Hollard’s success in boosting black-owned panel-beating businesses has led to the insurer exploring using the same method to improve the fortunes of black-owned businesses in the construction, building and plumbing sectors. So says Marvin Tshezi, the insurer’s executive head of claims, procurement, and enterprise and supplier development.

Combining its own procurement strategy with the government’s Yes4Youth programme, aimed at improving youth employment, and taking into account South Africa’s broad-based black economic empowerment (B-BBEE) legislation, Hollard has substantially increased the percentage of procurement expenditure going to black-owned panel-beating companies on its books.

 “It took three years for us to reach our daunting goal of ensuring that 50% of our claims spend goes to majority black-owned businesses,” says Tshezi. This surpasses the Department of Trade, Industry and Competition’s goal of 30%.

“In doing so, we’ve created a win for our customers, through increasing the number of competent panel beaters in our database; a win for ourselves, in that having more panel beaters to choose from has reduced repair time and costs; and a win for the South African economy, in that we have contributed to the sustainability of black-owned business. We believe we can now use what we have learnt to do the same in the construction, building and plumbing sectors.”

Panel-beating constitutes the largest component of Hollard’s annual R1.4-billion motor body repair account. This, in turn, comprises between 60% and 65% of the insurer’s vehicle-related claims payouts each year, he says. 

“As an insurer, the so-called ‘middle-class’ is our market. We asked ourselves what we were doing to grow that middle class, and especially the black middle class, in the long-term interests of our business. We decided we could make a start by growing the capacity of existing, black-owned panel-beating companies because we could have a real impact in that environment given the significant amount we spend on repairs,” Tshezi says.

At the programme’s start, Hollard looked at how its panel-beating custom was split among Exempted Micro-Enterprises (annual turnover under R10-million), Small Qualifying Enterprises (turnover between R10-million and R50-million per annum) and Generic large businesses (turnover more than R50-million a year). The insurer decided that it would have the largest impact if it helped EME’s become QSE’s.

One of the first challenges was to dispel the broadly held misconception that micro- and small panel-beating businesses are more expensive than their larger counterparts because of economies of scale. Using a data science tool specially developed for the panel beater programme, Hollard was able to show that often a small or micro-enterprise provided a service that was cheaper per unit. “All micro- and small enterprises really needed was access to market. Most often, they were competitively priced and had the tools and the expertise needed,” says Tshezi.

Added to the cheaper cost per unit, Hollard also benefitted from improved customer outcomes and an improvement in its B-BBEE level. “The programme has increased our transformation credits, lowered the average cost of repair and improved customer experience by reducing wait times,” says Tshezi.

Hollard extended the benefits of the programme through a number of deliberate interventions. For example, through detailed consideration of each business, it improved the percentage of panel-beating businesses owned by black women on its books from under 3% to around 24%.

It also boosted the fortunes of the micro- and small panel-beating businesses by agreeing to pay each business within 30 days. This improves small businesses’ cash flow – repeatedly identified as the single largest hurdle to small businesses across sectors.

Finally, the realisation that most existing panel beaters are older than 45 led to a programme to upskill unemployed youths. In March, 22 young people graduated from this three-year programme, providing a real boost to micro- and small businesses that cannot afford the approximately R350 000 to produce a qualified panel beater. This benefits insurers in that highly qualified panel beaters can significantly reduce repair costs - for example, by repairing a damaged bumper instead of simply replacing it.

“It’s been so successful and rewarding that we just have to extend our ideas into the building, construction and plumbing sector, ” says Tshezi. Most of the people who do the actual, physical work in these environments are black, but the vast majority can’t take on a R1-million contract mainly because they cannot afford the R750 000 capital outlay to get supplies. We have some cool ideas to tackle that.”