South Africa: Old Market, New Growth

Compared to most countries on the African continent, South Africa is a mature car rental market, with the major international brands having established footprints as far back as the 1950s (Hertz) and 1960s (Avis) through large franchise partners.

It also has a thriving mid-tier market of well-established independents, with brands such as First Car Rental (a Sixt franchisee), Tempest Car Hire, and Bidvest Car Rental.

With an advanced highway infrastructure serving well-known tourist destinations, representation in all major cities and airports and traditional “Western” car rental processes, South Africa has left behind emerging market status decades ago. Nonetheless, “The overall health of the (South African) car rental market is positive,” says Kevin Barnardo, owner of Cape Town-based RAV - Rent A Vehicle.

Barnardo says that the South African car rental market grew 20% in the first half of 2016 over 2015. Factors encouraging growth include recent weakness in the South African rand, which has had a positive impact on overseas travel to South Africa.

As well, South Africa relaxed stringent rules regarding travel with birth certificates for both South Africans and foreign visitors, which has made it easier for inbound tourists to visit. Because their money is going further, foreign visitors are staying longer and renting larger or more expensive vehicles, says Barnardo.

The weakened rand has also led to more South Africans taking domestic holidays instead of choosing more expensive ones abroad, while falling fuel prices have helped to lower airfares and spur travel by car.

The total car rental fleet in South Africa varies from 45,000 to 65,000 depending on the season.

Adapting to Change

Rates have been helped by the recent growth of international tourism due to favorable exchange rates, though this has been dampened in certain markets as a couple of major players fight for market share, Barnardo says. Corporate rates, negotiated on a yearly basis, typically stay competitive.

Prepay options are growing, with discounts given for bookings made on branded websites in which renters’ credit cards are debited upfront. “This works in both the suppliers’ and the clients’ benefit,” Barnardo says.

In terms of remarketing, most South African car rental companies are part of auto dealer groups, so they are able to sell de-fleeted rental vehicles via their dealerships, says Monique Schlorf of Explore Africa, a family-owned car rental brokerage based in Cape Town. Today, vehicles sold from rental fleets come with vehicle history reports that provide peace of mind to prospective buyers.

Some rental companies send out promotional emails to rental clients to buy used cars from their dealer umbrella. “It’s a well-oiled system,” says Schlorf.

Schlorf says the well-known European brokers have been gaining share in South Africa. “Online booking sites such as CarTrawler, Billiger Mietwagen, and Auto Europe are dominating the market at the moment with their instant price comparisons,” she says. “They might not offer personalized service, but for a lot of travelers it’s all about saving a buck.”

Schlorf says Explore Africa, agents for RAV – Rent-A-Vehicle, Thrifty Car Rental, and others, has maintained business through relationship building and personal outreach with travel advice. “We want to put a friendly face on car rental instead of being an obscure online booking machine,” Schlorf says, though she points out that the company launched a new website and is active on social media.

Barnardo says rental companies have ramped up their marketing through social media as well, and they offer retail discounts through social media channels. Schlorf adds that another new form of competition is rate discounts offered through incentive programs provided by local airlines and Discovery Health, the country’s largest health provider.

In terms of new transportation options, Uber has had an impact, though most taxis and chauffeured transportation occur in urban areas.

Johannesburg’s Locomute is Africa’s first carsharing network, growing to 300 vehicles from its launch in November 2015.

Still, traditional car rental seems well poised for the future, owing to long travel distances between cities and attractions. Nominal drop fees make it easy for travelers to pick up a car in one city and drop off in another, Barnardo says. “Car rental offers travelers around the world the opportunity to enjoy South Africa as fast or as slow as they feel.”