CODE RED

The Com­pe­ti­tion Com­mis­sion’s plan to in­crease black in­volve­ment in af­ter-sales ve­hi­cle ser­vice is laud­able but flawed, say mo­tor com­pa­nies and deal­ers

Financial Mail - - FEATURE - David Fur­longer fur­[email protected]

At­tempts by the Com­pe­ti­tion Com­mis­sion to throw open the ve­hi­cle sales and ser­vice in­dus­try to more black par­tic­i­pants are mis­lead­ing and dan­ger­ous, say op­po­nents. The com­mis­sion says its pro­posed code of con­duct for com­pe­ti­tion in the SA au­to­mo­tive in­dus­try will in­crease the num­ber of black play­ers, in­crease con­sumer choice and drive down ve­hi­cle own­er­ship costs.

It claims the cur­rent in­dus­try model, which al­lows mo­tor com­pa­nies to de­cide who may ser­vice ve­hi­cles un­der war­ranty and which re­place­ment parts may be used, is dis­crim­i­na­tory and un­com­pet­i­tive.

A fi­nal draft of the code was pub­lished in Au­gust and the dead­line for sub­mis­sions ex­pired at the end of Oc­to­ber. The com­mis­sion is giv­ing no hint of when it plans to im­ple­ment the code.

Mark Dom­misse, chair of the Na­tional Au­to­mo­bile Deal­ers As­so­ci­a­tion (Nada), says the com­mis­sion has ig­nored al­most ev­ery in­dus­try in­put and seems hell­bent on im­ple­ment­ing the code as soon as pos­si­ble. Though it will start life as a vol­un­tary code, he sus­pects it could even­tu­ally be­come com­pul­sory.

The draft code pro­poses whole­sale changes to the af­ter-sales man­age­ment of ve­hi­cles cov­ered by war­ranties or main­te­nance plans. Mo­tor com­pa­nies will no longer be able to in­sist that ser­vice and re­pairs are car­ried out by fran­chised deal­ers but must con­sider any in­de­pen­dent black-owned work­shop. Mo­tor com­pa­nies will be re­spon­si­ble for pro­vid­ing work­shops with train­ing, parts, man­u­als, pro­pri­etary in­for­ma­tion and even in­tel­lec­tual prop­erty. The com­mis­sion orig­i­nally wanted th­ese to be free but has since back­tracked.

It says the cur­rent “ex­clu­sion­ary” sys­tem pre­vents black play­ers from en­ter­ing the multi­bil­lion-rand auto re­pair mar­ket. How­ever, the Na­tional As­so­ci­a­tion of Au­to­mo­bile Man­u­fac­tur­ers of SA says that of the es­ti­mated 11.2-mil­lion pas­sen­ger and com­mer­cial ve­hi­cles on SA roads, only about 25%, or about 2.8-mil­lion, are cov­ered by a war­ranty or main­te­nance plan. That leaves 8.4-mil­lion.

“There is there­fore an ad­e­quate num­ber of ve­hi­cles to be re­paired or ser­viced,” it says in a sub­mis­sion. “There is no short­age of op­por­tu­nity for any au­to­mo­tive busi­ness to par­tic­i­pate.”

The Ford Mo­tor Com­pany agrees. “The broad au­to­mo­tive mar­ket is com­pet­i­tive and char­ac­terised by large num­bers of play­ers at all lev­els.”

The Gaut­eng pro­vin­cial gov­ern­ment’s de­part­ment of eco­nomic de­vel­op­ment has other ideas. It says the SA mo­tor in­dus­try at all lev­els is “plagued by slow and stag­nant trans­for­ma­tion un­der­lined by rigid own­er­ship pat­terns, skewed pro­duc­tive ca­pac­ity and undis­rupted mo­nop­o­lies”. It says the pro­posed code doesn’t go far enough in en­cour­ag­ing black par­tic­i­pa­tion.

The na­tional gov­ern­ment is con­fronting that at man­u­fac­tur­ing level. Fu­ture mo­tor in­dus­try pol­icy, un­veiled two weeks ago by trade & in­dus­try min­is­ter Rob Davies, will re­quire ve­hi­cle and com­po­nents pro­duc­ers to ac­cel­er­ate black in­dus­tri­al­i­sa­tion. Un­der the next leg of the au­to­mo­tive pro­duc­tion & de­vel­op­ment pro­gramme, from 2021 to 2035, those fail­ing to do so will for­feit in­vest­ment in­cen­tives.

Deal­ers say en­forced af­ter-sales trans­for­ma­tion will have safety con­se­quences. Not only does the com­mis­sion want mo­tor com­pa­nies to open the ve­hi­cle re­pair door to ev­ery­one — it also wants them to stop in­sist­ing on ap­proved spare parts. In­de­pen­dents should be al­lowed to use cheaper al­ter­na­tives pro­vided they meet qual­ity stan­dards.

To­day, that would au­to­mat­i­cally void any war­ranty.

Mo­tor com­pa­nies ar­gue that in the case of safety-crit­i­cal parts, the idea makes no sense. Dom­misse says the con­se­quences could be “catastrophic”. His Nada col­league, Gary Mccraw, says the po­ten­tial for in­jury and death is “very real”.

Mccraw says Nada is in favour of trans­for­ma­tion. “Our prob­lem is not the ‘what’ but the ‘how’.” He adds that while job cre­ation is im­por­tant, it can­not be at the ex­pense of the 60,000 peo­ple al­ready em­ployed by fran­chised deal­ers.

The SA In­sur­ance As­so­ci­a­tion (Saia) also has mis­giv­ings. The code wants in­sur­ers to use more black-owned re­pair shops, but the as­so­ci­a­tion says it must choose the most reliable, ir­re­spec­tive of back­ground. While the SA Black Au­to­mo­tive Cham­ber of Com­merce & In­dus­try says black sup­pli­ers should re­ceive pref­er­en­tial treat­ment and be paid by in­sur­ers within 48 hours of in­voic­ing, Saia says in­sur­ers are bound to check work­man­ship and costs first.

The com­mis­sion also wants mo­tor com­pa­nies to cre­ate more black deal­ers by lim­it­ing the amount re­quired to cre­ate and equip deal­er­ships. It can cost hun­dreds of mil­lions of rands to meet the stan­dards of some brands.

How­ever, com­pa­nies point out that th­ese stan­dards are set by global par­ents. As with the in­sis­tence on li­censed spare parts, pol­icy de­ci­sions are not taken in SA but in Europe, Asia and the US.

123Rf/vic­tor Ku­ly­gin

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