Tuesday 17th September 2019

The underpenetrated African fleet management market has considerable future growth potential

Published on November 27th, 2018

In Africa, South Africa stands out as a highly mature telematics market and the country is clearly established as the front-running market on the continent, being the home of multiple international fleet management solution vendors. Johan Fagerberg of Berg Insight reports.

Beyond South Africa, the Rest of Africa (RoA) market is served by several categories of fleet telematics providers, including the leading South African players, smaller vendors from South Africa and local providers based in RoA countries, as well as the major international fleet management leaders and to some extent also vehicle OEMs offering in-house developed or partner-powered fleet telematics solutions to its customers.

The top 5 South African fleet telematics providers – Cartrack, MiX Telematics, Tracker, Netstar and Ctrack – are notably all active in the RoA market, however to varying extents, ranging from expansion into a few neighbouring countries with low-volume business to truly pan-African operations and a strategic intent to grow in the region. The figure below provides an illustration of the number of South African top-5 FM players that are active in the different African countries.

MiX Telematics stands out as one of few players with significant presence also throughout the rest of the continent. The company is active in most African countries. Ctrack further has presence in around 20 countries in Africa, while Cartrack’s footprint extends to more than 10 additional African countries beyond the domestic market.

The presence of the top-5 South African FM players on the African continent

It is worth noting that the offerings on the local markets in Africa include a fair share of solutions based on low-cost hardware, for example imported from China or India, combined with basic in-house crafted back office software offering small feature sets and limited customer support capabilities. Being able to offer low-cost options is thus oftentimes important to be competitive as fleets in large parts of Africa are still unable to invest in premium FM solutions.

Vendors which can offer the full range of solutions – from basic stolen vehicle tracking and recovery services and light fleet management alternatives all the way up to top-range FM solutions – are thus particularly well-equipped to serve the entire continent. To some extent, this speaks in favour of the major South African solution vendors which have comparably broad portfolios. Many of these providers have indeed been able to transact north of its borders (as can be seen in the figure above) and do relatively well in RoA, whereas the unique challenges of the African market can make the playing field more difficult to navigate for their European and North American counterparts.

Diverse markets

Overall, Africa is clearly a highly diverse geographic region from a fleet management perspective. The continent can in general be divided into three subregions – South Africa, Sub-Saharan Africa (excluding South Africa) and Northern Africa. The two latter subregions together have an installed base on par with South Africa. The South African fleet telematics market is thus far ahead of the rest of the continent in terms of adoption, whereas Sub-Saharan Africa is the least developed region if excluding South Africa.

Northern Africa is comparably advanced and well ahead of Sub-Saharan Africa when it comes to fleet telematics penetration, though still quite a bit behind South Africa. The African fleet management market beyond South Africa is by many industry representatives described as challenging – though certainly also promising – for several reasons. The underdeveloped Rest of Africa FM market is eventually expected to catch up with South Africa and other more mature markets, but the time frame for this development is highly uncertain.

The weak economic conditions and foreign exchange rate fluctuations, in combination with the unstable political climate, make the Rest of Africa market a challenging business environment overall. Multiple vendors active in the region still argue that the RoA market has considerably more untapped opportunity than what South Africa can offer at this stage.

The author of this blog is Johan Fagerberg of Berg Insight.

Comment on this article below or via Twitter: @IoTNow_OR @jcIoTnow