Drivers supporting procurement from black-owned SMMEs outweigh constraints



Mark_Frankel.jpgThe on-going sustainable development of black-owned small, medium and micro enterprises (BSMMEs) is imperative to secure the future economic growth of South Africa.

We have seen how past actions have limited what should be a free-market economy and left BSMMEs facing a number of challenges when it comes to getting a business off the ground, growing it and making it sustainable.

They are frequently at a disadvantage when it comes to fulfilling compliance requirements or raising loan and share capital as they are considered a greater risk.

When it comes to managing cash flow, they can be hard hit by late payments.
They often do not have the leeway or ability to take financial risks particularly when it comes to investment in research and development and attracting and mobilising sustainable procurement and innovation expertise.

However, the drivers supporting procurement from BSMMEs far outweigh these constraints and there are distinct advantages to being a small business:

• They are better able to respond to the increase in consumer demand for more specialised and customised products and services.
• BSMMEs have an advantage in situations where there is no scope for cost-effective mass production usually associated with the operational capacity of larger companies. Such an advantage applies to the micro-economies within South Africa’s provinces where enterprise and supplier development initiatives include local sourcing.
• The entrepreneurial nature and speed of communication in BSMMEs makes them particularly well suited to responding to and customising their offering according to customer requirements and gives them a potential advantage over larger, less flexible companies in fast-changing markets.

The aim of the Shanduka Black Umbrellas’ (SBU) enterprise and supplier development programmes is to collaborate with partners in the private sector, government and civil society in order to address the low levels of entrepreneurship and high failure rate of 100% black-owned emerging businesses in South Africa.

South Africa’s entrepreneurial rate of 8% is well below the 16% required by the country’s GDP level, said Mark Frankel, CEO of SBU, speaking at the Smart Procurement World Western Cape conference in March. He added that meaningful supplier development is newly practiced in South Africa.

Consequently, SBU’s primary objective of business is business; and that companies’ resources are most often deployed in focusing on the tangible financial benefits that are likely to accrue from enterprise and supplier development strategies.

At the same time, the issue comes down to risk versus opportunity. While the short-and medium-term risks may vary for each company and industry, the ultimate risk of ignoring the need for sustainable enterprise and supplier development, enabled by the amended B-BBEE Codes of Good Practice, is no longer an option.

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