New Accounting Standards – substantial impact for Car Rental and Leasing Companies

IFRS 16 Leases, the new international accounting standard, will come into effect from 1 January 2019.  This will have a substantial impact on car rental and leasing companies.

During a presentation to SAVRALA members by accounting firm Deloitte Touche, Trevor Derwin, A & A Partner in the Johannesburg office explained that the essence of the changes lies in the accounting treatment applied by lessees. At present, the costs pertaining to leased vehicles are not reflected on the balance sheet; in the future all leases will have to be reflected on the balance sheet, with the exception of short term leases (less than 12 months) or low value leases.

“There are a number of considerations to take into account for companies who have lease agreements” said Derwin.  “These include the impact on the company’s financial report, key ratios, disclosures, the cost of implementation, the ability to access desired information, the impact of covenants and debt renegotiations and leasing strategies. It is essential that these companies start discussions with their bankers, analysts and lessor companies to ensure they are ready to implement the new standards.

“However, there will be no difference to the bottom line for leasing and rental companies,” he added.  “Despite the changes, there remains considerable advantages to leasing as opposed to buying vehicles.”

The main changes required by the new standards include the accounting treatment for lessees in a lease (where most leases will be brought on balance sheet as finance leases), the definition of a lease and enhanced disclosures.

Under the new standards, a contract contains a lease if it depends on the use of an identified asset and if it conveys the right to control the use of such an asset.   Further, the customer must enjoy substantially all of the economic benefits from the use of the asset during the lease term. In determining whether a customer has the right to control an asset, the customer must be able to determine how and for what purpose the asset is used.

A further consideration lies in substantive substitution rights.  In this instance, if the supplier has the practical ability to substitute alternative assets, and the supplier benefits economically from this right, the contract would no longer be considered a lease.

Many lease contracts today include both a lease and service component. Under the new standard these should be accounted for as separate components with the lease element capitalized to the on balance sheet lease, while the service component is expensed as incurred. Lessees may, however, elect to not separate non-lease components from lease components by class of asset.

“Identifying a lease will sometimes require a significant amount of judgment based on the elements of the definition of a lease” said Derwin.  “It is also important to determine the lease term, ie whether it is reasonably certain that an extension or termination option will be exercised.  In addition, identifying the appropriate rate to discount the lease payments will require significant consultation.”

“Although the new standards come into effect in January 2019, they will apply equally to existing as well to new lease arrangements,” he concluded.   “For those SAVRALA members who play the role of lessor, there is a business opportunity in that they can assist their customers to find the best solution.   We urge all your members, lessors and lessees alike, to discuss these changes with their auditors to ensure they are informed and ready to implement they changes as they come through”.

Download the PDF of the July 2017 presentation by Trevor Derwin:
IFRS 16 Leases – Technical Update

Volkswagen South Africa wins 2015 Motor Manufacturer Award

p2910SavralaVW-001JOHANNESBURG, OCTOBER 23, 2015 – Volkswagen South Africa (VWSA) wins the SAVRALA MOTY (Manufacturer Of The Year) award for the sixth consecutive year.

Celebrating its 20th year, the SAVRALA 2015 Manufacturer of the Year was revealed during a gala award ceremony at the Hilton Hotel in Sandton tonight, 23 October. Incredibly, for six consecutive years, Volkswagen South Africa (VW) took the accolade of overall car rental winner yet again.

Commenting on this achievement, SAVRALA President Marc Corcoran applauded VWSA’s remarkable achievement and said that one had no choice but to respect the consistent and recognised high levels of service given by VWSA to the car rental industry. “An important insight from this year’s data is the improved scores by almost all automotive brands, demonstrating the competitive nature of the industry,” he added.

RIC_5809-VW-2-001The MOTY 2015 results further reveal that VWSA has gained a distinct advantage over its peers in the key survey category of Communication and Support.

The competitive nature of this year’s MOTY awards was best demonstrated by the 0.1 difference in score between Audi SA and Toyota South Africa Motors which swopped podium places, with Audi taking home silver this year.

Illustrating the extent of how some automotive companies have focused special attention on their car rental customers, the Most Improved Award went to BMW SA which leaped from 11th place last year to 7th this year achieving a phenomenal 17% increase in their 2015 score.

Addressing concerns by some automotive brands that they are at a disadvantage when competing against their larger-volume peers in the car rental industry, a new award called Tutuka was created and won by Audi SA. “The performance of Audi this year clearly demonstrates that winning MOTY is not merely a function of the volumes sold to the car rental industry, but also of satisfying customer needs,” said SAVRALA GM Sandile Ntseoane.

The Value Award in its first year was a tight contest, but was won by Ford SA which, by the narrowest of margins, beat VWSA. Commenting further Marc said this ‘’was an important award as the cost of vehicle ownership is a key consideration for any fleet purchase, whether a corporate fleet or individual purchaser.’’

