SMME Development as a driver of BEE Procurement opportunities and the economy as a whole
"Governments, policy makers, even the World Bank, all agree that small businesses are the growth engine in any economy. Looking at other countries as an example, 95% of organisations in Australia are from the Small Micro Medium Enterprises sector (SMME), whilst Germany’s economic growth was also led by SMMEs. The same applies to South Africa where we have an estimated 2.8 million SMMEs in the country at present, who drive economic growth and development”, Alexander Soare, Managing Director of BEESA Boxsmart, told SmartProcurement.
In terms of the South African economy, SMME’s contribute between 52% and 57% to Gross Domestic Product (GDP) and provide about 61% of employment. Based on this, there needs to be an understanding that developing SMMEs is vital in securing the South African economy’s stability and growth.
“This is where Black Economic Empowerment (BEE) plays an important role and encourages organisations to look at their internal structures, as well as to look at how they do business”, Soare continued. “BEE is an integrated and coherent socio-economic process that directly contributes to the economic transformation of South Africa and brings about significant increases in the number of black people that manage, own and control the country’s economic assets. It also plays a role in correcting the income inequalities between black and white employees. But, even more so, BEE is not just about providing black people with employment, it focuses on the skills that get transferred to the black population. BEE is mainly a ‘skills development plan’, which influences every aspect of an organisation”.
There is a change in thinking around BEE at the moment, which makes BEE easier to understand and makes it less threatening to organisations. The scorecard sets out the elements by which each organisation is measured. These scorecard elements are: Ownership, Management, Employment Equity, Skills Development, Preferential Procurement, Enterprise Development and Socio-Economic Development. By listing the scorecard elements in this order it conveys the message that ‘ownership’ is the highest priority and so on. However, by reversing the order, organisations can begin to understand that BEE is not just about ownership and management, and by so doing the real approach towards BEE becomes clear. Ideally BEE should be approached from the bottom up, when applied to an organisation. In practice, it would look like this:
- Socio-Economic Development (SED) is concerned with developing an individual with the focus on education.
- Enterprise Development (ED) is about supporting small organisations to grow and become more sustainable. Unfortunately, many people have misunderstood ED – It is not about giving money away. Rather it is about growing organisations in your supply chain. For instance, how would your organisation secure a needed service or product in the market? When trying to ensure that your suppliers are providing the needed service or product, one of the first things to look out for is quality and price. When establishing that quality and price is right, your organisation can investigate how to help the supplier to maintain this standard on a long-term, sustainable basis. This process of assistance should furthermore not be shortsighted, but rather focused on the future of the supplier’s organisation.
- Preferential Procurement is rewarding organisations for doing business with other BEE companies.
- Skills Development (SD) is helping to understand that your services and products are only as good as your employees. Investing in the skills of your employees is an investment into the quality of your products and services, and is about securing your organisation’s position in the market.
- Employment Equity (EE) is about enhancing the black employee representation in your organisation. Black individuals who have been skilled through your skills development plan can be promoted into higher positions.
This leaves Management and Ownership as the last two points on the scorecard. By turning the scorecard on its head, it makes it easy to see what the important elements are and which ones should be focused on first. Ownership and Management will not work adequately when the other points have been ignored or insufficient attention has been given to them.
What does this mean for BEE and for organisations?
When looking at the needs of the South African economy, BEE needs to focus on and support smaller and medium organisations. BEE should furthermore be communicated in such a way that it is easy to understand and therefore easy to apply.
Unfortunately, there is not much information available and when it is, it is mostly just for the bigger corporations who have significantly different BEE regulations, compared to the BEE regulations for smaller companies. One solution for this is to provide the right information to organisations in a language that is easy to understand and provides guidance.
“BEE is on its way to help South Africa unlock its full potential, however, it is our responsibility to put the talented people out there and give them the right skills. We tend to easily blame others for our own difficulties instead of doing something about it. BEE, as perfect or imperfect as it might be, is helping us to take responsibility for others, our organisations and ourselves, for now and in the future”, Soare concluded.
Article submitted by Alexander Soare, Managing Director of BEESA Boxsmart.
Alexander Soare can be contacted at the details below:
Telephone: +27 11 726 3052
Cell: +27 82 441 1344