National Small Business Summit, October 2013
SUPPLIER DEVELOPMENT
AS A VEHICLE TO BUILD A SYMBIOTIC RELATIONSHIP
BETWEEN
BIG AND SMALL BUSINESSES
Leora Rajak
[email protected]
Nozizwe Jele
[email protected]
Are attempts to bring SMEs into supply chains working?
“We are not known / in the network when
RFPs go out”
“Its hard to break into existing supplier
panels”
“The tender requirements are insane, we
need months just to collect the
documents they want.”
“We’re registered on so many databases
but we never get any leads from them,
they’re just not taken seriously.”
“Government doesn’t pay on time”
How do we know we are not the 3rd quote in
a crooked process?”
“We can’t find black-owned and black
women-owned businesses to meet our
B-BBEE procurement targets”
“How do we know that this business
that is being introduced to us is ready
and able to meet our requirements,
what’s the risk associated with using
them?”
“The available databases of black owned
business lead us on a wild goose chase,
half those companies don’t exist
anymore, emails bounce back and
mobile numbers have been changed.”
“We’ve issued a tender but no one
responded”
“They said they can deliver but its been a disaster”
They’re not finding each other
Relationships that work: What we know
They need accurate and visible info
They need simplified processes
They need to see it as a journey
Set up for success
Ivanplats
Support throughout
Must make business sense and
receive business support
Not a comprehensive list
What we must aim for
Supplier readiness
Procurement readiness
Contract management and implementation
readiness
Common issues faced by the buyer – SMME supplier relationship
o Lack of vetting and verification of SMME pool
o “Telephone and fax” entrepreneurs
Demand Driven
approach
o Tenderpreneurship and other forms of corruption
o High churn of SMMEs
o (Perceived) High cost and effort of working with SMMEs
o Lack of professionalism of SMMEs
o Lack of sustained reporting and bookkeeping
o Low compliance to contract requirements by SMMEs
o The misalignment of procurement and transformation agendas
So what can we do in support of creating a symbiotic relationship?
Getting it right
SMMEs
Buyers
o Better / open databases
o Refined tender processes
o Education of SMMEs about what it
o Sympathetic ear to participation
means to be ready
o Supporting building of supplier readiness
o Tax clearance certificates
o Be in it for the long term
o Financial records
o Don’t set up to fail
o Encourage the seeking of support
o Slow but steady growth in contract value
o Encourage JVs
and volumes
And when it works…
Lead Corporate / Buyer (on behalf of the SME/S)
Fights the internal battles
Provides business development support,
compliance and stability creation
Facilitates market access
Encourages best practice
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Clothing / bag manufacturer
IT Company
TV Production company
Decorative tin manufacturer
Car service centre
Citrus Farm
Motor Body repairers
Making it work
Living,
reliable, and
shared
databases of
suppliers
Committed
buyers with
executive
support
Break fear of
employing
(especially
employing
youth)
Active, ready,
hard working
SMEs
Reliable and
effective
business
development
support
•
•
Harambee.co.za
[email protected]
THANK YOU
Enterpriseroom: Company Profile
Leora Rajak
Cell: 082 458 8671
[email protected]
Nozizwe Jele
Cell: 078 691 4827
[email protected]
About us
Who we are:
• Enterpriseroom is a specialist consultancy that assists companies to improve the B-BBEE
scorecard as well as their contribution to sustainable economic and enterprise
development.
• Since inception in 2008, we have delivered on some complex and exciting strategies and
programmes across a range of industries, and deal with clients of varying sizes and diverse
needs.
• We are passionate about entrepreneurship and believe that inclusive and enduring
economic growth in South Africa requires the number, size and success of small blackowned businesses to increase substantially, and soon.
Enterpriseroom is >50% Black Women-Owned, Category A ED Beneficiary.
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What we do:
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Enterprise Development (ED) is about growing new, and enhancing existing, small
businesses. ED is intended to drive the transfer of skills and resources from large
companies to smaller black-owned and managed companies.