MOTY 2015 also acknowledged the role of certain individuals the car rental industry:

  • Best Account Executive was won by David Maeko (Ford SA)
  • Best Manufacturer’s Technical Representative was won by Bennita Senyatsi (Nissan SA)

The MOTY evening also saw industry stakeholders recognise the remarkable service given by Dawn Jones, Imperial Car Rental CEO, who leaves the industry next month after 35 years.

“Dawn leaves behind an incredible legacy that few could even imagine achieving. Ever the shrewd car rental operator, Dawn had a remarkable, innate skill in developing warm relationships with her colleagues, customers and competitors. The industry thanks her for contribution and wishes her well in her future endeavours,” concluded Marc.

AWARD SUMMARY MOTY OVERALL

Overall Bronze
Toyota South Africa Motors

Overall Silver
Audi South Africa

Overall Gold
Volkswagen South Africa

Best Account Executive
David Maeko (Ford SA)

Best Manufacturer’s Technical Representative
Bennita Senyatsi Nissan (SA)

Most Improved
BMW SA Group

Value Award (Certificate)
Ford (SA)

Tutuka Award
Audi South Africa

On social media, join the conversation using the hashtag #MOTY2015.

About SAVRALA

SAVRALA is the trade body for companies engaged in the rental of passenger cars and commercial vehicles. Founded in the 1970s, SAVRALA represents South Africa’s the car rental rental industry

We lobby government to ensure that regulation and legislation affecting its members is fair. SAVRALA also works with public sector agencies, industry associations and key business influencers on key road transport, taxation and finance-related issues.

For more information about SAVRALA, please visit www.savrala.co.za or contact Natalia Rosa at natalia@bigambitions.co.za or 083 449 4334.

SAVRALA Golf Day supports Driving Ambitions

Driving Ambitions receives R73,000

Ari Seirlis (QASA CEO – left) receives a cheque of R73,000 from SAVRALA GM, Sandile Ntseoane (right)

Driving Ambitions, a project of the QuadPara Association of South Africa (QASA), are proud to be the beneficiary of the SAVRALA Golf Day who donated R73,000. This project is a driver training program for people with disabilities who need adaptation in vehicles to get their driving license and thereafter, new found freedom and mobility. This contribution will fund driving lessons for 14 Quadriplegics and Paraplegics.

The SAVRALA General Manager, Sandile Ntseoane thanked its industry members for their generosity on the day and was very pleased that both the car rental industry and its vehicle suppliers were able to give back to such a well aligned and deserving beneficiary as Driving Ambitions. Ntseoane encouraged members to ‘continue supporting Driving Ambitions beyond the annual golf day’. He continued that ‘the successful Driving Ambition candidates in time will become both valuable vehicle manufacturer and car rental customers.’

Minister of Transport and SAVRALA to engage directly

Minister of Transport with SAVRALA

Minister of Transport, Dipuo Peters with SAVRALA

The Southern African Vehicle Rental and Leasing Association’s (SAVRALA) much coveted overall Manufacturer of The Year (MOTY) Awards were held this past Friday, 24 October, in a glamorous gala event in Sandton, Johannesburg. Once again, incredibly, Volkswagen walked away with the highest honours again. Volkswagen have now won this prestigious award consecutively since 2010.

SAVRALA President, Marc Corcoran acknowledged what was achieved and said “Volkswagen should be proud of the consistent accolades given from their major fleet customers in such difficult and competitive trading conditions.”

This year, SAVRALA and its guests were truly honoured to have had the Minister of Transport, Dipuo Peters attend the event and give the key note address. While the Minister addressed many aspects of the automotive industry, and some of the challenges the industry and the country faces in terms of the road infrastructure and funding, a key highlight was an invitation from the Minister to engage directly on the various issues affecting their members.

SAVRALA President Marc Corcoran, responded warmly and added that “the industry had recently resolved to try and engage more directly with several key strategic Government departments and had identified the Department of Transport as a priority. The timing of this invitation is perfect and we look forward to making a positive contribution” he said. “As a member of the Tourism Business Council South Africa (TBCSA), SAVRALA had previously engaged with Government via the National Department of Tourism, however, we concluded that a more direct engagement with the National Department of Transport was more desirable to progress transport specific matters. We look forward to discussing a broad range of issue from infrastructure funding, road safety, law enforcement and the role of SAVRALA within the broader transport sector.

Editorial contacts: ADZOO – Manfred Noriskin-Ender 0829010342

SAVRALA welcomes setting up of e-toll panel

PRESS RELEASE: 27 June, 2014

SAVRALA welcomes setting up of e-toll panel

Southern African Vehicle Rental and Leasing Association (SAVRALA) welcomes today’s announcement by the Gauteng Premiere to set up a panel to review the implementation of GFIP e-Tolls.

