Zeda lists on the JSE

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FIFI PETERS: The next story reflects on the action at the Johannesburg Stock Exchange earlier on today, when they greeted their newest member. It probably felt like a bit of déjà vu for the Avis brand, given that it was listed on the JSE back in 1997 and delisted in 2005, when it was taken out by the Barloworld Group. Today it made a comeback under the holding company of Zeda, which also operates the Budget brand, the car-hire and fleet-management brand here in South Africa.

But for more on the listing of Zeda on the JSE today and I suppose what lies ahead for the newest entity on the Johannesburg Stock Exchange, I’m joined by the CEO Ramasela Ganda. Ramasela, it has been a really busy day for you today, and it is good to catch up with you again, ma’am.

RAMASELA GANDA: Thank you very much for having us. Good evening.

FIFI PETERS: Let’s talk about Avis [and] its history. It was on the JSE before. It has made a comeback now through the holding company, Zeda, which you head. But I suppose the more important thing is the future and what that future looks like for shareholders who choose to back you and the Avis and the Budget brands. Look into the crystal ball for us ……1:42.

RAMASELA GANDA: Just to pick up on what you said about coming back, in the last 17 years we’ve gone through a lot of transformation, especially in the last three years – transformation of our business internally and in our management structure, but also of the industry. What you see now [is] you are getting an Avis and a Budget operating company in the form of Zeda that has come out of Covid and come out very, very strong in transformation, looking at [the] opportunity of the ecosystem of mobility with short-term car rental, where we drive the usership.

I’ve indicated the usership economy, I think, for a couple of weeks now, to say this usership economy is where we see growth, because when you look at the number of applications that go through just buying a fleet, and just buying a vehicle on the floor, and that are only financing one channel, the old way of buying ……2:51 after 72 and refinancing the vehicle, compared to a vehicle that gives you the right of use and you don’t have to pay insurance on it, you don’t have to worry about maintenance and all kinds of complications that just generally come with owning a vehicle that goes out of maintenance plan after a couple of kilometres. You don’t have to deal with those kinds of things and you don’t have to take up that you don’t get full utilisation. As we all know, the ……. 3:17 depreciate quickly.

So what it does it provide is an opportunity as, one, a financing tool, but two, changing the mobility of how people look at a vehicle. For us, we see a lot of growth there, technology playing a major role in accessing the right to use the vehicle rather than the vehicle [in] the old style how car rental used to be conducted, delivering the vehicle, and then collecting the vehicle.

But now it’s just about movement, it’s about accessibility and it cuts across our business into short-term rental and long-term leasing, and industries that in the past we never were ……3:50. I’m talking about heavy commercial. We’ve seen how transportation of heavy commercial has really occupied our roads now. So we are financing a lot of those for heavy commercial, and really we see a lot of growth coming from there, and shareholders benefiting from the growth prospects of our business.

FIFI PETERS: How big is that part of the business right now? I’d like to know essentially is this Zeda going in for the lunch that is currently eaten by banks who finance a lot of cars that most people buy?

RAMASELA GANDA: We definitely are, we definitely going –

FIFI PETERS: Unapologetically so. [Laughing]

RAMASELA GANDA: We are flexible, we don’t tie you [down] for 72 [months]. You have the opportunity to return the car when you need it. You can today say I need a bakkie because I’ve got more responsibility this month to ……4:42. You have access to it and you need a passenger vehicle the following month. You’ve got that flexibility. You change jobs, you’re looking at flexibility, you’re freelancing, you’re doing all kinds of business, because more people now interestingly are doing more than one job and they’re not structured. We’ve got the millenniums who just don’t sit in one profession. The banks will be asking them for all this long-term relationship. We do a credit record, bearing in mind that you are going to have this vehicle for a certain period of time.

Our collection level is quite high. We do good recovery of vehicles, so our management of the fleet is very, very high. Utilisation is really high when you look at the car rental at 39……5:29, so really we are going [to] the bank for more financing.

It’s a subscription model. The subscription model Genesis is really to say don’t be locked in 72 months. ……5:40

FIFI PETERS: I was speaking to a group of young people after my conversation with you earlier about this model, and they were keen. You spoke about the millennials and I think that grouping just looks at ownership in a different way. I suppose they wouldn’t mind, and they’d be excited about the fact that you don’t have to be locked into a deal to pay off a car over five or seven years. You can do so in two or three, depending [on circumstances] and just change. Zeda will take on the insurance costs and the maintenance costs and all of that.

