With the current ill health of former president Nelson Mandela, it is important to remember the impact he has made on so many areas of life in South Africa, including the economy and the importance of developing small businesses therein, particularly those from disadvantaged backgrounds, Mark Frankel, CEO of Shanduka Black Umbrellas, a non-profit enterprise development service, tells SmartProcurement.
In an extract from a speech former President Mandela made at the second National Conference on Small Business on 5 November 1997 in Durban, he noted:
“By stifling entrepreneurship amongst the majority, apartheid not only robbed many of their livelihoods, but it deprived the entire nation of critical job creators; it robbed itself of a pool of creativity and drive. In order to develop the Small, Medium and Micro Enterprise sector in South Africa, we need to take into account inherited obstacles. These include: low levels of education and training; barriers to markets; inaccessible finance and lack of support institutions.”
Nearly twenty years later the need to develop small, black-owned businesses and provide them with opportunities within the mainstream economy is as important as ever.
“About 70% of private employment is in firms with fewer than 50 workers,” said Pravin Gordhan, Minister of Finance, in an October 2012 speech to the South African Chamber of Commerce and Industry. Around 9-million South Africans are employed by SMEs and the sector is said to contribute 60% of the national gross domestic product.
Most telling of all, said Gordhan, is that SMEs are creating a disproportionate amount of the new jobs—up to 80%. “Addressing the employment challenge facing our country will be difficult without a sustained upward shift in the number of firms operating in the country and the expansion of jobs created in smaller firms.”
Yet, in a briefing to the media ahead of his department’s budget vote in parliament on 15 May 2013, Minister of Trade and Industry, Rob Davies, noted that “out of seven small businesses begun in SA, within one year only two of them will continue to operate. In other words, five would have been out of business.” This equates to a failure rate of around 71% compared with 50% internationally. If one extends the evaluation period to three or five years, the failure rates are around 80% to 90%. Davies noted that the country’s high business failure rate was more a result of black entrepreneurs having been actively undermined and business ownership by black people outlawed during apartheid.
If it is small businesses that create up to 80% of the new jobs is South Africa, it is critical that more new businesses survive their formative years and become established. As noted in a recent edition of the Global Entrepreneurship Monitor, “While the South African government’s policy of Broad-Based Black Economic Empowerment has drawn heavy criticism for its inability to distribute wealth across a broad spectrum of the population, as was the intention, the higher weightings given to Enterprise Development and Preferential Procurement are a positive development, as these have higher potential to open up the market to more new and growing businesses.”
However, these new and growing businesses, particularly 100% black-owned businesses, will not be able to gain meaningful access to corporate supply chains without being able to operate their businesses at a level which meets the efficiency and compliance requirements of large corporate procurement policies and practices.
South African corporates can play a meaningful role in the development of 100% black-owned small businesses by providing procurement opportunities within their supply chains and assisting in the development of these businesses through avenues such as Shanduka’s Blackpages enterprise and supplier development portal, which links procurement managers to 100% black-owned companies and provides opportunities for small businesses to develop themselves through online training and access procurement opportunities and various support services.
For more information on the Shanduka Blackpage’s online procurement portal (in partnership with Supply Chain Network and in association with Absa Bank), which provides powerful technology to connect small and big businesses, visit www.shandukablackpages.co.za.