Rental works in South Africa

Rentworks is an Australian-based equipment lease packager and asset manager company that has moved into the as yet untapped South African rental market. Reporting a turnover of R150 million last year, the company has set itself a target of R400 million for the coming financial year.

John Delaney, GM/sales director, says Rentworks has capitalised on the fact that internationally, corporations prefer renting IT equipment rather than being saddled with outdated machines that gather dust and remain a cash drain on the balance sheet.

GartnerGroup, the international research company, has reported that in US, 60% of new hardware is rented using the same business model that Rentworks uses.

Rentworks has now taken its Australian success and applied it with a few modifications to the untried South African market.

Delaney says that by using a residual model, Rentworks finances the purchase of the equipment carrying the capital outlay in full and the client signs a contract for a lease period from one to five years. Rentworks shoulders the risk of the residual as it invests the money upfront and then when the lease period is over, either re-rents the equipment or sells it to recapture the outlay. Billing the client quarterly makes for easy budgeting and Delaney says companies` "ordinarily sticky financial departments have taken well to this plan".

The facility of upgrading during the lease period means state of the art equipment can become a reality for companies that rely on technology and prefer to have the equipment owned by Rentworks and take advantage of Rentworks rental offers. Up to a third of the equipment can be upgraded per year of the lease period, which means that IT budgets need not change and the boundaries of technology can be constantly challenged.

Delaney notes that South Africans have shown hesitancy about rental, but says the concept is increasingly being embraced, especially by larger corporations, such as banks. He adds that because Rentworks is the first to supply this option in SA, it has given the company a chance to consolidate and find the right staff before any competition enters the fray.

Delaney believes that Rentworks should be viewed as an asset management company rather than a rental company as it offers value-add services for clients, which includes a complete online inventory and breakdown of exactly how many machines the company has. This enables the client to logon at any stage and decide exactly which machines need upgrading, which also makes stock taking a lot easier.

Current Rentwork clients include PricewaterhouseCoopers, Rand Merchant Bank, Nedbank, Old Mutual, SAB and Sanlam.