POINT OF ENTRY - JSE MAGAZINE

POINT OF ENTRY

Incorporating SMEs into the supply chain of larger enterprises is a crucial way of empowering entrepreneurs while strengthening the economy

POINT OF ENTRY

SA’s SMEs often find themselves at the mercy of big players. Although the former are small enough to be agile and innovative, they are dependent on the latter to give them a chance, a route to market. So it’s a good thing that the country’s corporates are genuinely enthusiastic about offering such enterprises an opportunity to do business and to become a valuable part of their supply chains, as well as to help them grow into sustainable companies.

‘The ability to secure meaningful preferential procurement opportunities of core products and services is a true measure of the extent to which the market has adequately capacitated entrepreneurs,’ says Mpopi Khupe, founding partner of advisory and project management company Zevoli. ‘The development of quality entrepreneurs is informed by the level of effort and commitment of SA Inc to systematically afford non-traditional suppliers more procurement opportunities that are high in impact, and highly complex as opposed to limiting them to routine and leverage commodities.’ She adds, however, that this requires a deliberate strategy.

Peter Theledi joined Pioneer Foods in 2003 as a crate welder. Hard work saw him promoted to route controller in 2006, then as sales representative for the Sasko Bochum Bakery. By 2016, he was the depot manager at Rosslyn. That year, Pioneer Foods launched an enterprise and supplier development (ESD) pilot project.

As part of this, they provided Theledi with R2.4 million in funding, as well as business support and mentoring, enabling him to become a small business owner and the independent distribution contractor for the Sasko Bochum Bakery. In Bochum, he employs 43 people and covers 11 delivery routes, while in Tzaneen (where he opened a second depot this year) he employs 51 people and covers 16 routes. Theledi’s company provides Pioneer Foods with a useful distribution service, but it also creates an opportunity to support small businesses in the area, which sell the products he distributes.

Nico Moloto, group executive for sustainability and stakeholders at Pioneer Foods, says small businesses are an integral part of the company’s supply chain. ‘We aim to source some of the goods or services from SMEs throughout the stages of our value chain to enhance their participation, especially in our preferential procurement efforts. We believe the most effective area to assist SMEs is to provide them with market-access opportunities and grow them to become preferred suppliers.’

He says Pioneer Foods provides additional business development support to SMEs and – through its ESD programme – funding on favourable terms so they are able to meet the financial needs for assets and working capital. The group also offers technical-skills coaching from various internal specialists and mentorship through third parties.

South African Breweries (SAB) has a legacy of more than 120 years in SA and has always valued transformation and supplier development. The company has a number of initiatives to support SMEs and entrepreneurs at various stages of their journey, including the SAB KickStart, KickStart Boost and KickStart Ignite programmes; SAB Thrive; SAB Lerumo; and SAB Accelerator.

The key objective of SAB Accelerator is to grow SAB’s supply chain to include black-owned businesses, especially black women-owned firms. To achieve this, an incubator comprising business coaches and engineers dedicated to growing these suppliers has been set up. SAB Accelerator partners with the company’s suppliers and provides coaching and technical expertise, which helps them better understand the SAB landscape and value chain, and integrate them into the business.

‘As an organisation, we are deeply committed to growing local SMEs and enabling them to participate in our supply chain,’ says Azure Janneker, SAB’s media relations and crisis communications manager. ‘An estimated 20% of our total procurement spend in South Africa goes towards SMEs.’

Janneker says SAB strives to increase SME participation in its supply chain and also offers preferential payment terms for smaller suppliers, ‘giving SMEs an opportunity to participate in our business either through tenders or through specific programmes, which attempt to make them ready for the supply-chain environment’.

At Omni HR Consulting, developing SMEs is high on the company’s transformation agenda and forms an integral part of its supply chain. ‘Our current procurement status acknowledges 51% of our suppliers who form part of the emerging medium enterprise [EME] category,’ says marketing executive Cassandra Julius. ‘In our supply chain, we critically evaluate and ensure we have SMEs that form part of most of our procurement considerations and, as a result, are noted on our commodity listing to assist the organisation when making supplier selections and purchasing decisions.’

