Supplier Development: a positive step in building the Small Business sector in SA
Published by www.engineeringnews.co.za on 02 March 2016
Supplier Development is actually a positive step in the right direction for transformation, and also for supporting and growing SMEs. Developing South African suppliers is something that we should all be encouraging, not only because of our high unemployment levels, but also for socio-economic reasons. The new Supplier Development element which has been integrated into Enterprise Development within the Amended B-BBEE Codes of Good Practice has as its primary purpose, the increase of procurement levels from small businesses. While previously it was easy for companies to ‘support' smaller businesses through earlier payment terms, to earn points on their B-BBEE scorecard without taking any ‘real' responsibility, the Amended codes are encouraging companies to support and contribute to the success of SME suppliers at another level.
Business success rates in South Africa are not good; in fact they are quite poor. “One in 10 businesses survive in the first three years while, 80% of entrepreneurs are struggling with their financials and many are not tax compliant,” says The Hope Factory's CEO, Annie McWalter.
In order to change this status, small businesses need help from bigger corporates to keep afloat and succeed. On the 1st of May 2015, the Amended B-BBEE Codes were implemented and many corporates were in the dark as to how to roll Supplier Development out within their own organisations. Supplier Development is all about corporates working with their suppliers to promote success for both parties. Big businesses can do more to support the financial aspects and operations of SMEs and also need to help smaller businesses to overcome their many challenges. Aspects such as competency and capacity are key obstacles preventing the integration of small suppliers into corporate supply chains.
Preferential Procurement, including Supplier and Enterprise Development, contributes to 40% of the B-BBEE scorecard. Earning the 15 points through Supplier Development and Enterprise Development are quick wins if done properly. “And The Hope Factory can help,” says McWalter. “We offer SD solutions that are specifically tailored to your business objectives and that satisfy all the compliance requirements of the Codes. Business Mentorship is at the core of our programme. In our experience, entrepreneurs benefit most from a flexible and holistic approach to developing business and leadership skills that may or may not include funding, but must always include strategic mentoring.”
There are two options available to investors in order to meet the new requirements; either invest in existing black suppliers within the company supply chain or to introduce new black suppliers into the company supply chain. Both options require the investors to develop a supplier development strategy and get the assistance from a business development company to help it meet the requirements.
Supplier Development is proactive and the new codes encourage big companies to offer longer term (beyond one -year contracts) to its suppliers and to help them fulfil the terms of the contract along the way. Quite simply, South Africa cannot afford to fail in its efforts to develop a viable, effective and sustainable small business sector. One merely has to look at our current economic growth rates and forecasts, and the continued struggle against unemployment. Embracing Supplier Development will go a long way in ensuring that there is support beyond the invoice- that SME's are provided with much needed business mentorship to grow their businesses through more supply chain opportunities, become sustainable and impact their communities and the nation as a whole.
