Leasing in
South Africa

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Recent additions:

For a recent article on leasing in Africa, read the Equipment Finance Journal March-April 1998. Some of the information in this page is based on the said article by Chukwuemeka Ndu

[Added on 3rd April, 1999]

State of the market:

The Republic of South Africa is the dominant economy in South Africa. The market is essentially a mature market in terms of market penetration and sophistication of the structures utilized. The end of apartheid and the enthronement of democracy have invariably brought a more open economy. Leasing volumes have increased steadily in the last few years. The bulk of the assets leased continue to be motor vehicles with about 50% of the market. In the motor vehicle market, the trend has been towards contract hire. This is becoming increasing popular as companies tend to out-source non-core activities. Mining equipment is also leased to some of the mining companies, given the importance of the mining industry to South Africa.

The major players continue to be the four large banking groups. However, in recent years some specialized vehicle finance companies affiliated with the motor companies have entered the market. Commencing with the merger of the dual exchange rates and the removal of most exchange controls, the South African economy has become one of the most attractive investment locations in Africa.

Vehicles financing is the single most important form of leasing other than real estate.

Law and regulations relating to leasing:

Leasing of vehicles for private use is regulated by legislation which lays down minimum deposit, maximum funding period, etc.

Accounting

The South African accounting standard on leasing, AC 105 is drawn up on the basis of IAS-17 and requires all finance leases to be capitalised on the lessee's balance sheets.

 Taxation

Income tax depreciation is allowed on a writing down allowance basis. Plant and machinery have 20% depreciation rate. Passenger vehicles are written off in 5 years.

Market peculiarities

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Leasing associations:

 

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