How SA’s New Automotive Code Could Help Kickstart Economic Growth

Unlocking SA’s auto sector potential: It’s time to look closer to home

How SA’s New Automotive Code Could Help Kickstart Economic Growth

By Filum Ho, CEO of Autoboys and Vice Chairman of Right to Repair South Africa (R2RSA)

South Africa today is grappling with a recession, but a new automotive code of conduct could lead the way in showing how the country could create stronger, more long-term inclusive growth.

On 22 September 2017, the Competition Commission of South Africa published an historic first draft of a new Code of Conduct for the South African Automotive Industry.

Ordinarily, such a development may be easily overlooked amid the busy workload of the Commission. But this Code of Conduct could potentially usher in groundbreaking changes for players in the automotive aftermarket, South African car owners and even the broader economy.

This is because the proposed Code of Conduct will empower car owners with the right to repair or service their vehicles at a provider of their own choice, without voiding their warranties.

Today, car owners in South Africa are typically locked into using a vehicle manufacturer’s repair shops and parts because of embedded motor or service plans. South Africans are powerless when it comes to choosing where their vehicles can be serviced or maintained.

This is very different to the rest of the world. In countries such as the US, car owners can buy a motor or service plan separately from their car, giving them greater choice.

Organisations such as Section 21 company Right to Repair South Africa (R2RSA) – which was founded by the Motor Industry Workshop Association (MIWA) and represents 2 500 independent workshops and automotive aftermarket distributors, parts manufacturers – wants car owners in this country to have the same level of free choice.

Already, South Africa’s Competition Commission has travelled a long way in hearing this call with its proposed draft Code of Conduct that received a final round of feedback and submissions on 11 September 2018.

The latest draft of this Code seeks to address competition constraints in the automotive aftermarket industry by, for instance, ensuring that “independent service providers can undertake in-warranty service and maintenance work and in-warranty motor-body repairs”.

The Code also seeks to widen “the pool of approved service providers who can undertake in-warranty service and maintenance work, in-warranty mechanical repairs, and in-warranty motor-body repairs.”

Another key part of the Code is that there should be “no unfair restrictions on the sale or distribution of original spare parts; allowing greater consumer choice in choosing suitable spare parts for repairs and maintenance of their motor vehicles”.

The draft Code will also be unique, in a global sense, as it has a strong transformational element to it by pushing for historically disadvantaged individuals to own more dealerships and other business in the local automotive sector.

Original Equipment Manufacturers (OEMs) will have to promote the entry of historically disadvantaged individuals into their networks of service by, for instance, the subsidisation of capital, facilities, tools, equipment and training.

While the code will be voluntary, the likes of R2RSA will monitor and flag any transgressors.

Overall, these proposals are expected to create a more level playing field in the aftermarket sector and provide a much needed boost for the 8 000 independent workshops in South Africa, which employ thousands of South Africans.

History has shown that when big monopolies dominate economies, they don’t create jobs. South Africa – which is the most unequal country on earth according to the World Bank – is experiencing this first-hand, as several of its sectors have entrenched monopolies and an unemployment rate of 27.2%.

If we want an economy that is creating jobs, then we really have to support Small to Medium Enterprises (SMEs), such as the thousands of independent workshops scattered across the country.

Studies by the International Finance Corporation (IFC) have shown that SMEs account for more than half of all formal jobs worldwide.

This is why efforts by R2RSA and the Competition Commission in respect of right to repair could become an example of how South Africa is able to open up its economy, and make it more inclusive.

And this is also why Autoboys – which is SA’s first black-owned national glass and collision parts provider – is a proud and committed supporter of R2RSA and the benefits that fair competition in the automotive repair supply chain could bring to the country as whole.

Filum Ho is the CEO of South African auto parts and glass specialists Autoboys. Born in the US but now living in South Africa, Filum transitioned from a top career in investment banking at the likes of Deutsche Bank and Merrill Lynch to shaking up SA’s auto parts and glass markets. In 2017, African Rainbow Capital (ARC) acquired a 51% stake in Autoboys, making it SA’s first black-owned national glass and collision parts provider. Filum is also the Vice Chairman of Right to Repair SA (R2RSA).

How SA’s New Automotive Code Could Help Kickstart Economic Growth