South Africa Township Economic Development
Taxis provide the backbone of demand for the township auto maintenance, repair and support sector. Typically, this includes panel-beaters, tyre-repair outlets and motor mechanics. There are also chop shops and spares supplies. A recent webinar held by the Township Economy Team of the Ecosystem Development Small Enterprise (EDSE) Programme shed light on some of the lessons learned from existing initiatives to support and grow this sector.
The auto sector includes two distinct zones of opportunity. There is vehicle assembly, and then there is ‘the aftermarket’ which involves the repair, maintenance, refitment and disposal of vehicles.
A key goal of the recently released SA Automotive Masterplan (SAAM) for the period to 2035 is to increase local value addition from the current level of 37.4% to 60% – which could create opportunities for small enterprises. However, nearly 50% of auto components are produced through highly technical and capital intensive systems, with high barriers to entry.
Where opportunities do exist – in relation to pressed parts, seating and interior trim – local producers still face stiff competition from their global peers. This has informed an auto-incubation approach, in which the incubator is directly linked to an auto-manufacturer. On-site support is focused on creating highly efficient and competitive suppliers directly into the manufacturing operation, as part of a wider cluster-based approach. This approach requires tight vertical integration and close proximity to the manufacturer.
For a township economic development strategy, the more accessible opportunities lie in the ‘aftermarket’: for post-sales maintenance, repair, spares and recycling. This is also a market that exists in all urban centres and is not tied to the presence of auto-manufacturers.
In this market segment, a range of competition issues limit market access. Firstly, there is the distinction between ‘in warranty’ and ‘out of warranty’ vehicles. For in warranty vehicles, the manufacturers have kept a tight hold on market access, with warranty conditions that force motorists to have their cars serviced or repaired only at manufacturer approved service dealerships, or to face cancellation of the warranty.
South Africa is unique in the world for this practice, and in February 2020, the Competition Commission ruled that it was anti-competitive. New guidelines will make it illegal, based on the ‘Right to Repair’ initiative. Until now, most township-based mechanics have been excluded from the entire in-warranty market; this ruling should open new opportunities.
Township Automotive Hubs South Africa
Township Automotive Hubs have been initiated to strengthen access into this important market, as part of township revitalisation efforts. The following Hubs have been established over the past 5 years:
1. The Winterveld Township Automotive Hub based in the City of Tshwane Municipality.
2. The Chamdor Township Automotive Hub based in the Mogale City Municipality.
3. The Umlazi Township Automotive Hub based in the eThekwini Municipality.
4. The Illovo Township Automotive Hub based in the eThekwini Municipality
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