By Koketso Mamabolo
In Chapter 3 of the National Development Plan (NDP), the government acknowledges how far we have come in transforming our economy, while recognising that more needs to be done to go even further:
“The corporate landscape of South Africa has changed remarkably since 1994. However, it remains highly concentrated. This poses a barrier to business entry and expansion in key markets, which are essential for employment creation. Present forms of black economic empowerment (BEE) are not achieving all the desired objectives.”
Enterprise Supplier Development (ESD) has emerged as an effective approach to achieving the vision set out in the NDP. Suppliers from previously-disadvantaged backgrounds are faced with an array of challenges when setting up businesses and attempting to enter the market. Supplier development initiatives seek to transform supply chains, by providing support through training, financing and preferential procurement.
We take a look at five companies who are leading the way with their ESD strategies, and delve into some of the programmes they have launched.
With over R100-million in their portfolio for SME support, Distell are setting a high standard for ESD initiatives. They were celebrated for their work, in opening up the gates to SMEs, as one of the finalists for the Top Empowerment Enterprise Supplier Development award in 2021.
Their enterprise development has three facets:
- Market access
- Financial inclusion
- Access to business development services
The objective is to procure from more black and black women-owned businesses, thereby assisting them to scale up their operations. Distell is achieving this through initiatives such as their flagship program, E+Scalator, launched in 2016. The programme is geared towards supporting non-agricultural clients.
Through the use of an online platform, suppliers are able to browse for opportunities to do business with Distell, in real-time.
“Our strategy is to provide our enterprise and supplier development beneficiaries with the services and support they need to overcome challenges preventing them from growing their businesses. This was particularly important given the severity of COVID-19, which placed many businesses under significant financial strain in an already recessionary environment. Despite these difficulties, Distell maintained its over R100-million portfolio of support to qualifying SMEs,” said Charles Wyeth, the group manager for local economic development at Distell, in the company’s 2021 sustainability report.
The Handwork Hub, a 100% black women-owned enterprise, was started in 2017 to supply Distell with tassels for their Amarula bottles, and has already scaled production up to over one million per month. “Distell E+Scalator Program has provided ongoing operational, financial management and production support to the business,” they say on their site. The Handwork Hub has now reached the point where they can offer their services to other suppliers.
As a company that works with perishable goods, suppliers that can provide quality, fresh produce are integral to Spar Group’s business. Small-scale farmers struggle to enter the market and SPAR is addressing this by actively transforming their list of suppliers, particularly in rural, semi-urban areas, while localising the food supply chain.
SPAR has identified opportunities for improvement in the way produce is provided to retailers. After harvesting, produce is taken from rural areas to distribution centres in the cities, and then taken straight back to retailers in rural areas. In an effort to localise their supply chain, SPAR launched their Rural Hub project in 2016. The first rural hub was opened in Mopani, Limpopo, with two more opened, in KwaZulu-Natal and Mpumalanga, following the success of the pilot hub.
With the hubs SPAR is able to procure from more black and black women-owned farms, facilitate the development from a small-scale farm into an SME and source produce from within 200km, ensuring freshness and quality.
“SPAR has committed to funding the capital and operational expenditure as well as the associated logistics infrastructure required for the development of the three initial packhouses,” the company said in 2017.
Produce is sourced from farmers and transported to a hub, ownership of which is shared between retailers and producers. From there the produce is distributed to nearby retailers, informal traders and government feeding schemes
The farmers are given training covering subjects ranging from fertilisation and harvesting, to economics and legal knowledge. Local GAP certification is used as a pathway to GlobalGAP, and businesses are expected to comply with Global Foods Safety Initiative (GFSI) standards, processes which SPAR guides the SMEs through.
“We need to target the agricultural mega aggregator’s suppliers – the new, expert, black-owned farming companies who work directly with farmers to provide technical and management skills – in order to incorporate smallholder farmers in their procurement volumes and growing plans,” said Mary-Jane Morifi, Chief Corporate Affairs and Sustainability Officer at Tiger Brands, speaking to Farmer’s Weekly.
Tiger Brand’s ESD programmes are backed by the Dipuno Fund, which has R100-million to offer funding along with the technical and business skills that farmers are trained in. The fund is about “financing and providing liquidity to black-owned small enterprises and black smallholder farmers.”
They split their approach into procurement and channel development. The former focuses on bringing in more black suppliers, the latter aims to have more black product distributors and micro-distributors. Their Market Access Programme has over R150-million worth of contracts with black owned SMEs since inception.
Aggregation points, like the Baphuduhucwana Production Incubator (BPI), are used to reduce costs through bulk-buying. The Agricultural Aggregator model was instituted in 2019, with aggregators onsite with the farmers, offering their knowledge of the technical and non-technical aspects.
The company does not want to rest on its laurels and has set ambitious targets for 2022, including developing 900 black-owned enterprises and creating 4000 jobs.
South African Breweries
In 2018 South African Breweries (SAB) began partnering with businesses from other sectors for the Market Access Platform (MAP) initiative. The platform is used to facilitate preferential procurement and localisation. SAB, along with its partners, aims to widen their supplier base by bringing in more black and black women-owned businesses.
“Corporates need to start collaborating around various ESD initiatives to drive greater economies of scale for legitimate SME support services and open up greater market opportunities for suppliers – by sharing suppliers between corporates,” reads MAP’s mission statement. This cross-sector project includes a steering committee of powerhouses: Macsteel, Coca-Cola Beverages Africa, General Electric, KFC, Total along with SAB.
SAB benefits through offering access to their Accelerator programme via the MAP project. In 2020 alone, R125-million was spent supporting suppliers, who are also given training.
The SAB’s Thrive Fund is another of their enterprise development programmes, focused on both enterprise development and localisation, similar to SPAR’s Rural Hub project. It was created in partnership with Awethu Project, who are themselves a black-owned company investing in SMEs. “SAB Thrive Fund investees benefit from 100% black equity capital and business support,” said the company to Spotong Magazine in 2017.
Sasol South Africa (Pty) Ltd.
Sasol seeks to promote the growth and longevity of SMEs by assisting in ensuring the growth and longevity of black-owned businesses. The company is using their position in the industry to drive transformation through funding, training and connecting suppliers with technical experts.
Sasol makes a distinction between SMEs in their ESD programmes and those in their Business Accelerator Programme (SBA). The former involves supporting SMEs on their own premises, whereas those in the latter receive the support at Eco-Industrial Park, in the Sasol Business Incubator (SBI) facilities.
The SBI is a private-public partnership between Sasol and the Department of Trade and Industry. The incubation facilities are fully-equipped, including Wi-Fi, maintenance and security.
“The intention is to enable and host a sustainable economic ecosystem comprising a diverse mix of SMMEs, service providers and stakeholders that can support each other as well as other businesses located in the Eco-industrial Park,” reads the SBI quick information sheet.
“We want people building their own factories on their own land, which will be possible through the SBI,” said then Deputy Minister of the Department of Trade and Industry Mzwandile Masina, in 2016 when the programme was launched.
VP of Energy Business at Sasol at the time, Maurice Radebe, added: “As a proud contributor to South Africa’s economic development, Sasol believes that stimulating entrepreneurial activity has significant potential in enhancing industrial growth.”
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