Convoy, Engen’s ESD fund, supports sustainable supply-chain transformation. It also provides access to finance for both capital and business development needs for entities that are at least 51% black owned and/or black-women owned. It works by easing requirements for qualifying ESD SMEs to secure business loans as well as by providing business-development support for selected beneficiaries.

‘Growing and nurturing business skills for emerging entrepreneurs in South Africa will boost employment, improve education levels and help alleviate poverty,’ says Unathi Magida-Njokweni, Engen’s transformation and stakeholder engagement manager. Pitch & Polish is another initiative Engen supports – an annual competition and workshop that provides members of local communities with expert guidance on how to polish their business pitches. Since its inception, more than 10 000 budding entrepreneurs have participated in the programme.

Business coaching firm MyCoach specialises in coaching entrepreneurs in technology, be they entrepreneurs who have tech companies or companies that want to use technology to scale or automate their businesses. ‘Coaching helps entrepreneurs build and gain clarity on their strategy and vision,’ says MD Eugene van der  Merwe. ‘We also assist entrepreneurs with setting up their online presence and help them dramatically reduce their overheads by using online/cloud-based software that is either low cost or free for small companies.’ This leads to plenty of savings, especially time and cost.

Waste-management company EnviroServe also provides entrepreneurs with training through regularly held information sessions at its facilities, according to Rakesh Seetal, the company’s head of procurement. ‘We advise them of upcoming tenders and RFQs [requests for quotation], and train them how to complete tender documents in order to be administratively compliant.’ EnviroServ also offers entrepreneurs an opportunity to compete for work in its supply chain, encouraging ‘compliant BEE entrepreneurs to compete using the 80/20 selection criteria, which gives them an added advantage’.

According to Tshidi Ramogase, public affairs and communications director of Coca-Cola Beverages South Africa (CCBSA), soft drinks – which are manufactured, bottled and sold locally – hold immense value-chain opportunities to create and support transformed businesses. ‘These enterprises are where the jobs South Africa needs will come from, and CCBSA is determined to be a part of the solution,’ she says. This year, CCBSA embarked on a comprehensive preferential procurement transformation strategy that will shift R3.9 billion of its weighted procurement spend as measured by BEE to black-owned and black women-owned suppliers over the next three years. It has committed to training 25 000 black retailers in business skills by 2020 via its Growing My Business and Bizniz in a Box programmes.

Hemant Harrielall, GM of the Chartered Institute of Procurement & Supply (CIPS) Africa, says organisations should view SMEs as contributing to a mixed economy – a prerequisite to unlocking economic growth. ‘Over time, integrating more SMEs into supply chains will ensure the even distribution of market power,’ he says, adding that it will also create employment. CIPS offers SMEs globally accredited training and short courses in procurement and supply through contact training sessions or e-learning platforms, providing them with ‘cutting-edge and ethical procurement skills’ that give them a competitive edge.

Suzanne Ackerman-Berman, director of transformation at Pick n Pay, believes big business has a major role to play in building the economy across all levels. ‘Transforming the supply chain is a fundamental part of growing this country. By creating opportunities for small-scale suppliers, farmers or entrepreneurs, we help them get into a position where they can service other retailers – or even go out on their own, in the process creating jobs and becoming more skilled themselves.’

Through its ESD programme, Pick n Pay helps small businesses enter the retail market by providing mentorship, guidance and business development support. They gain access to Pick n Pay’s internal corporate experts who assist them with business management processes, such as marketing and advertising techniques; buying and negotiating skills; cash flow; and business principles.

Ackerman-Berman says the programme has had incredible successes. She cites the example of local entrepreneur Portia Mngomezulu, who, through the programme, was able to grow her small skincare and cosmetics business into a nationwide success, generating more than R20 million in sales over the past 24 months through Pick n Pay alone.

It takes more than once-off interventions to make a difference, she says, adding that entrepreneurs are key to SA’s economic freedom. ‘They are job creators, the developers of skills and innovators. By supporting, sustaining and scaling small businesses in this country, they can become meaningful contributors to our economy.’

By Toni Muir
Image: Muti