Business navigating pitfalls to survive

inlsa

Andrew Layman, CEO of the Durban Chamber of Commerce and Industry.

My weekly columns often elicit calls and|e-mails from people unknown to me who tell me my thoughts have struck a chord. Sometimes the chord is discordant and that is fine, too.

If what I write did not stimulate thought, I would be worried.

Sometimes, as happened last week, the caller wants to talk about something unrelated to the article. I don’t mind that either, for I think my position at the chamber is enhanced by accessibility.

This caller was concerned about big companies putting small ones out of business. He cited Walmart as an example, but the point he made would apply equally to a chain supermarket opening in a small town or township, or the construction of a ‘‘mall’’ where local retailers would be unable to compete and would go out of business.

In a high-level workshop I attended some years ago, and which was hosted by the Small Business Project, there were allegations against big business that marked it, at least in some guises, as one of the most significant impediments to small business growth. In particular, small business advocates cited instances where large companies |imposed conditions on small suppliers that prevented their supplying any other buyer.

This sort of contractual arrangement may be acceptable as long as the major continues to procure from the minor, but when the relationship sours, the small business is suddenly cut off from the sole client and the business may well go under. People described this practice as unacceptable, and argued that it would not be permissible in the EU, for example, where competition law would not allow it.

Criticism was levelled at the Competition Commission of SA for being preoccupied, it seemed, with high-profile corporate misbehaviour and far less interested in the small man who encountered corporate obstacles.

I regret I did not have much good news to give my caller about Walmart. In my view, its entry into the local market is a windfall for consumers. The competition will have to look sharp, and, contrary to some belief, I think that local suppliers, at least in some if not all, spheres will benefit from local procurement.

Businesses adapt to the environment, anyway; they are not usually powerful enough to change it. Thus, whatever the company’s business model may be in the US, or anywhere else, I expect it to be savvy enough to fit in here and take our local conditions into good account.

This is not about Walmart, however. It is more about the progress of business.

Over time, chains have expanded and many small retailers have fallen by the wayside. The corner café disappeared, only to be replaced by convenience stores that offer the same products and services, but from different, and better, localities. They seem to do well.

They, too, are usually franchises and enjoy all the benefits that accrue from this model. Retailers in townships, or in towns where their businesses are threatened, should think about this development. A |co-operative of spaza shops, independently owned, but perhaps with common decor, product range and branding could achieve the same success as convenience stores have achieved relative to corner cafés.

At the very least, a buying consortium would save costs, while bulk buying and local packaging may allow the small shop to sell products cheaper than the supermarket, and at times when the large competitor was closed.

A “mall” is planned for Umbumbulu. I’m sure this has great appeal for the locals who may have access to products across the road rather than 30km away in Isipingo. A retail precinct would be more sensible than an ostentatious “mall”.

“Malls” cost money and rentals are beyond the reach of small local traders, if, indeed, they are wanted in the centre at all. Developers want the national brands; and so, too, do the local people who, sadly, do not recognise that the money they spend in chain stores goes out of the community into pockets in big cities, mostly out of Durban even.

Work that the chamber, together with eThekwini Municipality, is doing in Umbumbulu has alerted me to the fact that township areas will not revive economically, nor have more jobs or greater personal prosperity, if city retail and service business models are simply transposed there.

A new paradigm of community economics needs to be found.

* Andrew Layman is the CEO of the Durban Chamber of Commerce and Industry.