SMMEs are the way forward and need all the help they can get
Banks should design innovative financing solutions for SMMEs and offer small suppliers in the bank’s supply chain cash flow finance
When a number of supply chain reports were released before Covid-19, business leaders listed risks such as data breaches, cybercrime, IT downtime, and extreme weather conditions as their main concerns. Of course, a global pandemic did not feature on anyone’s radar.
According to the World Bank, formal small, medium and micro-enterprises (SMMEs) make up 40% of GDP in emerging economies, and this number is significantly higher when informal SMMEs are factored in. Arguably, the key to a prosperous and sustainable future — with enhanced job creation — will be the SMME sector, particularly in Africa, and the role of major corporates in helping to guide, support and shape this vital segment.
Ultimately, especially as we navigate a new and uncertain operating environment, the importance of supplier development (particularly in the current SA socio-economic context) cannot be underestimated. But how exactly can corporates make it work?
- Create (meaningful) opportunities. Small businesses frequently lament their lack of access to credible domestic and international markets. Large corporations, especially those that spend billions annually procuring products and services, can use their procurement budgets to give SMMEs the boost they need. Opening up opportunities for these businesses to access prominent supply and delivery chains is one of the most efficient and consistent ways in which established corporates can contribute to sustainable entrepreneurship development.
- Transfer knowledge. Skills development and capacity-building are fundamental to ongoing business success. Business development support, including assessments, training, mentoring, advisory and information, is also critical in enabling SMMEs to become stronger organisations of the future. When SMMEs interact with large corporates, they are compelled to make changes to increase efficiencies. Being part of corporate supply chains also improves access to information, driving technical proficiency and industry innovation.
- Provide financial support — where you can. Banks should design innovative financing solutions for small businesses, and also offers SMME suppliers in the bank’s supply chain cash flow finance at favourable interest rates, with no collateral required.
Businesses in other sectors can look at streamlining payment processes to ensure suppliers get paid on time, provide complimentary testimonials and reviews to help with new leads or simply recommend suppliers to others in the industry.
There is no doubt that supply chain leaders are building future-fit supply chains that drive company procurement priorities and advance sustainable and social business agendas, while simultaneously opening and strengthening the small supplier ecosystem. This is no easy task, however, supporting entrepreneurship through corporate supply chains delivers material benefits to local economic development and transformation and is, therefore, good business.
The global crisis wrought by the pandemic has forced each of the supplier development value chain partners, the supply chain practitioners, the business strategists and the economic development policy technocrats, to think and act differently, respond effectively, and build agile yet sustainable programmes.
SMMEs, equally, have a lot of soul-searching to do to be co-creators of solutions, and for them to remain relevant and participate constructively in rebuilding initiatives.
• Fele is Absa Group chief procurement officer.
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