Government backs campaign to tackle illegal auto parts trade

Around 200 industry stakeholders, including senior representatives from the Department of Trade, Industry and Competition and the National Regulator for Compulsory Specifications, recently convened at Automechanika to launch the Blow the Whistle Compliance Forum. This forum’s goal is to eliminate the illicit trade of auto parts in South Africa.

Vishal Premlall, the national director of the Tyre, Equipment, Parts Association, a respected member of the Retail Motor Industry Organisation, leads the campaign and expresses his delight at the government’s endorsement. Premlall stresses that the illegal parts trade significantly affects SA, posing risks to consumer safety and the nation’s economic stability. He says, “The collaborative establishment of an Industry Compliance Forum, involving regulatory bodies and stakeholders, presents a strategic opportunity to address this challenge and contribute to the country’s overall growth.”

Since its establishment just 24 months ago, the South African Petroleum Retailers Association’s whistle-blower hotline has successfully resolved over 130 reported cases.

Shawn Reddy, the product marketing manager for Motus Aftermarket Parts, emphasises the significant challenge facing South Africa and the rest of Africa: the prevalence of counterfeit auto parts. As the continent moves towards granting consumers more independence, Reddy notes reduced product guidance, inspection and control, resulting in an influx of counterfeit auto parts that jeopardises both vehicle owners’ and passengers’ safety.

Counterfeit product producers often operate covertly, evading taxes and hindering economic growth. Reddy states, “Many customers are unaware they purchase counterfeit parts, believing they are identical to the original components. This not only endangers passenger safety, but also undermines compliant businesses, reduces tax revenues and hampers the growth of legitimate industries.”

Nduduzo Chala, the managing executive of the South African Tyre Manufacturers Conference, identified two major illicit trade risks: misdeclarations at ports and a lack of knowledge about tyre products within the industry. He notes that officials often misinterpret tyre products, leading to misdeclarations. Although the industry has reported numerous cases, it faces challenges in receiving feedback from SARS and a low prosecution rate. Loopholes in current SARS and ITAC laws and regulations enable circumvention, further perpetuating illicit trade practices.

The impact on the economy is substantial. Charl de Villiers, the chairperson of the Tyre Importers Association of South Africa, highlighted the significant negative effects of illicit financial flows (IFFs) on economies. He cited unofficial statistics showing losses of over $60bn between 2018 and 2020 due to inward and outward IFFs in South Africa. The most commonly illicitly traded commodities include precious metals and electrical machinery and equipment.

The current depressed economic climate is influencing consumer choices, with a growing trend of consumers purchasing non-branded products, inadvertently supporting illicit trade.

Dion de Graaff, the CEO of Autozone, shared data indicating that up to 70% of non-branded products are being imported, compared to 55% just nine months ago. “The problem is that these imports often offer consumers limited recourse. Most branded products come with a 12 to 24-month warranty, while these imports typically provide only a naught to five-month warranty, posing a significant issue.”

Premlall stresses that the solution is not straightforward and requires a hybrid approach, with collaboration from all parties involved, starting with origin declaration and identifying risk indicators throughout the supply chain.

Juanita Maree, the CEO of the South African Association of Freight Forwarders, agreed, highlighting the need to connect different instruments with full visibility and accountability from the point of origin to the frontline, along with post-facto on-site audits to effectively curb illicit trading.

Premlall closed by underscoring the pivotal role of the media in shaping public perception and behaviour. “By showcasing successful crackdowns and legal actions against illegal traders, media reinforces the notion that illegal activities will not go unnoticed or unpunished.”

Source: Cathy Findley PR