The major national insurers have long since established impressive strategic and executive support for broad-based black economic empowerment (B-BBEE) within their organisations. Indeed, a closer look at *ten of the leading short-term insurers reveals that 70% publically state their commitment to B-BBEE as being strategically important. Nevertheless the majority of these players can expect a rating downgrade of approximately two levels for the 2015/6 audit period. So where are the insurers losing points and how can they take advantage of some quick wins to pull them back on track?
Assuming that ownership structures and performance against the key priority elements of the B-BBEE scorecards remain unchanged, our research shows that the average rating across the top ten short-term insurers is likely to drop from a level 4 to a level 6. This drastic downgrade is being caused by the introduction of the revised codes, which have consolidated the key scorecard elements from seven to five but more importantly, have altered the weightings associated with specific scores.
The significance of Enterprise and Supplier Development
The Enterprise and Supplier Development category is one of the two categories that has been blended. In this case it has resulted in the merging of the ‘preferential procurement’ and the ‘enterprise development’ categories. Preferential procurement, under the old codes, did not lend significant weighting to procurement from black owned suppliers, however the revised codes have raised the barrier to entry by adding a massive 40% weighting to procurement from organisations with a 51% black ownership structure, and a further 12% to organisations with a 30% black woman owned structure. Additionally, Generics (organisations with a turnover of R50 million or more) are able to score bonus points and additional enterprise and supplier development points by recruiting services from these ‘Empowered Suppliers’.
Until now, the larger insurers have struggled to recruit and retain the services of these ‘Empowering Suppliers’, siting skills, scale and operational risks as key reasons. This fact holds true when we drill a little deeper into the preferred glass suppliers for each of the chosen insurers, which reveals little deviation in vendor choice from the main incumbents over the past three years.
Meeting the true spirit of transformation
As a three-year old national glass provider, with an extensive national footprint, My Glass decided to integrate the new B-BBEE codes early into its growth strategy and organisational design. Uninhibited by the need for physical fitment centres, My Glass took a fresh approach recognising that it could quickly create a network of local, independently-owned businesses, whilst simultaneously stimulate job creation and economic growth. By April 2016 My Glass will complete its shareholding agreements with four of its black owned My Glass Licensees, elevating its B-BBEE status to 58.83% black owned. This is a significant competitive advantage for the organisation and one that offers real dividends in the form of enterprise and supplier development benefits for the insurers who choose to partner with My Glass.
To learn more about the B-BBEE strategy and My Glass, please email firstname.lastname@example.org
*My Glass desk based research