There is continued reduction of margins by trade discounting on procurement direction by Insurers. Turmoil has been evident in our new world post the Covid-19 Pandemic shutdown and even since allowed re-opening for trade in our repair industry under level 3 lockdown stress associated by making ends meet has been a challenge beyond expectation.
With respect and sincere commiserations to those members of the general public whom have suffered financial instability due to job loss and more evident in only rotational short time employment with the effect on their livelihood which has resulted from repercussions of huge negative impact on the sustainable operation of a large amount of small business operations. Cancelled insurance policies, less cars on the road and the lack of possibility of funding excess contribution for repair under incident reported authorisation has the contributed outcome of reduced current work in progress levels by around 35% at present.
For the business owner having to maintain continuity of expenditure commitment at best 65% of required margin is never going to be attainable and thus cutting back on cost is the only premise. Cost of labour is by far the greatest monthly outlay and thus retrenchment, adding to unemployed statistics is possibly the easiest means of reduction of expenses.
This background is provided to emphasise the content of this article and the stark reality as to how the motor body repairer business owner has to now make ends meet. It is sad that we are hearing of staff reduction and layoffs of previously employed staff not including forced closure of some MBR facilities by not being able to finance their continuity or hopefully a return to almost similar production levels.
The support of people in dire need of basic necessity is going to have huge financial impact on the fiscus and the only means of support will be higher taxes, more outlay and higher cost making the demise of existence even more realistic.
It may appear as if this is leading to a negative sentiment and we all aspire to proactive change for a positive result; being first prize and able to aspire to a meaningful contribution. If this message is read with the intent required, this may go a long way in placing the request or plea in the spotlight.
In the first instance we apply huge praise and heartfelt thanks to almost all short term motor insurers who accepted our plea for assistance in the early stages in adding to cash reserves by suspending the deduction of trade discount from authorisations in the interim and now ask stakeholders at these Insurers to extend this premise as the new normal on the road ahead.
We have seen numerous appeals to contribute to the rebuilding of the damaged economy as a joint collective and if our Insurer partners heed to the request we almost certainly will ensure a serious dent in reduction of unemployed people by providing them with access to basic existence and food on the table to themselves and their immediate dependants.
Without actuarial calculation we are certain the Insurers are noticing lesser impact on their margins and reserves and thus the consideration to apply these savings to broader benefit other than the elite coffers of their shareholders are affordable.
By means of understanding a 5% trade discount equates to around R52 000 per R1 million of turnover and this additional income stream supports payment to a substantial number of, in most instances, continued employment and income to and through demographics mainly to disadvantaged community people.
Should you read the plea but not being the decision maker please ensure this is escalated to the right responsible person for their consideration.
By Steve Kessel, CRA Operations Director