Avis SA is set to conclude a major empowerment deal by the end of the year, involving at least 25% of its southern African car rental business.
This will strengthen the empowerment profile of Avis SA when bidding for business with government and parastatals.
News of the empowerment negotiations was given yesterday by Avis SA CE Grenville Wilson, at the announcement of the group's annual results to March.
He said the equity deal would follow empowerment initiatives by the company already under way, for example Avis's joint venture with local black partners in a contract to manage the fleet of the Kruger National Park.
Wilson said it would be more costly for an empowerment partner to invest at group level, as the group comprises not just Southern African vehicle hire operations, but also of similar operations in Norway and Sweden and in local fleet management and long-term car rental activities.
"We need empowerment equity investment in Avis Rent-ACar SA, and we are looking at a stake of 25% or more," he said.
Wilson said Avis's discussions were "reasonably well advanced" and he hoped there would be a deal by the end of the year.
He said negotiations were likely to involve a consortium of "two or three key players".
Avis delivered better than expected annual results, showing a 23% growth in revenue to R1,5bn and a 45% jump in headline earnings a share to 125,1c.
However, given the tough conditions ahead, Avis SA is forecasting that the growth in headline earnings a share in the current financial year will decline to 15%.
Wilson said that the local tourism industry was expected to hold up reasonably well this year. He said that even with the stronger rand, SA was a great tourist destination, perceived to have "a safe-haven status".
"The self-drive visitors are less price sensitive, and SA offers a first world product in terms of hotels, airlines and car hire."
Independent analyst Mike Ingham said that Avis had made "not a bad effort" in the year to March, but he noted that it would be tougher this year with a slowing down in the growth rate of the SA economy, particularly in mining and manufacturing, and a general global decline in tourism.
"It will be a challenge for Avis to get real growth," he said.
Business Day
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