In April 2014 one of the country’s leading loss adjusting and associated services companies, Crawford & Company South Africa took the local insurance industry by the horns and shook it up when Chedza International Holdings (Pty) Limited (Chedza) became the majority shareholder in the company in an empowerment deal said to be worth about R25 million.
Norman Hornby, Chief Executive Officer of Crawford & Company South Africa, and Mpho Mahanyele, Chedza CEO and Crawford and Company Group Executive Director, reflect on the transaction that has made Crawford & Company South Africa the first fully black-owned loss adjusting, and risk management and associated services, company in the country.
The Company prides itself on being a one-stop shop and offering a range of services, not just loss adjusting. These include services and resources in business interruption, investigations, reporting, assessments and business processes and consulting. Through its claims management system and global reach it services the mining and power and energy, transportation and marine, engineering, and Information and Communications Technology (ICT) sectors through the country and Africa.
Give us some background on Crawford & Company South Africa.
Previously the company was part of Crawford & Company International, which held the majority of the company. Crawford & Company International, a listed company on the New York Stock Exchange (NYSE), has a global network of more than 70 countries. It is the world’s largest independent provider of claims management solutions to the risk management and insurance, including self-insured entities.
Tell us about Chedza.
Chedza is a Broad-Based Black Economic Empowerment (B–BBEE) company, 32.50% black women owned and a level 3 contributor to B-BBEE. The company has shareholdings in a number of South African businesses, and is particularly interested in companies that have a substantial growth potential.
Empowerment has been defined by the South African government as an integrated and coherent socio-economic process that directly contributes to the economic transformation of South Africa and brings about significant increases in the number of black people that manage, own and control the country’s economy as well as significant decreases in income inequalities.
Chedza facilitates B-BBEE through the ownership, control and management of a group of business entities by utilising specialised purpose vehicles and suitable business opportunities to facilitate empowerment.
Its goal is to become the most successful player in the business of empowerment and to maintain the leadership in the industries in which it operates. This leadership is based on service and/or product excellence within these businesses. We encourage mutual and sustainable business relationships. We want to harness the power of diversity and, through this, build strong companies which, in turn, build strong industry sectors and a strong South Africa.
Much has been made of the Chedza B-BBEE methodology. Can you briefly outline how it works and why it is so successful?
The methodology it uses to facilitate B-BBEE transformation and growth is based on a relationship between Chedza and the respective company which sees the principles of skills transfer from, in this case, Crawford & Company South Africa to Chedza and growth facilitation from Chedza to Crawford.
From 1 May 2015, the amended B-BBEE Codes (published 11 October 2013), ownership will no longer be an option, but a requirement. Businesses with a turnover of more than R10 million per annum, will have to verify their ownership status against the requirements of ownership.
Therefore, through its model, Chedza has met the requirements of the Codes over the years regardless of amendments. Its model has emphasised ownership and, as such, the amended codes has led to its model being more in line than ever before with B-BBEE requirements.
This methodology can be used as a blueprint for other companies that want to do business in the country, but are apprehensive about the B-BBEE regulatory environment.
Take us through the transaction between the two companies.
In 2006 Chedza purchased 25.1% of Crawford & Company SA. In 2013 the decision was made that it would be in the best interest of Crawford & Company South Africa, its employees and its shareholders, to change its shareholding structure. As a result Chedza purchased the remaining 74.9% of Crawford & Company South Africa.
While Crawford & Company International sold its control stake (74.9%) in Crawford & Company South Africa to Chedza, the company is an associate of Crawford & Company International in Sub-Saharan Africa. This has essentially taken the company from a minority shareholder association to an association agreement with Crawford & Company International.
What this means is that Crawford & Company International and Chedza will be closely linked, with Chedza representing Crawford & Company International in Sub-Saharan Africa. Therefore the company has continued to trade as Crawford & Company South Africa, with the leadership team and staff remaining in place.
The transaction made Crawford & Company South Africa the first black-owned loss adjusting company in the country. What is the meaning of this and the benefits for the company?
The empowerment deal has led the company into a new and exciting era that has led to a bigger demand than ever for its team, all of whom are experts in their field, by companies and underwriters from across the continent.
The deal has merged the international and local experience and expertise and region-specific knowledge of the company. The company has been on an eight year journey which has seen Crawford & Company International transfer its skills to the local Senior Management Team (SMT). This has led Crawford & Company South Africa to move from only offering loss adjusting services to extended service offerings, thereby expanding its client base.
Our services to the various sectors, mentioned earlier mining and power and energy, transportation and marine, engineering, and Information and Communications Technology (ICT)) go far beyond loss adjusting. Therefore we are able to offer our clients a range of related services, such as risk management, investigations, reporting, assessments and business processes and consulting, etc. This expansion, of our resources and services, has been part of a strategy to become the first place our clients come to because we are able to offer them a one-stop shop of services.
This is where Chedza placed a pivotal role as it has brought to the table a strong locally-owned presence, innovation to the company’s business offering and positioned the company to meet the challenges and opportunities of the industry and its clients head on. It also forms part of Chedza’s business model to build strong companies through harnessing the power of diversity.
Our perspective shifted from a global inward looking one to a local one looking outwards and this means a few things. Firstly that we now have the ability, because we are the first black-owned loss adjusting company in the country, to transform our profession. We are working to attract more youth into the profession by expanding our in-house training programme and service offerings. This also supports government’s focus on job creation and skills development.
Secondly it allows us to adapt our service offerings to the South African and African markets. We are in a position where we can offer services to transport parastatals to support their infrastructure development programmes, which are of the largest capital expenditure programmes the country has seen in a decade. As more and more African countries expand and build their infrastructure we are able to assist them as well.
Thirdly, and last but not least, it places us in a better position to meet government’s development agenda. While our unique structure meets the requirements of the B-BBEE legislation, it also gives us is an optimisation of the potential of our local operation and global footprint.
Through all of these we are able to be more relevant and to make a meaningful contribution to the socio-economic landscape of our industry and the country.
LEADING EDGE | Transforming Business for Success
by Valdi Pereira