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Procurement departments in the insurance industry spearheading change

31 May 2006 Beachhead Media & Investor Relations

The insurance industry is increasingly being called upon to help formulate and drive transformation, particularly for sectors without Black Economic Empowerment (BEE) Charters, according to David Reid Ross from Alexander Forbes Risk Services.

Insurance companies and brokers have a rare vantage point into sectors where transformation is lagging without a Charter, said Ross. Because we govern how business is allocated to many of the procurement partners and service providers in sectors like the motoring industry, we are able to encourage consideration about how these industries will fulfil the requirements of the Codes of Good Practice.

Continuing with the auto industry as the example, Ross explained that the business of panel beating, salvage dealers, towing companies and the like represent an economy of approximately R9 billion. Of that, some R5 billion goes to panel beaters alone. Barriers to entry, entrenched family ownership, and a limited skills base prevent an easy answer for clients of Alexander Forbes who wish to balance contribution to BEE with demand for price and quality.

Our clients from small businesses to companies insuring large fleets of vehicles want us to help them adhere to their own procurement guidelines as well as foster BEE in the economy. Our challenge is how to shift spend without disrupting a large economy.

Coupled with the requirements manufacturers impose for approved repair shops, a full-service enterprise with the requisite equipment can cost an entrepreneur some R10 million before he hires his first employee and opens his door. Even a small shop repairing only dents and dings can require some R2.5 million in start-up financing.

Representative bodies have begun working together, said Ross, but the industry is open to scrutiny and perhaps it is about time. BEE is a national strategy, he concluded, our Charters must align if the transformation process is to be successful.

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