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Momentum in local procurement can bolster South African SMME growth

ENGINEERING NEWS / 20 JUNE 2018 - 12.09 / SCHALK BURGER

While small, medium-sized and microenterprises (SMMEs) in South Africa do not contribute the equivalent proportion to employment or gross domestic product as those in developed countries, there are various initiatives that are helping to draw SMMEs into the formal sector and into larger supply chains, speakers at the Small Business Indaba said on Wednesday.

"The private sector can significantly boost SMME development through local procurement," Proudly South African COO Eustace Mashimbye said.

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He stressed, however, that the quality of the products or materials must remain high and within the specifications of the companies and within the various regulations.

He noted that franchises in South Africa that were part of the Franchise Association of Southern Africa were working with Proudly South African and the Department of Trade and Industry to transform their supply chains to include local black-owned suppliers.

"The franchises, which include large fast-food and delicatessen companies, will not buy inferior products to supply their operations. The Proudly South African database acts to ensure compliance and high quality. Similarly, we also try to ensure that procurement managers know about local companies producing items or materials that they need.

"We have also developed integration with the Central Supplier Database of national government and Proudly South African companies will be automatically registered on [the database] and will be alerted to tenders by various government agencies and departments for services they provide or products that they produce," Mashimbye pointed out.

He added that small businesses generally battle to attract customers and maintain profitability, which hinges on access to markets. This is why stimulating the inclusion of smaller businesses in supply chains provides significant opportunities to ensure that the value addition is done locally.

Small businesses provide employment for about 90% of people in developed economies, which make them key to solving the inequality, unemployment and poverty challenges in South Africa, he noted.

He also stated that government could contribute to the growth of SMMEs by eliminating middlemen and procuring directly from South African producers.

Meanwhile, many of the small enterprises in South Africa are involved in manufacturing, noted Small Enterprise Development Agency (Seda) research specialist Lizzie Mabotja.

The research Seda has done highlighted the importance of manufacturing and productive businesses, and considered how contracts with large organisations benefit small businesses and how manufacturing support programmes stimulate employment in these businesses, she said.

"Significantly, many of the small businesses we studied during the needs analysis survey were survivalist enterprises with an average age of seven years and employing one to five employees.

They would often produce different products as the grants, incentives and demands for products changed."

"Our survey highlighted the importance of cohesion and integration of policies, initiatives and regulations, as well as the formation of partnerships between organisations working on similar objectives."

Formalising the country’s informal small businesses would help them to access broader opportunities and integrate into wider supply chains, she added, noting that Seda was working to ensure that quality standards were adhered to, as well as helping small businesses with the registration and legal processes to become formal businesses.

Mabotja highlighted that the aim of the research was to provide evidence for the development of effective manufacturing support programmes. She also highlighted a need to ensure the required digital infrastructure was in place.

"These enterprises are aware of the importance and significance of a digital presence as a driver of change, although they do not always have the skills to manage digital channels or to effectively assess the economic prudence of using new technologies.

“Seda's technology programme focuses on injecting the right technology and advice into these smaller manufacturers."

Significantly, there is also a need to increase the practical and hands-on training aspects of skills development, as the entrepreneurs vastly preferred learning from existing entrepreneurs to theoretical training.

Similarly, entrepreneurs often had significant experience, which was difficult to formalise, and helping them to become certified to access wider markets and provide better visibility in supply chains was of significant benefit for the small businesses.

Getting the basics right would provide a boost to SMME development and growth. Their development would also have a disproportionate effect on service industries, Mabotja emphasised.

"Manufacturing, though down to 12.9% of the gross domestic product, remains a key sector that presents significant benefits, if we can unlock them.

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LINK : http://m.engineeringnews.co.za/article/momentum-in-local-procurement-can-bolster-south-african-smme-growth-2018-06-20/rep_id:4433

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