I’d like to understand how you see the psychology of your more mature South African, the older guys who still believe in ownership –  that I must own this car and maybe still aspire to not only want to buy it, but eventually pay it off completely from the banks. How do you see them coming on board the subscription model?

RAMASELA GANDA: One of the things that they understand very well is cash flow. People do a ……6:48  because of cash flow. And if you are able to talk to what matters today, how much you pay today, and how much you can save, you’re starting to talk to that market to say ‘it’s fine’. For the same amount you can even get a car with all the benefits. So what we are seeing a lot is the conversation’s completely different. It’s about what it costs me today, can I pay school fees, can I get an additional one rand to finance certain things, instead of just financing the car?

I’m talking about total cost of ownership. Insurance is not a cheap business, and maintenance after certain kilometres just becomes a headache. You pay a lot. Most of the cars after 100 000 kilometres go out. So that’s where it really talks to them. It really talks to them from a cashflow point of view, not just only an access point of view, that you are actually financially better off.

And we’ve seen this model now starting to work in corporate. We actually did not see this immediately as a corporate uptake; we see it as a luxury car, that people are really taking on luxury cars on the subscription model. So really opportunities if [the] public sector can take this type of model, we see a lot of public sector that have construction projects or any other type of projects – we are seeing uptick in it, where they take this model.

So it’s really not an individual-based model. It’s available to the larger market. And the more people start seeing – it’s similar to e-hailing. It just seems one day people will say, ‘I’ll never use e-hailing’. Today we are financing e-hailing, which gives us exactly another leg of subscription because some of the drivers on e-hailing are already our customers.

FIFI PETERS: Talking about the public sector, I want to go there because yesterday we were speaking to a company that was supposed to list before you – a week before you, in fact, in the form of Premier Group. They decided not to list. Okay, they were doing something different.

They actually came to market to raise money, also kind of through an unbundling from their holding company in the form of Brait. But they decided not to go ahead, after the whole Phala Phala report was initially released. And the reaction on the markets followed, which was really negative. The rand weakened a lot, the bond market weakened a lot, and they claimed they could get better value in the private market.

You chose to go ahead with your listing, notwithstanding the market action. But I’m sure that you were watching closely as well. I’d like to understand why you went ahead at this time, and why you were able to look through the political noise.

RAMASELA GANDA: The reality of where we operate as a country and even regions where we operate as we position ourselves, even with the licence to be an emerging market trader, so what we said to the Avis/Budget group, this is the industry we operate. It’s got a lot of challenges. Emerging markets have got challenges, whether it’s finance, access to finance, whether it’s all kinds of things. So that is the industry and the market we’ve been operating in.

We looked at the issues of Phala Phala and everything around it, looking at where we come from, from the deep dark days of Covid where airports were shut and really there was no movement and there was no demand, and what really came out of where you see an opportunity where everybody is pulling out. At the moment  there are a lot of opportunities in the market that you don’t have enough companies……10:32 for people that can really invest. We see this as an opportunity that we are providing an economic drug, whether through agriculture, tourism and all sectors, for people to really invest in.

I guess one important thing for us, because we were not looking to raise initially, [is] we looked at it and said it’s as good as it gets at this time in the market. Things do get bad and things do come back. As it goes down, it comes back. And this is the time for us to just go for it, because we’ve seen a number of economic crises; they come, they go, and the strong remain.

For us at this point, we look at it and say because we’re not raising there’s an opportunity. We could have gone to private and Barloworld could have gone that way, but the level of return  we believe the investors will still benefit in.

We are predominantly still funded by banks, but we still see our growth pipeline needing more capital being raised in the future. But the market just still provides us with that access. Yes, interest rate are quite high at this moment, and it’s just how we manage it well. If you look at our leasing business, most of our contracts are passed over just your normal transaction rates that you get passed over.

So the challenges and instabilities of the areas in the market we operate in, Fifi, will be there. We need to drive the economy of our country because we believe that the growth in the region, whether Zambia, Namibia, really depends on us accessing capital.

We still believe this is a great opportunity to raise. If you look at that transformation, if you look at ESG, (Environmental, Social and Governance), a great opportunity for even us ……. on that.

FIFI PETERS: Okay. I got you. I got you. Well, congratulations once again and I know we’ll be speaking again in future. That is the CEO of Zeda, the latest company to listen on the JSE today, Ms Ramasela Ganda.