cease operations, though Sixt Tunisia is up and running again. Sixt Egypt had seen a drop in reservations but has now exceeded pre-reservation numbers, Jaensch says.
In Africa, the international car rental brands are represented predominantly through franchises. These franchise partners are often large holding companies with interests in multiple industries, including automotive and transportation. Avis Budget Group, for instance, recently signed an agreement with CFAO, a multi-industry conglomerate with more than 12,000 employees.
“This is essential because of the chaotic nature of some of these markets,” says Ault. As well, “The bigger the group, there are more built-in customers.”
For a foreign car rental company, the conglomerates are more easily vetted entities, Ault says. Their ties to the local culture, as well as their knowledge of the automotive ecosystem in those markets, facilitates basic business processes such as vehicle financing, procurement, maintenance, and sales after de-fleeting.
In North Africa, which has a greater mix of leisure, the European customer base for the major car rental brands is a good source of short-term inbound rentals. In sub-Saharan markets, the focus is on built-in customers in the form of long-term corporate rentals. For example, expat workers on assignment for major projects such as oil exploration and mining will be given a company car. Part of the Avis agreement with CFAO includes lease offerings under the Avis brand for markets in Western Africa.
In most sub-Saharan countries, inbound tourism revolves predominantly around safaris, which are handled by tour operators. The remaining market is served by a vast “unorganized” sector of mom-and-pop companies owning a handful of vehicles that come with a driver.
In those sub-Saharan regions, self-drive car rental is virtually nonexistent, as a lack of paved roads and street signs, as well as safety issues, make driving — at least for foreigners — untenable. Red tape still hinders travel to countries such as Nigeria, which requires a cumbersome visa process.
In those countries, business is still rife with corruption. The need for political connections, “finder’s fees” (a more polite term for bribes), and under-the-table exchanges are facts of business life. “The ease of doing business in these countries is horrible,” says one executive.
In terms of new mobility modes, the only action is in the most mature market, South Africa, where Uber launched in 2013. Carsharing has yet to take hold, except in Johannesburg, where carsharing startup Locomute has grown from six Fiat 500s to 300 cars since its launch seven months ago, according to a press report from the company.
Africa’s middle class — with the exception of South Africa and emerging pockets in Ethiopia, Kenya, and Nigeria — is not expected to grow exponentially. Nor will Africa overcome its infrastructure challenges in the near future. Therefore, self-drive is not expected to take off, and the unorganized market is in no danger of disappearing, Ault says.
Technology has accelerated business development in Africa. Smartphone penetration is high and facilitates transactions such as buying and selling cars. Ault thinks one day technology will facilitate peer-to-peer transactions that would take over the unorganized market.
Ault believes that the growth opportunity for car rental in Africa is tied to the acceleration of domestic and foreign corporate investment, in the form of long-term corporate rentals and leasing. From this foothold, “the major rental companies will have an opportunity to introduce the more traditional form of short-term leisure car rental,” he says.
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