"Operating outside large metropolitan areas and primarily serving the agriculture and mining sectors, the role of these smaller transport operators in their local and regional economies is often underestimated," said Toni Fritz, Head of Vehicle and Asset Finance - Business of Standard Bank.
"Without these transport contractors, farmers and mine operations in far-flung corners of the country would find it difficult to move products and commodities. Within their towns where fuel, service and supply facilities, drivers and local labour rely on the transport sector, their contribution to the economy is even more important.
"Some of these smaller operators rely on single medium- to long-term contracts with a single customer to finance their operations. Although this gives them certainty over the contract period, there are several factors that restrict them from opening up their businesses to further opportunities," said Fritz.
These inhibiting factors include:
The result of these pressures on smaller contractors is increased scrutiny by financial institutions. This often occurs in times of economic stress, when companies are seeking financial assistance to bridge gaps in their cash-flow shortages or even acquire new equipment.
"The primary responsibility of any bank is to manage risk and ensure that transport operators are able to meet their commitments. This sometimes requires that customers' cash flows are 'stress tested' to assess their sustainability under different scenarios. In this case, the ability of the operator to diversify his operations and the strength and duration of single contracts become critical factors," said Fritz.
"As we understand the needs of the market, we actively support the growth and sustainability of smaller contractors within reasonable risk parameters.
"There is no doubt, however, that many small contractors are beginning to feel the strain of the ongoing economic downturn. It is important that as soon as signs of financial stress become evident that operators approach the bank for assistance and advice. The sooner the step is taken; the sooner plans can be put in place to assist viable operations to meet financial challenges.
"As partners in supporting economic growth, Standard Bank believes a sustainable transport sector is vital, especially in a country where there is limited rail capacity. Helping to keep trucks on the road and creating opportunities for new operators is critical to all our futures. We intend to be a part of this industry going forward," concluded Fritz.
