Picture: 123RF/RAW PIXEL
Picture: 123RF/RAW PIXEL

The outbreak and global spread of Covid-19 will go down as one of the most disastrous pandemics in modern human history, with more than 178-million confirmed cases recorded globally to date and nearly 4-million people dead. The last time the world experienced a pandemic of this nature and scale was almost a 100 years ago, when the “Spanish flu” killed about 50-million people.

The Covid-19 pandemic necessitated the total shutting down of economies around the world as governments battled to contain the spread of the virus and minimise its impact. As we count the cost it is clear that so far the consequences have been nothing short of catastrophic. The pandemic has disrupted the way we live and work, our livelihoods and brought global economic activity to a near standstill in much of 2020. As a result, global GDP for 2020 contracted by 4.3% and is expected to make a slow rebound to about 4% in 2021.

In SA the economy contracted by more than 7% year on year in 2020, with an estimated 3-million jobs lost. According to the latest Stats SA employment figures for the first quarter of 2021, the number of jobless people stood at a record high of 32.6%. More people are expected to lose their jobs as we continue to feel the effects of Covid-19 and as the economy struggles to recover. Young people in particular make up the bulk of the unemployed in SA today.

The increase in SA’s unemployment rate had already been on an upward trend even before the onset of Covid-19 due to an economy that’s been sluggish for the better part of the past two decades. This despite concerted efforts from the government, private sector, NGOs and other stakeholders to curb the trend. These sobering numbers provide fertile ground for social instability, especially in the context of the pandemic. If not addressed soon and effectively, the humanitarian and sociopolitical effects on the country could be deep.

SA has its work cut out as far as economic recovery in the aftermath of the pandemic is concerned, and this means one thing only — we have to achieve faster and higher levels of economic growth. A multipronged approach is required to drive this required growth and increase employment and support economic inclusion and social cohesion. A part of the solution lies in fully exploring and promoting entrepreneurship, especially given that the formal economy is shedding instead of growing jobs. Entrepreneurship could be a viable alternative to formal employment for the multitudes of unemployed people.

One way of achieving this is for those in the ranks of the unemployed, especially the youth, to start considering entrepreneurship as an option, instead of looking to be absorbed by the already constrained job market. By choosing to be entrepreneurs they would be able to create wealth and employment while contributing to the growth of the economy. Given the number of people who, out of necessity, have established small and medium enterprises (SMEs) in SA, there is little doubt that the drive, energy and creativity among our people are all there. All that needs to be done is to harness them.

Creating an environment where entrepreneurs can thrive could lead to the rise of more SMEs, whose importance in the growth of any economy and job creation can no longer be gainsaid. In Africa, SMEs represent a significant part of the economy as they constitute about 90% of private businesses and contribute more than 50% of country employment rates and as much as 40% of GDP in most countries.

SMEs therefore play a crucial role in stimulating growth, generating employment and contributing to poverty alleviation and social development. With most big businesses in a state of flux due to the pandemic and having little room to drive faster economic growth, it is now left to SMEs to step up. This can only be possible if SMEs have the support needed for them to succeed, including access to finance, access to markets and access to business development support.

Big businesses and their large supply chains remain a crucial part of the ecosystem required for SMEs to thrive. They can efficiently and effectively deploy billions of their procurement spend to support the development of as many SMEs as they can, thereby easing their access to markets. This is perhaps a more pressing obstacle facing SMEs than access to funding. SMEs often struggle to penetrate existing markets, or create new ones, especially when competing against established businesses. The markets exist, but the linkages do not. To help local SMEs gain access to markets, large corporates must get involved. Big businesses spend billions of rand annually procuring products and services from other companies. Recent studies have shown that small businesses grow within a few years of becoming part of a corporate supplier base.

In the African context there is significant development impact to be gained from localising procurement. Yes, it is true that a broad range of procurement challenges and constraints face corporate buyers when identifying and locating suitable suppliers. These include concerns over the SMEs inability to deliver on contracts due to capacity constraints and underdeveloped networks and insufficient working capital, among many others. There are, of course, a few practical ways for corporates to get involved. In addition to providing access to finance, they should consider making their procurement processes transparent and easily accessible to SMEs.

As we emerge from the Covid-19 pandemic it is important to note that it will largely be through creating an environment in which entrepreneurs thrive that full economic revival can be achieved and unemployment reduced in the long run. Large corporates have a big role to play in this regard.

• Fele is chief procurement officer at Absa Group, sponsor of the Absa Business Day Supplier Development Awards.

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