Enterprise Supplier Development is critical to sustainable economic growth and transformation

The National Development Plan (NDP) aims to eliminate poverty and reduce inequality by 2030.

October 30, 2013

By Gert Schoonbee, MD of T-Systems in South Africa

The National Development Plan (NDP) aims to eliminate poverty and reduce inequality by 2030. The vision of the NDP is to create long-term growth and sustainability for South Africa, and in order to meet the 2030 deadline, the transformation begun by Black Economic Empowerment (BEE) and Broad-based Black Economic Empowerment (BBBEE) needs to be taken to the next level. While state-owned entities have been mandated supplier development and localisation, in other words keeping skills and money within local communities, government and government-operated businesses cannot be expected to transform the country on their own. Corporate South Africa plays a critical role in transformation, and initiatives such as Enterprise Supplier Development (ESD) are key in driving sustainable and commercially viable local development.

At its heart, ESD is about leveraging procurement spend to promote skills development and job creation. Although this topic is high on the national agenda, it is often difficult to implement effectively at an organisational level. Small black-owned suppliers face a number of challenges, including insufficient skills, and for start-up organisations, a lack of track record. Funding can also be an issue, as these organisations do not have the capital available that their larger counterparts have.

In order to effectively assist these companies, and the economy as a whole, South African enterprises need to take a multi-faceted approach that ensures growth whilst providing skills transfer, helping to achieve sustainability, skills development, employment and job creation.

Organisations within South Africa need to create ESD strategies that enable localisation – the creation of jobs and skills within previously disadvantaged communities to enable the upliftment of these communities, often in rural areas. One of the ways to do this, especially for large multinational corporations with a footprint across South Africa, is to outsource some of their own competencies in geographically dispersed regions to small BEE businesses, giving them access to the long-term business contracts they need to grow. These businesses can then be mentored and provided with the necessary support, financial and otherwise, to ensure their success.

Other strategies for the development of suppliers include preferential payment terms, enabling them to manage cash flow and not having to wait the usual 30-60 days for payment. Corporates should also give these small suppliers advice and access to knowledge in areas where they may be lacking, such as sales, procurement and legal. Financial support can be used to incubate small suppliers, ensuring that skills gaps within these businesses are addressed, and enable the management teams to gain the right tools and knowledge to become successful.

Ultimately creating a sustainable and economically sound future for South Africa is of benefit to every business in the country, and should form part of responsible business strategy. With the codes surrounding BEE on the brink of change, this will become increasingly important, since ESD is set become one of the pillars of the BEE scorecard. ESD goes beyond BEE and Corporate Social Investment, incorporating skills development, procurement, enterprise development and socio-economic development, helping to ensure transformation and the empowerment of previously disadvantaged individuals and enterprises, as well as sustainable job creation and a more stable economic future for the country.