Purchase Order Funding Helps SMEs Deliver on Tenders

Ruan Fourie dislikes the word funding, even though his company is one of the busiest purchase order funders in the country. His point: money alone does not get a government order delivered and paid for.

A supplier first, a funder second

Fourie, CEO of AAA Consortium, told host Omega Fumba he came to funding from the supply side. He has supplied government since he was 20 and says he has delivered on some 11,000 orders. His firm now works with other small suppliers because, in his words, government wants SMEs to be the new suppliers. "I dislike the word funding," he said, preferring partner, and the firm's slogan is "achieve together."

When a business brings an awarded order to AAA, Fourie said, it is not simply handed a loan to pay its supplier. The consortium's 32 permanent staff work on every deal, it can introduce suppliers it has used for years, and a separate track-and-trace team follows each order and chases payment. "Your deal has now become our deal," he said.

What he checks first

Fourie listed the factors that decide whether he will back an order: whether the business is tax compliant, because government cannot pay a non-compliant vendor; whether the margin leaves any room (a 5 percent margin does not); what is being delivered; and the paying record of the department. With data from roughly a thousand deals a month, his team tells clients to avoid departments that pay late or not at all, and to skip tenders there, because a delay can set a small business back a year or two.

He illustrated how a simple order can hide complications with a R5 million purchase order for 180 laptops. The original request required the department's name to be laser engraved on each machine, which meant moving sealed stock to a third party and back. It also needed secure transport, because the order was public, and the client's cheap keyboards and wired mice would not be accepted by the end users. Handling that, he said, is what the consortium is for.

Letters, suppliers and pricing

Government scoring is mostly price plus preferential points, Fourie explained, and the deciding gap between bidders can be a point or two. A letter from AAA, issued through its portal, can be added to a tender to show financial backing. He advised owners to negotiate a discount of two to three percent from original suppliers to win on price, and noted that suppliers give the consortium better terms because it pays upfront.

Winning a purchase order does not automatically bring funding, he warned. Check the bid and get your pricing right before you quote. The biggest supply-and-deliver order the group has funded was for Eskom, which needed R140 million in capital and was paid two days early.

Before you need it

Fourie's main advice is to talk to a funder before the award, comparing it to making sure the baking trays are ready before you bake. Join the system, tell the funder what you are bidding for, and have terms agreed on the side so that a same-day call after an award can have a tender sorted in four to five business days. For orders under about R100,000 he thinks owners can manage with their own or a personal loan, keeping that money strictly as deal money, not rent money. Bigger orders need a dedicated funder.

He also defended government procurement: the Central Supplier Database, introduced in 2017, replaced the days of faxing files to individual departments, and a reputable supplier can legally win repeat orders. Rejected applicants at AAA now get an explanation, he said; one client's R840 tax shortfall was fixed within an hour by the firm's CFO. He added that the firm has stopped bidding for work itself so that it never competes with its clients, and is building a private-sector line.

Mentioned in this episode

• AAA Consortium on LinkedIn: The company Fourie leads.
• Central Supplier Database: The government register a supplier must be on to be paid.
• AAA Consortium's Ruan Fourie unpacks funding readiness: Our written interview with the same guest.
• Purchase order funding for tenders: how it works and who qualifies: Our guide to how it works.