MARTIN FEINSTEIN: SA must build better corporate supply chains to help small businesses

Enterprise and supplier development (ESD) is one of the most powerful mechanisms to support market access, capacity-building, revenue growth and sustainability for small businesses in SA.

As an element of the broader BBBEE legislative framework, it accounts for a significant proportion of the total national spend on small business support. As such, ESD strategies that focus on onboarding, and scaling of suppliers via training and revenue-generating contracts, can have an enormous effect on mitigating the chronically high failure rate of small businesses.

The practice of ESD generally takes place within each corporate, with limited external sharing of best practice, tools and techniques. To the extent that ESD investments or proprietary commercial methods support trade competitiveness, this is understandable. But knowledge sharing is key to advance ESD. The ESD capacity building programmes run by Tiger Brands management, and the Absa Supplier Development Awards, which highlight excellence in ESD and offer a series of webinars that showcase effective ESD methodologies, are encouraging and popular initiatives. 

There is still room for improvement. A more structured and systematic approach to developing skills and sharing best practices could make a substantial and systemic difference to ESD outcomes in terms of SMME impact, while the development of consistent, shared impact measurements — as opposed to BEE scorecard compliance — could better reflect the contribution of the private sector to the national imperative of improving market access and growth for small business 

The establishment of a credible, national multi-stakeholder community of practice (CoP) for ESD practitioners could be a game-changer. This was one solution considered at a recent ESD workshop facilitated by the EU-funded Ecosystem Development for Small Enterprise (EDSE) programme.

EDSE’s mandate includes supporting improved access to supply chains by small businesses, inter alia via ecosystem dialogue to support improved collaboration and practice. A recent EDSE survey of 29 research reports and case studies reveals recurring issues in the practice of ESD that are relevant to both the public and private sectors, and which echo some of the key findings of the recent Sanlam-funded Gauge report on BEE.

These include:

• Lack of consistent, objective measurement of the effect of ESD and therefore the extent to which private sector spend is supporting the right outcomes;
• Overemphasis on compliance vs demonstrable small business growth outcomes;
• Potential for improved collaboration between public and private sector;
• Limited sharing of best practice within the ESD sector; and
• Lack of systemic SMME impact due to the disaggregated nature of ESD spend and effort.

With most corporates implementing their own ESD strategies and BEE/ESD consulting being a highly competitive market, there is little exchange of information between practitioners — partly because some companies see their ESD pipeline and activity, particularly when closely aligned to business objectives and operations, as a strategic advantage and may be reluctant to share.  

This is understandable. However, there are ways to improve ESD effectiveness through a more collaborative approach to developing skills and sharing “what works”, without compromising competitive advantage. A professional and competent ESD CoP platform could be the catalyst here, and the EU-supported EDSE programme is putting its money where its mouth is by committing R3.2m to kick-start such a platform.

EDSE, working with the department of small business development and the SA Supplier Diversity Council, will be holding two further workshops in April and May, followed by a symposium in July, to consult with a broad range of ESD practitioners and consultants on the CoP concept, with a view to launching a prototype platform in the second half of 2022.

A CoP helps create a “knowledge ecology” where relationships, tools and methods come together and enable the creation, sharing, integration and use of ESD knowledge. Such a collaborative, ESD-focused platform can create the context and trust necessary to grow a “knowledge garden” that can be seeded, fertilised and harvested by a diverse group of committed practitioners.

The currency of a CoP is intellectual energy, allowing for professionals with a shared interest to create and share knowledge and experience, engage in dialogue and drive innovation and creativity.  

While policy responsibility for ESD resides with the department of trade, industry & competition and the BEE Commission, the department of small business development — with its twin agencies, the Small Enterprise Development Agency and the Small Enterprise Finance Agency — has a mandate to facilitate market access and appropriate finance for small business. The impending merger of these two entities into a super-agency for SMME development should also be an inflection point for exploring a new ESD-focused partnership with the private sector to support supply chain access, supplier performance support and funding. Given the agencies’ national footprint, large SMME client base and their focus on ESD and youth-owned business funding, there is huge potential for jointly working to support a pipeline of black-owned businesses.

Increasingly, the department of small business development and its agencies are adopting an ecosystem approach to SMME development. A CoP that collectively works towards more effective ESD, and that aligns public and private efforts, has the potential to support the ESD sector operate closer to its maximum potential as a powerful national lever for economic inclusion and job creation.

While there may be some scepticism about the government’s role and capabilities in SMME development, a focused ESD practice platform can lead to a better understanding and alignment of corporate needs and priorities on the one hand and government’s mandate and plans on the other.

• Feinstein is key expert for SMME development with the EU-funded EDSE programme.