The second day of the National SMME Policy Colloquium hosted by the Industrial Development Corporation, deliberated on the role of enterprise and supplier development (E&SD) and how it could benefit both small business suppliers and big businesses if applied correctly.
The colloquium is a three-day gathering of government agencies, business leaders and other stakeholders with the aim of influencing national policy programmes of the newly-established Department of Small Business Development.
Enterprise and supplier development seeks to encourage big businesses and big procurer of goods and services to diversify supplier chains with the aim of growing small businesses and creating jobs.
In South Africa, E&SD is the highest beneficial category in the revised BB-BEE Codes of Good Practice scorecard.
However, comments at the colloquium revealed that in South Africa, E&SD as a concept is still largely misunderstood, or at least applied differently, by both government and the private sector.
Some delegates voiced their opinion that ES&D should be a voluntary action not a compulsory one.
“Enterprise and supplier development should be a conscious and moral business decision, not a compliance issue as it appears to be happening,” said Teddy Daka, CEO of Ansys Limited.
Others disagreed. “There needs to be a change of certain government laws, a radical shift in procurement laws for set-asides be made compulsory,” said Gregory Mofokeng, secretary-general of Black Business Council in the Built Environment.
Also discussed was how the state as the biggest buyer of goods and services, should have the duty to nurture and empower small suppliers and enterprises.
Small businesses were not spared the rod with the Small Enterprise Development Agency (SEDA) saying that some of the problems were being created by SMEs themselves by not matching their business skills with technical ones.
Other E&SD challenges identified by delegates included a corrupt civil service which subverts SME contracts for individual benefit, uncooperative private sector to diversify supplier chains, and an incoherent government policy on the role of E&SD programmes.
The role of state-owned enterprises
State-owned enterprises; Eskom and Transnet described that their E&SD programmes were more focused on suppliers in their own value chain and procurement systems.
The National Youth Development Agency (NYDA) said it was concerned that big corporates were not developing small suppliers in a meaningful way, but only “ticking the boxes” to comply with the legislation and reap benefits.
Pearl Munthali from Passenger Rail Agency of SA, said E&SD is about the investment in value chains so that their suppliers supply quality goods, not about the abuse of prices.
Eskom’s Monkwe Mpye said their E&SDs were now focused more on “technical skills” rather than “soft skills”, and concurred that set-asides have empowered black women-owned enterprises doing business with Eskom, which was up from 6% to 26%.
“We’ve started a pre-contractual relationship with suppliers. We’re also going back to unsuccessful supplier applicants, train them on the shortfalls that resulted in them not winning bids, and then invite them to close tenders,” said Mpye.
Some of the proposals made to advance E&SDs ranged from the need for laws that compel government to purchase goods and services locally, and SMEs being given upfront payment.
Other ideas included having an SME ombudsman, disincentives against corrupt civil servants, a toll-free number for whistleblowers, and a database of SMEs that have been implicated in corruption.
Establishing common objectives by having a policy that defines E&SDs to government, corporates and SMEs and agreeing on timelines was also suggested.
“If government can have performance-based guarantees for their suppliers, SMEs should also have payment-based guarantees,” said Mofokeng.