While its members complied with the 3 December implementation of e-Tolling last year, the industry has had to spend millions of rands to integrate the necessary e-Toll and e-Tag systems so that its customers could be billed.

Notwithstanding these investments and ongoing daily e-Toll administrative costs, SAVRALA would welcome an opportunity to participate on an e-Toll panel, as proposed by the Premiere Makhura, with a view to help find an agreeable, sustainable and efficient solution to fund much needed infrastructural upgrades while also noting the need to continue developing an integrated, reliable and efficient public transport system in Gauteng.

Editorial contacts: ADZOO – Manfred Noriskin-Ender 0829010342

BOOST TOURISM TRADE CONFIDENCE BY IMPROVING INTER-GOVERNMENTAL RELATIONS

For Immediate Release

tbcsa-logo

PRESS STATEMENT

BOOST TOURISM TRADE CONFIDENCE BY IMPROVING INTER-GOVERNMENTAL RELATIONS

Pretoria, 23 June 2014: The Tourism Business Council of South Africa (TBCSA) haswelcomed the State of the Nation Address by President Zuma with a request forGovernment to prioritise inter-governmental/business relations and creating an enablingenvironment for the travel and tourism trade.

TBCSA Chief Executive Officer, Mmatšatši Ramawela said the trade welcomed the SONA’sconsistent feature of the travel and tourism industry, saying this sends a strong messageabout Government’s regard for the industry.“We welcome the Presidents’ consistent profilingof travel and tourism in his speeches. To us it’s a demonstration of the increased coverageand attention the industry is receiving within Government.

Ramawela emphasised the need for Government to create a conducive environment for thetrade, highlighting the need to improve inter-governmental relations as one of the mainchallenges which the TBCSA has identified. “Recent pronouncements on immigrationregulations without broad consultation with the travel and tourism trade as a partner ofGovernment constitutes an unfortunate disconnect between the public and private sector.The harm already done in terms of forward bookings and tourist perceptions about thedestination is unfortunate and we fear that it may take some time to repair” she said.

Commenting on the SONA’s remarks about increasing foreign visitor arrivals to more than15 million annually by 2017 and increasing tourism’s contribution to the country’s revenue,Ramawela said that the President’s ambition of achieving double-digit growth in touristarrivals was achievable but could only be reached if there was greater cohesion in intergovernmentalstrategy and support given to the travel and tourism trade.

Marc Corcoran, President of the South African Vehicle Rental and Leasing Association(SAVRALA) said: “SAVRALA welcomes the recognition by President Zuma of Tourism’spotential to assist growth in the South African economy. “We look forward to work withMinister Hanekom to ensure that appropriate government policy and resources place tourismhigher on the agenda to ensure that the R125bn revenue target is achieved. We are,however, concerned that the President failed to address the lack of progress to attain theDecade of Action 2020 road safety targets which should by now have seen a turnaround inthe annual road carnage which continues to claim over 14,000 South African lives annually”.

Ramawela said sentiments expressed by SAVRALA on transport matters are similar to thefrustrations experienced by other sectors within travel and tourism, whose work is directlyimpacted by legislation and policy decisions made elsewhere in the realm of Government.

“In the President’s words, change will not come without some far-reaching interventions. Webelieve one of the interventions should be improvement in inter-governmental and businessrelations at a local, provincial and national level. Create the right climate, and then theinvestment and job creation will follow” Ramawela concluded.

Ends

For further information please contact: Ms. Kagiso Mosue, TBCSA Corporate Communications Manager on +27.12.654.2660


Editors Notes

TBCSA

Tourism Business Council of South Africa (TBCSA) is a member-based organisation, made up of TourismAssociations as well as leading businesses operating in the Travel and Tourism sector. The Council seeks toensure that the industry is unified and speaks with one voice when engaging relevant stakeholders on macroeconomicissues affecting the sector.

Sector associations affiliated to the TBCSA are as follows:
1. AHI – Afrikaanse Handelsinstituut
2. AASA – Airlines Association of Southern Africa
3. ASATA – Association of South African Travel Agents
4. BARSA – Board of Airline Representatives of South Africa
5. EXSA – Exhibition & Event Association of Southern Africa
6. FEDHASA – Federated Hospitality Association of South Africa
7. FGASA – Field Guides Association of South Africa
8. HOSA – Hiking Organisation of South Africa
9. NAA –SA – National Accommodation Association of South Africa
10. ORCSA – Off-Road Council of South Africa
11. PHASA – Professional Hunters Association of South Africa
12. RASA – Restaurant Association of South Africa
13. SACA South African Chefs Association
14. SAACI – Southern African Association for the Conference Industry
15. SABOA – Southern African Bus Operators’ Association
16. SATSA – Southern Africa Tourism Services Association
17. SAVRALA – Southern African Vehicle Rental Association
18. SAYTC – South African Youth Travel Confederation
19. VOASA – Vacation Ownership Association of South Africa