Company Announcement - Economists agree that small and emerging enterprises will play a critical role in resolving South Africa’s unemployment crisis. If one considers that each SME creates up to 50 employment opportunities then a promise of ‘six million jobs’ could be fulfilled by creating 120,000 new businesses. How can South Africa reach this target for SME development? One of the conditions required for SMEs to thrive is an enabling and ‘business friendly’ regulatory environment, which government must deliver; but it is the private sector which must encourage, incubate and reward entrepreneurship.

The motor body repairer development programme launched as a pilot project by insurers Hollard Insurance and Telesure Investment Holdings (Telesure) in August 2014, provides an excellent example of private sector innovation. “The seven panel beaters that were selected for the programme  - – two in Cape Town, two in Durban and three in Gauteng – have come through with flying colours,” says Malcolm Schnaid, group procurement manager at Hollard Insurance.

SMEs in the programme have benefited from mentorship on the part of participating insurers, as well as from their association with leading insurance brands. “Each of the panel beaters in the programme offers quality workmanship and excellent service. This has enabled us to sign them on as permanent members of our supply chain, one of the objectives of the project,” he says. The next step will be to negotiate motor vehicle manufacturer approvals for the participating MBRs.

Early on in the process it became clear that the small panel beaters needed sufficient and consistent volume of motor vehicle repair work to ensure success. To improve the flow of work through the supply chain, Hollard partnered with Auto Magic, to assist the insurer with the management of all ‘driveable’ motor claims (a ‘driveable claim’ is a claim involving a vehicle which can still be driven, post–accident). Cash flow was singled out as another major challenge for start-up SMEs in the motor vehicle repair industry. Parts suppliers extend inadequate credit terms to these companies with the result they cannot secure the parts necessary to complete and receive payment for a job. To counter this problem, the partners in the MBR development programme put funding arrangements in place to ensure that each of the participating panel beaters could order and receive parts in a seamless and timely fashion.

Another positive spin-off from the programme is that the participating panel beaters have begun marketing their services to potential clients outside of the insurer-MBR relationship. “The project has been of great value to me and my business because it has increased my footprint, as other insurers have now added me on their preferred supplier list because of the weight of the project,” says Motsaka Ledwaba in Midrand who was part of the pilot project.

As the first round of this MBR development programme comes to an end, the partners have had a chance to reflect on the challenges identified in the industry. “The biggest challenge is that there are many stakeholders in the motor vehicle repair chain and each of these must work together to ensure success - if one player in the chain stops or slows down then the entire process is impacted,” says Schnaid. Efficient and transparent communication between all stakeholders in the process is thus a critical factor for success.

Hollard is more than happy with the results from the pilot programme. One of the things that it has achieved is better alignment between the motor body repair supply chain and the insurer’s internal processes.

Another is a better understanding among supply chain participants of the nuances that exist in the way that different insurers deal with the supply chain. Schnaid explains: “Each insurer has its own terms, conditions and processes so it is important that the SME supplier that undertakes motor vehicle repairs for multiple insurers understands the need to meet varied processing and reporting requirements, among other things.”

Hollard is ready to build on the success of its pilot MBR development programme by expanding the concept into other areas of the insurer supply chain. The insurer’s next project focuses on developing SMEs in the non-motor repair industry – for example builders, plumbers and electricians – with support from Discovery Insure and Auto Magic.

“We will complete a request for proposal process with our transformation partner, Enterprise Room, and invite companies to participate based on an agreed set of criteria,” he says. The programme will identify six or seven Gauteng-based firms and then extend mentorship and support to those firms for a period of 12 months, in a similar fashion to the MBR programme. “The insurance industry relies heavily on the claims supply chain - enterprise development and programmes to develop SMEs in these areas will have to become part of our business planning going forward,” concludes Schnaid. “We are aware that the other insurers are watching us closely and expect many to follow suit and bring additional capacity into this initiative – we can achieve so much more as a united industry than if each stakeholder runs its own project.”