Our focus:
Working with large companies in developing strategies to improve their B-BBEE scorecard.
Building meaningful ED strategies and supporting their intervention.
On-going management of ED programmes, ensuring alignment with company strategy,
identification and assessment of beneficiaries, linkages into support networks, graduation
programmes and “gate-keeping”.
Helping emerging companies improve their businesses by developing strategies to access
market opportunities, and matching with our larger corporate clients.
Training and business development support for small black-owned businesses.
Enabling qualifying businesses to understand and access available opportunities, including
loans, grants and other available support services, e.g., Government
Our value add : why Enterpriseroom?
• Deep understanding of BEE and in tune with latest developments, including charters
• Extensive experience in strategic analysis and in developing solutions directly relevant to addressing a
particular ED need
- Recognised expertise and the ability to listen to what our clients and ED partners need.
• Knowledge and understanding of the Financial Services Sector and Charter
- Our on-going work with Standard Bank; Discovery; Hollard and Telesure has given us exposure to this sector
and deepened our understanding of the sector’s challenges, value chains and landscape of ED opportunities
• Knowledge and understanding of the enterprise development sector
- Successfully designed and implemented ED programmes in Nampak, Discovery, MultiChoice, Telesure,
African Rainbow Minerals and Standard Bank, as well as numerous smaller companies.
- Over R800m in ED budgets under management.
- Distribution solutions for beverage company for establishment of 500 small and medium enterprises (SMEs)
each employing 5-10 people.
- Converting >R200m in SMME finance applications from declined to successful.
- Evaluation of emerging entrepreneurial SMMEs for market opportunities >R200m.
• A focus on facilitation as opposed to selling a service
- We develop, source and manage solutions that fit – we don’t try and convince you that we have it all
packaged, or that we can do it all.
- Supported in some of our engagements by highly experienced implementation partners
• An understanding of the challenges
- We are realistic about what can be achieved but are still willing to push the envelope through innovation
and managing risk.
Summary Codes’ Revisions
• Companies can only achieve any of the 40 points if they have an ESD plan for their
beneficiaries with:
• o Clear objectives
• o Priority interventions
• o Key performance indicators (e.g. increased turnover, job creation, systems creation)
• o Implementation plan with milestones
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ESD is a priority element. Have to achieve 40% of points in each of the sections:
• o Preferential Procurement – 10 points (of total 25)
• o Supplier Development – 4 points (of total 10)
• o Enterprise Development – 2 points (of total 5)
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SD is 2% of NPAT; ED is 1% of NPAT AND SD does not count as ED i.e. you can’t do
3% on supplier development and get all the points. They are entirely separate targets.
• EDBs are only QSE/EME – now under R50 million turnover – with >50% black ownership
• ·
Procurement from black owned elevated to 9 points with a target of 40% (was 12%)
• ·
Only “Empowering suppliers” count under PP, defined as “a B-BBEE compliant entity which can
demonstrate that its production and/or value adding activities take place in the country”. Then there’s a
list of criteria which must be fulfilled to qualify as an empowering supplier. Large enterprises must
comply with 3 of 4 and QSE with 1 of 4. EMEs are exempt from empowering supplier definition. Criteria
are:
• o At least 25% of expenses (exclude labour and depreciation) must be spent in RSA
• o At least 50% of new jobs created must be for black people AND in the first year of the Codes, number
of black employees must be maintained
• o Beneficiation – at least 25% and includes local manufacturing, production, and/or assembly and/or
packaging (think Nampak)
• o Skills transfer – spend at least 12 productive days per annum in BDS for beneficiaries.
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There is no limit on the amount that must be spent on a supplier for it to be recognised as a
supplier.
• Benefit Factor Matrix changes:
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Overhead costs – 70% of value
Interest free loans – 70% (was 100%)
Standard loans – 50% (was 70%)
Investments – 70% (was 100%)
Early payment – capped at 2.25 points; definition has been rectified to maximum 15% of invoice