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B-BBEE due diligence process creates additional strain on small business suppliers

Inconsistent vetting procedures and application of BBBEE rules within the insurance sector are creating problems for many smaller business suppliers within the motor body repair sector.
Richard Green, National Director of the South African Motor Body Repairers’ Association (SAMBRA), a proud association of the Retail Motor Industry Organisation (RMI), representing over a 1,000 motor body repairers and responsible for repairing over 80% of all insured repair claims, says these vetting inconsistencies need to be addressed.
Green says SAMBRA fully respects that if the requirement of the insurer is a certain level BBBEE score, members will utilise the services of specialists to create a programme that ensures that such a level is met, irrespective of the turnover or size of the business.
“These structures are all constructed utilising the directives of the current Act and verified by accredited agencies. However, we are still seeing many instances where these small businesses are simply being excluded from certain insurer’s work flow, whilst the same businesses are accepted by other role players in the industry and even by government itself for procurement purposes,” says Green.
Green says the issue is not the criteria being stipulated by the insurers. “A company is allowed to set its own criteria as that is the nature of a free-market business, but there needs to be a consistent application of B-BBEE rules so as not to be arbitrary. The real issue is therefore that insurers seem to set their own rules over and above the B-BBEE thresholds. This not only creates uncertainty, but also unnecessary additional costs for MBRs to try to comply with.”
The situation motor body repairers find themselves in is not dissimilar to the one car rental companies found themselves facing from the Airports Company of South Africa (ACSA). In that particular case the Imperial Group, which rents cars under the Europcar and Tempest brands, successfully challenged ACSA’s rental rules in the high court. The Supreme Court of Appeal ruled against ACSA saying “the Airports Company of South Africa (ACSA) cannot make up its own black empowerment rules” and said while it is rational to set targets to promote transformation, ACSA seems to have set its targets arbitrarily.
Green says small businesses on the receiving end of these practices are significantly compromised financially when they are excluded from the supply chain of bigger companies. This is exacerbated by the fact that they are also financially out-muscled should they opt for legal action. ”It is not a good strategy to lock horns under these circumstances as no court can force a client to buy from the small business even if the small business wins such a legal battle. It would be a case of winning the battle but losing the war.
“It is concerning to see that many SAMBRA members, even once they have taken expert opinion and have been verified by certified verification agents, are still regularly subjected to extreme scrutiny and excluded from work allocation.”
As an important custodian of industry standards, SAMBRA appreciates that specific business circumstances may vary from one business to another. “We encourage our members to obtain very specific guidance from a qualified and experienced B-BBEE consultant. Once that has been done surely then the outcome, as it is reflected and verified, should be respected by ALL insurers? There needs to be a level playing field with one set of rules everyone adheres to.”