Path to Success - JSE MAGAZINE

Path to Success

Ecsponent Limited is driving transformation by providing an inspired growth solution of women-owned SMEs

In remembrance of what SA women such as Lilian Ngoyi, Helen Joseph, Albertina Sisulu, and Sophia Williams-De Bruyn achieved in 1956, the country celebrates Women’s Month in August.

This celebration gives us an opportunity to celebrate and consider women’s achievements and the important role they play in society. Apart from fulfilling their traditional roles as mothers, wives, partners and caregivers, women are also reaching top positions in areas of business, politics and academia. However, in the SME sector, more must be done to advance women.

While it is commonly held that the key to SA’s economic development, and indeed that of Africa, is to build a strong SME sector, most financial institutions still consider these entities to be high-risk. This is often due to SMEs’ informal practices, lack of credit history and no access to collateral. The result is that access to capital – one of the most critical barriers to success in this sector – remains unaddressed.

For female entrepreneurs, access to capital is just one aspect of the struggle to achieve economic inclusion. The Women’s Legal Centre points out that gender inequality is ingrained in SA society, with unequal divisions of labour and a lack of control over economic resources just some of the contributing factors. Black women are especially vulnerable because of the racial and gender impact of poverty and unemployment. In a rural setting, these problems are aggravated.

BEE AND PREFERENTIAL PROCUREMENT CAN BENEFIT WOMEN
Large businesses in SA are required to apply preferential procurement practices, and failing to do so places a business under threat of survival. To comply with preferential procurement principles, corporate SA has to increase its procurement from empowered SMEs. However, corporates often consider dealing with SMEs a business risk, so instead of placing business-critical orders that attract higher margins with them, the SMEs receive orders for incidentals, such as food or cleaning supplies.

These types of orders present a low business risk for the corporate but a low margin for the SME – a zero win for everyone, including the SA economy. Corporates do not make BEE procurement targets, while the low margins do the SMEs no favours.

Exacerbating the problem for women is the ongoing perception that BEE is mainly a men’s game, where women are treated as minority partners. Corruption, old boys’ networks, patronising procurement officials, a lack of working capital and, especially, a lack of skills, are cited as reasons women lag behind in accessing preferential procurement opportunities.

Yet the BEE Act is clear on the need for women to be equal beneficiaries of black economic empower-ment. As such, large businesses could benefit by including women in their procurement practices, as according to the Small Enterprise Development Agency (SEDA), 72% of micro-enterprises and 40% of small enterprises are owned by women. This gives large corporate businesses a variety of female-led SMEs to include in their supply chain.

GROWING THE SKILLS OF SMEs IN SUPPLY CHAIN MANAGEMENT
In addition to providing access to capital, training and skills transfer are important components of any business if SMEs are to grow into successful, mature businesses that will drive economic growth.

In supply chain management, it is essential that entrepreneurs and vendors know how to apply good and effective procurement practices, and are skilled in the nitty-gritty of transaction costing and management. They also need to understand the BEE scorecard system and its measurements. Fraud bedevils the supply chain, so vendors must know what they are up against in a world where corruption is a daily reality.

‘We provide enterprise development and credit to encourage growth and development in the SME sector through supply chain management solutions that secure the funds in procurement transactions,’ says Terence Gregory, CEO of JSE-listed Ecsponent Ltd. This is a solution whereby a client, usually a big corporate, identifies vendors, or puts out a tender to attract vendors who meet regulatory criteria, including the requisite BEE credentials.

‘Once the vendor is identified, we assess it to establish its financial status, skills levels and ability to deliver on the orders,’ he says. ‘We then take the vendor through the procurement process, teaching them and assisting them to negotiate better terms or even to import goods according to the correct specifications.

‘The South African economy has to be inclusive to survive and thrive. Large corporate businesses should be able to focus on their core business, with the assurance that the goods and products they require to do so are delivered on time and according to specification, while creating opportunities for emerging vendors. Education, community upliftment, and true empowerment will be the natural result of this, with all the stakeholders involved drawing benefit. Without support and training, cash disappears very quickly. We have had to find unique ways to secure the transactions, since we warrant on time and on spec delivery to the corporate clients. We overcame that problem by inserting ourselves into the supply chain and securing the flow of cash.’

PUTTING ITS MONEY ON THE LINE
Through this process, SMEs typically become self-sufficient to graduate to formal banking and a permanent supply chain list of the large corporate after six to eight transactions and, through it, Ecsponent facilitates transactions for exempted micro-enterprises, qualifying small and black-owned enterprises, and black female vendors.

One such female vendor is Jennifer Bokwa, a qualified attorney. She is a shining example of what can happen when a determined entrepreneur gains access to finance. After a long career in SA’s public sector, Bokwa eventually decided she wanted to run her own business. Three years later, unable |to secure start-up finance from any bank in the country, she approached Ecsponent.

So far, Bokwa’s company has successfully concluded four transactions, primarily supplying IT equipment to SA’s Road Traffic Management Corporation. Executing the first transaction, she spent time with Ecsponent to understand what it takes to manage a procurement process and potential pitfalls she may face as an entrepreneur. She also completed a course on succeeding as a small-business owner. Her track record is exemplary, and Bokwa’s company will soon be in a position to secure mainstream business finance.

This illustrates that success is definitely within reach, but it doesn’t happen overnight, as Alula Water CEO Dinao Lerutla came to realise. Alula supplies water and solar systems to large corporations, government and state-owned enterprises. Lerutla approached Ecsponent three years ago to fund water filtration systems to SA’s energy provider and water board, as well as the government of Botswana. Since then, Alula has concluded several transactions, and continues to rely on Ecsponent to facilitate transactions, since funds are not forthcoming from banks.

Corporates benefit from secure delivery and increased BEE points in respect of preferential procurement. By combining skills, mentorships, funding and partnerships between large businesses and emerging entrepreneurs, Ecsponent creates win-win solutions. Not only does this contribute to greater female economic participation but the economy becomes more inclusive and sees positive growth – an elegant solution in a complex and challenging economic climate.

1st Floor, The Wedge
43 Garsfontein Road,
Waterkloof, 0145
+27 (0)87 808 0100
[email protected]
www.ecsponentlimited.com