KATE ELLIOTT: SA must foster a truly competitive automotive aftermarket
Opening up the market to SMEs will help create broad-based economic growth within the sector, says Right to Repair SA
Right to Repair SA is known for advocating for consumer choice. But consumer choice has an important flipside, and that is the creation of opportunity - an all-important word in a country such as ours that is currently experiencing an unprecedented unemployment rate of 34.4%. Never have we needed an increase in broad-based economic growth more than we do now.
Any policies, such as the Guidelines for Competition in the SA Automotive Aftermarket, which give effect to the Competition Act of 1998 in the automotive industry, need to be applauded and their implementation carefully monitored.
Free markets are the basis of a capitalist society. However, under certain conditions totally free markets can fail to deliver optimal results. One reason for this is harmful conduct by firms that have grown too big and are in a position to unilaterally abuse their size and/or collaborate with their competitors to engage in collusive activities.
Competition law contains provisions or rules that aim to ensure and sustain a market where vigorous but fair competition will result in the most efficient allocation of economic resources and the production of goods and services at the lowest price. It’s designed to create a level playing field where both big and small businesses can compete fairly and effectively.
The importance of robust competition law and policy becomes even more important in emerging markets such as our own. One of the pressure points is the presence of multinational companies, which can be both hero and villain. In the context of the automotive industry in SA the multinational contingent is for the most part represented by the original equipment manufacturers.
While we appreciate multinational companies may help emerging economies in the modernisation of their economies and industries by transferring technology, know-how and skills, providing access to export markets, intensifying competition or by making available goods and services that are better and/or cheaper than those offered by local producers, that is not always a given.
In some instances, multinational companies can stifle economic development by locking host economies into low value-added activities and crowding out local investments and jobs. Furthermore, anticompetitive practices of multinational companies may reduce consumer welfare and they may help build consumption patterns that are unsuited for host countries.
This is where robust competition policy can help safeguard our local economy from the potential harmful actions of multinational companies and help ensure the relationship is one of mutual benefit rather than a one-way drain of funds out of the country with no real benefit to the local economy.
Where does the automotive aftermarket fit into this discussion? The automotive industry is the third largest sector in the national economy. While a large portion of this can be attributed to the manufacture and retail of new motor vehicles, the repair and service sector cannot be discounted. There are about 12.7-million vehicles on the road in SA, and all of these will need to be serviced and repaired during their lifetimes. Opening up this market to small and medium enterprises, which are often owned by previously disadvantaged individuals, will help create vitally important broad-based economic growth within the sector.
Furthermore, vehicle workshops that are operating in a truly competitive market will provide better and more affordable services and repairs. Accordingly, the importance of having a truly competitive automotive aftermarket is twofold. It will ensure access to the market for the previously disadvantaged and create jobs contributing to the alleviation of poverty, and second if the sector is operating at maximum efficiency, the cost savings will have an impact on all sectors of the economy, much as the petrol price does.
We have the tools already in place to create a healthier economy in this sector. Let us not miss this opportunity to stimulate growth and employment. It is abundantly clear that we should support the implementation of the Guidelines for Competition in the SA Automotive Aftermarket to their fullest extent, and this needs to remain a key focus of government moving forward.
• Elliott is CEO of Right to Repair SA.
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