Compliance

On 1 July 2021, three key pieces of legislation came into effect, directly impacting the automotive industry. Our memberships in industry bodies have been critical in developing our deep understanding of what we need to change to comply with the regulations and the impacts they will have on the Group and our industry. We support these and other upcoming changes in the regulatory environment and believe that they will allow us to improve transparency and trust with our customers. Our memberships enable us to actively participate in the industry forums, support industry bodies and contribute to the shaping of upcoming automotive policy.

New regulations

Protection of Personal Information Act

POPIA gives effect to South Africa's constitutional provisions regarding the protection of personal information held by public and private entities, covering individuals and business clients. It limits the rights of businesses to collect, process, store and share personal information. It also makes businesses accountable for protecting the privacy of this information.

Detailed information on our implementation of POPIA.

Automotive Aftermarket Guidelines

The Automotive Aftermarket Guidelines (Right to Repair) aim to increase the inclusivity of previously disadvantaged individuals and small and medium enterprises in the automotive value chain; create more transparency around value added products and the servicing, maintenance and repair of vehicles, especially when sold with the vehicle; and increase consumer awareness and choice. The guidelines have a strong transformation focus and are designed to remove perceived high barriers to entry into the automotive industry. naamsa and the National Automobile Dealers Association (NADA) are working with the Competition Commission to introduce and implement the most effective set of Automotive Aftermarket Guidelines. Motus is a member of both industry bodies.

Our response to the Automotive Aftermarket Guidelines and Our contribution to automotive industry change.

Administrative Adjudication of Road Traffic Offences Act

The Administrative Adjudication of Road Traffic Offences (AARTO) Act is aimed at improving driver behaviour, encouraging motorists to be law-abiding and reducing road accidents. This will be achieved by creating a parallel system of enforcement, the introduction of a demerit system applied to offences, significantly higher fines and a new tribunal to deal with motorist disputes. After 22 years in the making, there are still some concerns that certain AARTO requirements are not practical or need investment to ensure there is consistent application nationally; hence a phased approach to its implementation has been adopted.

The first phase, 1 July 2021 to 30 September 2021, will entail establishing seven AARTO service outlets, enabling eNATIS - the national traffic information system - to collect AARTO payments, and delivering AARTO education to motorists. The new demerit points system is likely to come on stream in July 2022. It applies to drivers and operators (the person responsible for the use of a motor vehicle) with the effect of ultimately leading to the suspension and cancellation of driving licences, professional driving permits or operator cards. If a vehicle is suspended it may not be sold or used on a public road. A key challenge is accessing data on demerits issued against vehicles and drivers as the Department of Transport and Road Traffic Management Company (RTMC) have not finalised the electronic process or made the electronic interfaces available.

While we support the Act and hope that it promotes safe road behaviour, especially among transport operators, it does have serious implications for our car rental businesses as it does not allow for any type of sanction on tourists, thereby penalising and creating additional administration and operational barriers and costs for the rental business. Through our membership in SAVRALA¹ and NADA, we are engaging on these concerns with the regulators at NEDLAC and directly with the RTMC.

The final implementation date for AARTO depends on the success of each phase and is estimated to be sometime in 2022.

Franchising Code of Conduct in Australia

In March 2021, it was announced that Australia's new Franchising Code of Conduct would be strengthened with mandatory obligations that better protect new franchised dealerships. This is positive for our business, bringing a degree of balance to the relationship between dealers and vehicle manufacturers. The code allows for an arbitration process and penalties for those who fail to comply.

Upcoming legislation

The Financial Sector Conduct Authority (FSCA) has started preliminary actions to better understand the dealer introductory commission (DIC) market in South Africa, with the aim of ensuring that customers are being treated fairly. The manner of regulation will only be determined by the FSCA after it has reviewed the data collected from various industry stakeholders (mainly banks, dealerships and OEMs). We have established a Group DIC committee to ensure that we adopt a proactive response to any regulatory changes. We have engaged with our business in the UK on the potential impacts, as similar legislation was enacted by British regulators. Our contribution to the development of this regulation will be undertaken through our representation at the Banking Association South Africa and NADA. We are also engaging closely with our OEMs and banking partners to find solutions.

The FSCA has also started investigating insurance-related value-added products and services (VAPS) sold at point of sale to better understand the processes and practices used to market and sell these products. Current legislation empowers the Prudential Authority to prohibit the sale of VAPS at point of sale or to declare any unregulated products as regulated products. The inability to sell medium to long-term insurance products in dealerships will impact profitability if the FSCA decides to ban this revenue stream, whether partially or fully. We have developed action plans to respond to possible regulatory changes.

The final draft Cell Captive Conduct Standard, which regulates the structure of cell arrangements, was issued on 28 July 2020. The conduct standard, in its current form will have far reaching consequences for Motus' financial services providers (FSPs), requiring a restructure of our cell arrangements. In preparation, we have explored the various scenarios that could impact our businesses, so that we are ready to respond quickly and decisively. We will continue to monitor legislation and processes to ensure compliance.

The Conduct of Financial Institutions (COFI) Bill is part of the Twin Peaks model of regulation. The COFI Bill aims to strengthen the regulation of the financial sector in relation to customer treatment and general market conduct, outlining what customers and industry players can expect of financial institutions. The COFI Bill will be tabled in Parliament during 2021 and a number of conduct standards are expected to be tabled for consultation. Financial institutions will be re-licensed, and activities will be regulated as opposed to products. Our compliance and legal teams within our FSPs will have to be strengthened and dedicated business resources made available to ensure compliance with this principles-based approach. We are reviewing, amending and formalising our internal processes and procedures, where required. It is not known when the Bill will be promulgated.

Changes to the Financial Intelligence Centre Act (FICA) will move dealerships from being reporting institutions to accountable institutions alongside banks and our FSPs. While the administration requirements will not be a material impact, dealerships will have to adapt to a stricter compliance regime. A start date is yet to be published.

2021 performance and looking forward

Group

• Objective: proactively monitor and respond to regulatory changes and ensure that we adapt to the complex and evolving regulatory landscape with agility.

Regions

South Africa

• Heightened management's level of vigilance to manage the increased residual compliance risk resulting from the new legislations effective this year, to ensure the required interventions are implemented and the associated costs provided for.
• Completed POPIA requirements according to a detailed plan and guided by a central working group that covers all our operations in South Africa. The working group has received assistance by outside legal advisors to ensure a comprehensive approach to our implementation (see Data management).
• Reviewed and amended all franchise agreements, point of sale and trade documentation, and service, maintenance and warranty booklets, among others, to comply with the Right to Repair guidelines. We have also reviewed our communication with customers on benefit plans, adapted our systems to incorporate opt-outs in real time, and created a customer dispute resolution and mitigation process. As the Right to Repair guidelines impact many aspects of our business, related training is being delivered to employees involved in the purchase process; from dealership, customer care and finance staff to call centre employees and those working in claims authorisations, among others. We are also alerting customers to the consequences of using an independent service provider during the in-warranty period.
• Provided all requested information to the FSCA for its investigations on DIC and VAPS.

UK

• To replace the discretionary commission finance models that were banned in January 2021, we are working with our finance partners to create a compliant risk-based pricing model (where commission is based on the customer's credit profile). We have also established a lending panel for finance partners who prefer to offer fixed rates.