Proudly SA: Inclusivity paves way for new entrants to economy
A number of business practices conspire either for or against inclusivity, and it is worth having a look at just a few in their relation to localisation and its own role in promoting greater participation in our economy.
Preferential procurement and enterprise development cannot, however, be used merely as tools for your black economic empowerment scorecard. That isn’t really sustainable and does little to entrench a culture of meaningful local procurement that truly benefits the business, the supplier, the growth of the economy and jobs.
Enterprise and supplier development programmes, supplier pipeline initiatives, impact partnerships - these are some of the ways in which corporate South Africa has truly embraced the need to grow and nurture small, mostly black-owned businesses and bring them into their supply chain.
A number of our members and stakeholders do this with great effect. Edcon’s “Design Innovation Challenge” takes young designers and puts them through an intensive design and 21 steps to retail programme, absorbing some into their own structures, but allowing others to fast track into successful businesses of their own, with the training they have received.
SA Breweries, together with some of the companies that are part of the Market Access Programme, have created a database of pre-qualified small, medium and micro-enterprises available to other companies looking for local suppliers.
Absa has partnered with the Lionesses of Africa programme to grow and develop specifically female entrepreneurs.
These and many more of our large corporates are playing their part in creating sustainable inclusivity programmes.
A crucial component to be monitored consistently is to look at the respective value chains of these companies to ensure that the actual products they are sourcing from local beneficiaries are locally produced.
It begins with raw materials and day-to-day consumables, bringing new entrants into the supply chain so that they too can drive economic inclusivity.
As part of our ongoing follow-up since the October 2018 Presidential Jobs Summit, we have been soliciting local commitments and pledges from more than 30 companies, which has been part of our work in pushing the inclusivity agenda.
By encouraging companies to commit to a specific rand amount or a specific part of their procurement process (sourcing only locally manufactured office furniture for example or stationery) we are slowly but surely converting their supply chains to become more local and through coupling this with their preferential procurement and enterprise and supplier development programmes, also making it inclusive.
We have worked over the past few years with the Franchising Association of South Africa (Fasa) and taken smaller member companies to “elevator pitch”-type events in an effort to grow the levels of local procurement and inclusivity in that sector.
Franchising is a massive business, and irrespective of the nature of the franchise (fast-moving consumer goods to hardware and everything in-between) there is the procurement not only of the raw materials such as restaurant ingredients, but of the furniture, crockery, uniforms etc that create the specific “look and feel” of that brand.
Done correctly, and through fair import-replacement sourcing strategies, franchise procurement can be a great driver of inclusivity.
However, done in an unfair and anti-competitive manner, it benefits only a few and can even lead to the downfall of small business owners, who buy a franchise believing it to be a “safe bet” only to find that prescriptive buying and even pricing regulations render the business unsustainable.
Fasa cautions franchisors against preventing franchisees from procuring goods and services from third parties outside their recommended suppliers. If the franchise can source an item of the same quality, which will not compromise or harm the brand, then they should be free to do so.
This in turn can grow inclusivity as franchises look to support businesses within the communities in which they operate and localise their supply chain.
New anti-competition laws, which we are still studying, have stringent measures in place against “closed shop” arrangements that work against economic inclusivity.
In the past, franchise agreements have been challenged by franchisees looking to make their businesses more economically inclusive, but at least one of which we are aware did not succeed in court.
The new legislation should, therefore, support small business owners not only in respect of these kinds of contracts but also in allowing better access to markets as prioritising, favouritism, nepotism, collusion and all these kinds of unfair business practices come under legal scrutiny.
Economic inclusion is an imperative for the country. It creates economically active citizens who are free to buy and sell how and where they wish, which in turn increases the tax revenue base putting more back into the fiscus.
Localisation and inclusion can be synonymous. By practising the one, we are by default supporting the other and creating much-needed jobs in the process.
For all the youth, especially those who are unemployed and listen to ama-piano, this week’s song by Kabza de Small and DJ Maphorisa entitled Vumanibo (which loosely translated means “please agree”) is directed at established businesses, urging them to agree to open up the economy to new entrants and their locally produced goods and services.
Eustace Mashimbye is the chief executive of Proudly South African.