SMEs need opportunity to scale up public and private sectors' procurement demands

David Marobe

One of the surest ways to grow an inclusive economy and realise the goals set out in the 2030 National Development Plan is by investing in entrepreneurs, who are critical to the development and well-being of any society. Government and the private sector need to work together to support small and medium enterprises (SMEs) and can best do so by not only having procurement set-asides but efficiently implementing these as well and providing targeted technical assistance.

This is according to David Morobe, Regional General Manager at Business Partners Limited (BUSINESS/PARTNERS), who believes that SMEs have the ability to scale up to Government’s and private sector’s procurement demands when given the opportunity and necessary guidance.

“Procurement preference is a well-recognised source of SME support, however, there is a perception that SMEs are risky and unreliable suppliers, or that they don’t have capacity or the capabilities to supply according to set requirements.”

Morobe says these misperceptions need to be corrected as there are numerous advantages of procuring from SMEs. “From a ‘doing business’ aspect, SMEs are agile and adaptable, and are often more innovative, in order to remain competitive against more established industry players. They are also more in touch with community needs and trends, thereby facilitating new market opportunities.

“Apart from direct bottom-line benefits, utilising SMEs also creates a strong sustainable business community, driving social upliftment and providing a tangible solution to South Africa’s growing job crisis*.”

If SMEs are to meet Government’s and private sector’s procurement demands, an SME procurement preference approach needs to be objective, targeted and coupled with tailored support to mitigate any inefficient practices, says Morobe. “Such an approach needs to be justified for targeted sectors such as the Green Economy which is in recent years creating new opportunities with numerous multiplier effects. As such industries begin to gather pace, entrepreneurs from other sectors as well as Government also begin to benefit from the targeted approach.

Morobe adds that developing the necessary skills for SMEs to cope with procurement demand is a vital component of this growth. “The provision of targeted technical assistance and training for SMEs cannot be over-emphasised. Through Government and private sector growth accelerator and supplier development programmes, SMEs will be able to improve their capacity to provide a holistic service.”

Similarly SMEs can also help themselves by harnessing skills of other SMEs through collaboration and partnership for economies of scale, Morobe adds.

In terms of realising an inclusive economy, a public-private sector partnership is also essential, says Morobe. He welcomes the recent action taken by the private and public sector to set up a joint fund to support and fund small business, with the private sector already committing R1.5bn and the expectation to expand the fund to R10bn in the near future.”

In the public sector, of the R1.3 billion allocated to the Small Business Development Ministry for the 2016/17 financial year, 83% will go towards strengthening small businesses and cooperatives. This was announced by Minister Lindiwe Zulu during her recent Budget Vote presentation in Parliament. Zulu also initiated a review of government expenditure on SMEs over the past decade to determine how much has been spent and whether this has resulted in equivalent levels of growth in the sector.

In her speech, Minister Zulu also addressed the need for skills development stating that one of the department’s focus areas is to provide technical assistance with regard to the structuring of co-operative models that will improve production efficiencies and economic viability in the SME sector.

“The announcement by Minister Zulu is encouraging as the real employment in our economy is happening in the SME sector and we need to continue to build on that,” says Morobe.

SMEs are growing and continue to support the South African economy, and this was confirmed by more than 18 000 new SMMEs submitting tax returns for the first time in 2016. “We must take cognisance that SMEs are collectively responsible for about 60% of new jobs created annually in South Africa.

“It is therefore imperative South Africa forges a strong partnership between the private sector, government and civil society that works to foster and increase the success of SMEs,” concludes Morobe.