Speakers at the recent Automotive Aftermarket Workshop, hosted by the Competition Commission, presented their views of the current state of play in the industry, many not without emotion.
The event took place on 17 March at The Capital, Menlyn Main, Pretoria and aimed to gather industry stakeholders as part of an information gathering session for the Competition Commission. The topic being addressed was exclusionary practices in the motor industry.
Vishal Premlall, Director of the Motor Industry Workshop Association (MIWA), says the insights shared from various stakeholders was valuable and “showed how invested people are in making sure change happens in this sector. Representatives from insurers to panel beaters and mechanics agree that the status quo cannot continue as it is exclusionary and unsustainable,” he says.
MIWA directly represents over 2 500 independent aftermarket workshops and indirectly a further
5 000 odd non-member aftermarket workshops. The membership covers workshops from start-up businesses to five-star workshops. A sample and tested survey conducted amongst its members revealed that 43.47% are Historically Disadvantaged Individuals workshops and 50.21% have a BBBEE status. “Workshops are generally Mom and Pop owned businesses employing up to 10 staff members who support up to six dependents. The substantial investments to start up a small aftermarket workshop is often a cash-out of life long pension funds. Protecting this investment against economic pressure remains a challenge for these business owners,” he explains.
“Whilst we understand the Foreign Direct Investments that manufacturers put into South Africa have natural benefits like job creation, we are also aware that the automotive aftermarket employs a greater number of employees with a far higher value creation in South Africa. The model as it stands is slowly squeezing out the little business at the bottom of the chain trying to remain sustainable in an already difficult market.”
Premlall says there has been a longstanding need for a fair and competitive regulatory environment that enables freedom of choice for consumers and which gives aftermarket Small Medium Enterprises a chance to stay in business. “Consumers have been facing tough economic times for a considerable period now so we welcome the Commission’s efforts to investigate finding a workable solution that will not only relieve the burden of consumers but also facilitate discussion between industry stakeholders.”
Viviene Pearson, a representative for the South African Insurance Association (SAIA), pointed out that premiums are becoming unaffordable because of the price of repairs. “Only 35% of cars in South Africa are insured because consumers are under pressure. Alternate quality parts do exist and could go a long way to bringing down the cost of insurance premiums if used in repairs,” she says.
“The timing is right for reforms,” says Leonard Smith from the South African Auto Repairer and Salvage Association (SAARSA). He told the audience that pre-2002 car repairs were done based on skill. After that it became all about investment as Original Equipment Manufacturers (OEM) started dictating which specialised and expensive equipment needed to be used. “Many workshops could not afford to comply. There are further barriers to entry. Even those who do comply still don’t get work,” he says.
Bruce Allen, who spoke on behalf of National Automobile Dealers’ Association (NADA), said that in line with global trends, and our local drive for consumers right to choose, the discussion is a relevant one, and worthy of further debate. “Due to the complexity of vehicles (and resultant skills required to understand the technology and build design), as well as the OEM’s right to protect the integrity of their product while they are the custodians of the insurance product covering defects (warranty), ensuring that vehicles are worked on with the correct skills and tools is imperative to protect consumers both in terms of their vehicle integrity and safety.”
Sisa Mbangxa from African Panel Beaters and Motor Mechanics Association (APMMA), the organisation that lodged a complaint with the Competition Commission in 2014, says accreditation processes imposed by the OEMs are exclusionary. “The OEMs keep using safety as a reason for restricting access to vehicles under warranty. But what about the 70% of vehicles on our roads not under warranty? Is safety less important?” he says.
He adds that the APMMA supports the Right to Repair Campaign – a campaign started by MIWA in South Africa in 2013 with the aim to allow consumers to select where their vehicles are serviced, maintained and repaired at competitive prices in a workshop of their choice.
“MIWA members are active and founding members of the newly-formed and independent Right to Repair (R2R) South Africa non-profit company whose primary focus is to champion a workable solution for South Africa. In addition, we are members of the International R2R Coalition,” explains Premlall. “For a considerable period of time now, MIWA has tried to engage (to no avail unfortunately) with industry stakeholders to reach a workable solution to some of the unfair practices that pervade this market. We are, therefore, delighted to see that the Competition Commission is finally putting this topic in the spotlight.”
Hardin Ratshisusu, Deputy Commissioner of the Competition Commission, says there is obviously a need to improve transparency and it is long overdue that the industry be regulated. He says the Commission has had the issue on file since 1994 and the time has come to form a code. He added that this needs to be a voluntary code with consequences and laid down a deadline of six months for it to be drafted.
Representatives from the Federal Anti-Monopoly Services (FAS) of Russia gave a delivery on the self-regulating code that was implemented in 2013. “This is a relatively new code. So, while we should respectfully absorb insights from the Russian code considerable work has been done over the last 20 years or so in the European Union, United States, Australia and India that we should look into. We don’t need to reinvent the wheel but can learn from pre- and post-challenges experienced in these countries and see how these apply to our situation,” says Premlall.
Moving forward, Jakkie Olivier, CEO of the Retail Motor Industry (RMI), a broadly representative collective voice for the automotive aftermarket representing 14 different trade associations, confirmed the RMI would be convening workshops with its trade associations to prepare a draft code which will be submitted to the Competitions Commission for consideration. “We will offer our full co-operation to the Commission to help reach a workable solution in the best interest of all and we are willing to take the lead on this initiative, together with affected stakeholders,” concludes Olivier.