Supporting black-owned and managed businesses

We are developing sustainable working models for black-owned and managed businesses, including non-OEM branded workshops and majority black-owned dealerships, in historically under-served areas near and around informal communities. We are also making our parts and services more accessible to informal traders and technicians. Not only do these initiatives aim to support communities, but they also provide us with access to new markets.

  • Finding the right equity partners with the competencies and capital that align to our ability to fund partnerships that yield longer-term returns.
  • Between 75% and 80% of our procurement spend is with or linked to established multi-national OEMs with whom we have stringent distribution and franchise agreements. The remainder of our procurement spend can be directed to B-BBEE compliant suppliers or exempt micro enterprises (EMEs) and qualifying small enterprises (QSEs); however, this smaller category of spend can sometimes result in a discounted B-BBEE rating.
  • Developing a sustainable procurement pipeline from black-owned businesses.
  • Providing the right support to small suppliers to help build their capacity to meet our product specifications and accreditation requirements, particularly for core and high-spend procurement categories.

What we are doing

B-BBEE compliance and preferential procurement

We ensure that our suppliers in South Africa have a valid B-BBEE scorecard. Where we can, we enhance our procurement processes to direct more of our controllable spend to B-BBEE compliant businesses, including EMEs and QSEs. This includes regularly reviewing our supply chain to identify opportunities to procure from SMEs. Given the nature of our businesses, these opportunities are limited; however, some do exist primarily within our dealership and car rental wash bays and for canteen services at various sites.

Makhaya project

The Makhaya project aims to create a sustainable micro-network of informal sector mechanics, providing them with equipped non-OEM branded workshops, technical support and SME-linked business training. These second tier workshops are located in or adjacent to our owned or franchised network of aftermarket parts or pre-owned dealership sites, or as independent joint ventures.

Aftermarket Parts is a supplier to the network and provides working capital and pricing support to the entrepreneurs. The businesses are closely monitored and are given reasonable access to our value chain and customers. Not only does the initiative support enterprise development and sustainable incomes, but it also contributes to the safety and reliability of vehicles that are 10 years or older and which many South Africans rely on.

Supplier and enterprise development

Our enterprise and supplier development (ESD) strategy is to find opportunities within our controllable procurement spend categories (that is outside of our franchise and OEM procurement) to provide training, mentoring and financial assistance to SMEs, particularly black-owned enterprises, to help them build sustainable businesses. To support SMEs, businesses within the Group outsource activities such as wash bays and cleaning services, or their canteens to small businesses, enabling them to operate rent- and utility-free. When providing loans to our SME suppliers, we monitor our procurement spending with the supplier, and review the enterprise's business sustainability and ability to repay the loan.

Case study

Interest-free loan

R7 million

in funding made available to the Unjani Clinics network; R2 million up to 2026 and R5 million up to 2027, to help upgrade or expand clinics

In 2021, we made R2 million available to the Unjani Clinics NPC (non-profit company) for the clinics to access interest-free enterprise development loans. Unjani Clinics, which is also a corporate social investment (CSI) beneficiary of the Group
( see Investing in education and technical skills development), supports professional women nurses to operate container clinics that provide quality affordable private healthcare in lower-income communities. Six nurses have been assisted from this tranche of available funding, amounting to R1,8 million. They have used the loans to extend their consulting rooms to enhance their service offering and accommodate a growing patient base. All six clinics have to date met their loan repayment agreements. One clinic has already paid back its loan in full. To date over R800 000 has been repaid and R990 000 is available to re-lend to the network.

Given the success of the first funding tranche, in 2022 we made a further R5 million available to Unjani Clinics as an
interest-free enterprise development loan. At August 2022, six clinics had taken up loans to instal solar systems with the total loan amount being R446 000. Additional loan applications have been received for clinic expansions and to relocate clinics to more favourable sites.

Unjani Clinics

How we measure our performance

Our procurement spend is monitored monthly to better understand how it is being distributed among our suppliers and to identify opportunities to shift spend to more B-BBEE compliant suppliers. Our procurement and ESD metrics are independently verified as part of the B-BBEE scorecard verification.

Governance of social impact.

2022 performance and key objectives

South Africa

Black-owned and managed businesses

  • In partnership with Toyota South Africa, we have invested in land to build a majority black-owned satellite dealership in Tembisa, Gauteng, costing around R30 million. During the year, the Memorandum of Incorporation and shareholder process for the dealership were completed. We will hold a minority share and provide operational support and training to the dealership team. The opening of the dealership however has unfortunately been set back for up to 24 months due to construction delays.
  • Within the Makhaya project, our initiatives in KwaMhlanga were closed in 2022, including our partnership with a local taxi association (Project Q), as sadly they were no longer viable or sustainable. However, we are pleased that the workshop in Alexander, Gauteng, remains operational and is supporting six vehicle technicians. An additional two workshops are still in the pipeline, and will be developed using the lessons learnt from our previous implementations.

