Growing new vehicles market not a sure thing
THE FINAL liquidation last week of Changan South Africa, the local importer and distributor for cars and bakkies produced by the Chinese state-owned vehicle manufacturer Chana Auto Company (Changan), is a reminder that the new vehicle market remains a tough environment despite the continued sales growth.
Its liquidation ironically occurred while another Chinese manufacturer was taking a major step towards establishing a more solid base for itself in the country. First Automobile Works announced it had awarded a contract of about R200 million to Wilson Bayly Holmes-Ovcon Construction to build its new R600m vehicle and truck assembly plant in the Coega industrial development zone.
The South African new vehicle market remains intensely competitive with more choice of brands and models available to consumers than most other markets of the world. This competitiveness is fiercest in the cheaper entry-level segment.
Teresita van Gaalen, the former chief executive of Changan SA, attributed the voluntary liquidation of the company, despite massive efforts to try to keep it afloat, to its high debts levels since a previous importer of the brand was “rescued” in 2009 by the Johannesburg branch of China Construction Bank.
Despite this setback, Changan International Corporation said it remained committed to this market, it was “doing everything possible to restart operations as soon as possible” and confirmed it was seeking a new strong, long-term partner.
Mike Whitfield, the managing director of Nissan South Africa, put the lure of Africa into context. Africa was regarded as a huge opportunity as it had about 16 percent of the world’s population but accounted for only slightly more than 1 percent of total industry new vehicle volumes. Sacci A survey conducted by the SA Chamber of Commerce and Industry (Sacci) showed that late payments by the government to service providers was the norm rather than the exception. Sacci chief executive Neren Rau said that some of the findings showed that all providers of goods and services to the government had experienced payment delays of more than 30 days. However, some providers said the
Changan International Corporation said it remained committed, doing everything possible to restart operations as soon as possible.
majority of payments were made on time.
Late payments affected the cash flow of the firms and placed temporary constraints on operations. Rau said if service providers were not paid on time, they would have to halt the further provision of goods or services until payment that was in arrears had been made.
Reacting to the problem, the Black Business Council (BBC) established a hotline last month for black entrepreneurs to monitor payments. BBC said the hotline would be funded in part by a R3 million grant from the National Empowerment Fund.
The hotline came in a bit late for Sanyati, a black-empowered engineering and construction company, which in July applied for the termination of its business rescue proceedings and the start of liquidation after being owed about R80m by the Free State government and other departments.
Sacci members made a few suggestions which government departments should take note of, saying promptness of payment should become part of the government leader’s performance agreements.
Proposals suggested that payment be a primary mandate of the chief procurement officer.
“The prompt payment by government to providers of goods and services is crucial to ensuring the stability and growth of South Africa’s business sector, especially the small and medium enterprises sector.” Telkom “Let sleeping dogs lie” is not a very wellknown legal argument, but it is one that surely should have been put to Telkom’s board in its consideration of last month’s ruling by the Competition Tribunal.
To most people – outside Telkom – the R449 million fine looked like a bargain; and after eight years of nasty litigation it was as close as you could get to a “get out of jail free card”. Just about everybody welcomed it. The communications minister said while it would have an impact on Telkom’s finances, the ruling did at least conclude this matter. The Public Investment Corporation, which holds a 9.3 percent stake in Telkom, said the ruling was positive as the fine was substantially lower than the R3 billion the market had priced in.
Even the competition commissioner, Shan Ramburuth, said he was happy with the ruling because it sent the right message to dominant firms such as Telkom. But with Telkom now about to try and persuade the Competition Appeal Court (CAC) that R449m is too high, Ramburuth is understandably determined to ensure the CAC hears the “right message”.
Perhaps Telkom is fighting on too many fronts and did not give the issue sufficient consideration? Perhaps, as an essentially highly litigious creature, it feels obliged to continue the fight in the hope that it will get something carved off its “bargainbasement” R449m. Or perhaps it wants to keep the matter in a sort of legal limbo and ward off the cases that will inevitably be brought by the various parties that have been prejudiced by its behaviour?
Meanwhile, consumers continue to be prejudiced by Telkom’s behaviour, which says the Internet Service Providers’ Association’s Dominic Cull continues to be anti-competitive. So perhaps it is time for Finance Minister Pravin Gordhan to consider limiting the amount of lawyers’ fees that can be charged against tax.