Black-owned dealerships

42

black-owned Hyundai, Kia, Renault and Mitsubishi dealerships out of a total of 191 dealerships

(2021: 30)

Preferential procurement and ESD

  • 62% of suppliers (excluding OEMs) have valid B-BBEE scorecards (2021: 61% ).
  • The Retail division is developing plans to maximise the benefit accruing from OEMs having improved scorecards.
  • Within our four areas of ESD support, we spent R26 million (2021: R23 million) on outsourced wash bay facilities, R2 million (2021: R2 million) on canteen and food services and R1 million (2021: R2 million) on the transportation of vehicles. This year we also spent R10 million on special projects such as branding and signage.
  • A pilot project was started to assist 10 SMEs adapt their operations to become more sustainable so that they can participate in our supply chain. The pilot will be finalised in December 2022 and further roll out of the initiative will depend on the success of the pilot.
  • Every year, Car Rental identifies an ESD beneficiary to support; whether they are in need of help to purchase a vehicle or equipment or cover their business overheads. Small black businesses in the manufacturing of cleaning products, recycling and fibre installations and other IT-related business have been supported to date, and added to our supplier base.
  • Some of our ESD initiatives include:
    • Three Auto Pedigree suppliers, including a wash bay operator – Eco Auto Spa – who was initially assisted with the purchase of car wash equipment and materials and now operates on our premises free of charge. The business has expanded to providing cleaning services at other Auto Pedigree sites, including the head office. Initially assisted with the purchase of kitchen equipment, the owner of McLicious Café operates on our premises free of charge and now employs an additional employee. Auto Pedigree also supports Tlatlapa Trading, a vehicle courier service.
    • Working capital support for the SME who is facilitating the Kia corporate identity and branding upgrades.
    • Three Ford suppliers, two black-owned panel beaters (Panel/Paintwork and Valets and Damas Panel Beaters) and Mlungisi's Carwash. We assisted Damas Panel Beaters to acquire Ford Factory Approval, enabling the business to repair vehicles without the Ford factory warranty being impacted. Pleasingly, the car wash business is diversifying its operations to cleaning buildings.
    • Free-of-charge workshop space for Honda supplier, GP Auto Scratch.
    • Free-of-charge wash bay space and early invoice settlement for Active Corporate Cleaning, a supplier to Mercedes Benz. The brand also supports Culinary Concepts, a bistro located at two of its commercial vehicle business sites. Culinary Concepts has achieved growth beyond Motus.
    • Perla Hygiene Services, which provides wash bay and cleaning services to all our Nissan dealerships.
    • Free-of-charge wash bay space for seven small black-owned suppliers to Volkswagen, all of which are financially stable and employ on average 10 people at each of our sites.
  • Following a review of its supply chain to find opportunities to enhance its local procurement, Aftermarket Parts identified Motor-parts Africa Group (MAG) as a partner to provide blister packaged products. We assisted the business with its investment in machinery and other resources as well as working capital to support MAG's ability to develop a blister package solution for Aftermarket Parts. Within the first quarter of 2023, the business has successfully delivered a number of orders. The project is closely monitored to ensure MAG's ongoing sustainability.

Preferential procurement

R71,5 billion

total procurement spend, of which 29% was categorised as controllable

(2021: R56,7 billion; 35% )


65%

of our controllable procurement spend was with preferential suppliers

(2021: 63% )


R2,9 billion

spent with >51% black-owned businesses against an internal target of R2,5 billion

(2021: R2,3 billion)

R1,8 billion

spent with 30% black
women-owned businesses against an internal target of R1,5 billion

(2021: R1,0 billion)


R2,1 billion

spent with EMEs and QSEs against an internal target of R2,1 billion

(2021: R2,0 billion)

Enterprise and supplier development

R121 million

invested in ESD, a 59% increase compared to prior year

(2021: R76 million)


68% (R82 million)

of our ESD spend is estimated to qualify for the 2022 B-BBEE scorecard, equating to 3% of net profit after tax (NPAT), meeting the dtic Codes’ target of 3% of NPAT

(2021: R54 million; 3,1% of NPAT)


Scored 15

out of 15 points for the ESD pillar of the 2021 B-BBEE scorecard

 

Objectives

  • Continue to look for opportunities to increase the number of black-owned Motus-aligned franchise dealerships and grow the network of black-owned second tier workshops.
  • Provide business segments with additional training on the quality of their ESD projects.
  • Support the outsourced wash bay businesses to transition to grey water systems.
  • Facilitate OEM support for black-owned dealerships to upgrade their corporate identity and branding.
  • Connect the Auto Kasi mechanical workshops and their customers to our Aftermarket Parts retailers, enabling them to
    pre-order parts and thereby increase sales.

Case study

Hyundai has provided deserving SMEs with a five-year interest-free loan to support their growth and sustainability. In total the loans amount to R44 million. Some of the businesses supported include:

  • Ekurhuleni Panelbeaters and Spraypainters: a R1 million loan to a strategically located 100% black women-owned and managed business in Johannesburg to enable the business to join the Hyundai Approved Repairer Programme (HARP). The loan is being used to meet the HARP Programme's criteria. Improvements include a revamp of the building façade and signage, a new preparation deck and 4,2 tonne lift, damp treatment and painting of walls, ceilings and floors, installation of an oil separator system, the relocation of the spray booth to conform to workshop layout standards and the construction of a covered parking lot.
  • Diamond Panelbeaters: a black women-owned business in an industrial township area north of Pretoria, which diversified its operations during the COVID-19 pandemic to include a 24-hour towing business that is manned by three employees. The loan has been used to construct a covered yard for towed vehicles ordered by insurance companies.
  • Stratism Solutions: as a skills development supplier to Hyundai, the business has realised steady growth from our business development support. Its customer base has grown from 14 customers in 2020 to 37 in 2022 while maintaining a high level of service and it has increased its SETA accreditations. The business now employs 10 permanent employees and four temporary student interns and facilitators. Stratism Solutions has also improved its training facilities, including a separate ablution block, a tarred parking lot and an expanded computer laboratory.

Hyundai ESD
Programme