The health of small and medium enterprises (SMEs) is crucial to the South African economy. According to a 2020 study conducted by McKinsey & Company, SMEs represent more than 98% of businesses and employ more than half of the country’s workforce. SMEs have faced unprecedented setbacks during the pandemic, with approximately 19 percent closing their doors for good in 2020.
On 30 September, Trialogue, in partnership with the Eskom Development Foundation (ESDEF), hosted a CSI webinar which explored how big business can help to resuscitate this vital segment of the economy. The webinar panellists were Cecil Ramonotsi (CEO of the ESDEF), Nomawethu Mampho Sotshongaye (Founder and Managing Director of Golden Rewards 1981) and Kevin Stroud (Supply Chain Manager at Sibanye-Stillwater).
Eskom’s strategies to support SMEs
Thirty-five percent of companies surveyed by Trialogue in 2020 supported entrepreneurs and small businesses, with the sector receiving an average of 5% of CSI expenditure. However, companies need to be strategic to help SMEs grow and thrive in the current difficult environment.
Eskom is well aware of the challenges facing SMEs. As a state-owned enterprise that works in alignment with the National Development Plan’s transformational agenda, it is keen to create a sustainable environment in which SMEs can operate. Its Supplier Development and Localisation Unit, for example, empowers SMEs through skills development, job creation and procurement, focusing on youth- and black women-owned enterprises. The ESDEF’s CSI portfolio focuses on a variety of programmes, from education and health to food security and enterprise development, but plans to adopt a more focused approach given pandemic financial constraints. “We are looking at how to consolidate our activities and maximise contribution to development in our procurement spend,” Ramonotsi explained.
Skills development and capacity building are at the heart of many of Eskom’s programmes, from its well-known Business Investment Competition (BIC) and its Contractor Academy to its business incubators (where it has previously partnered with the Department of Trade and Industry’s Small Enterprise Development Agency and various non-profit organisations).
The Contractor Academy capacitates SMEs so they have the skills and know-how to tender in Eskom’s (or other government institutions’) supply chain. “We see these capacitation programmes as among our most important, and incubation is the key to creating impactful, sustainable SMEs.” Eskom has worked with original equipment manufacturers as it believes this can provide opportunities for development and providing skills capacity to SMEs.
Eskom’s BIC, which has been running since 2008, is open to registered black-owned SMEs in the engineering and construction, manufacturing, agriculture and agri-processing, and trade and services sectors. “The competition capacitates entrepreneurs with skills and access to networks to enable them to pivot into their own market spaces,” Ramonotsi explained. “Helping SMEs to develop and expand their businesses is critical in these troubled times, especially as so many are closing down.”
While financing is not part of Eskom’s remit, it may become a feature of its incubation programmes, particularly through partnership models.
Sibanye-Stillwater’s supply-chain assistance
Stroud, a procurement specialist at Sibanye-Stillwater, explained that the company’s commitment to the local economy is primarily through enterprise and supplier development and funding, procurement, training, skills development, internship opportunities and recruitment. “The role of SMEs in the supply chain is critical and we are committed to making them sustainable,” he said. The company has enterprise development centres in all the regions in which it operates, with an open-door policy. “The centres open a communication channel for community members. In addition, they function as a one-stop shop for SMME’s in search of funding or requiring assistance with procurement,” said Stroud.
Sibanye encourages its bigger suppliers to bring smaller, local SMEs into the supply chain and to ensure that skills transfer takes place. SMEs also receive business acumen training that also includes insight into the company’s tendering and procurement approaches. “We are always searching for women and youth participation, and those whose business proposals are accepted are taken into our incubation process,” Stroud said, adding that, Sibanye is exploring a change to the preferential procurement strategy, to support 10 percent preference for women-owned, five percent for youth-owned, and five percent for black-owned SME procurement, which it hopes to implement in 2022.
From 2017, Sibanye began offering funding to its local SME suppliers administered through Phakamani Capital, which assists doorstep SMEs with cash flow, allowing them to grow and become sustainable. “These suppliers are offered a prime -2 rate, which gives them an opportunity to move into the market. This is an enabler and goes a long way with our local suppliers,” Stroud explained. The company’s CEO fund, started during the 2020 pandemic, assists new suppliers entering the supply chain. Another pandemic initiative to help SMEs was to waive 180 loans during the initial phase of the pandemic. “Through the funds, we supported at least 350 suppliers and helped young and female entrepreneurs,” Stroud pointed out.
The entrepreneurial experience
Sotshongaye founded Golden Rewards 1981 in 2010. Her company focuses on road maintenance, vegetation management and fencing. “As a woman in the construction industry, you get rejected a lot. People think we’re not capable of doing what our male colleagues can do – we have to work twice as hard to be recognised,” she said. Cash flow was – and is – a significant challenge, along with access to funding and equipment. “Banks don’t loan money to SMEs because it’s too great a risk,” she told attendees.
To improve her business skills and gain access to the market, Sotshongaye entered Eskom’s Contractor Academy in 2016 and graduated the following year. “The knowledge and skills I acquired played a huge role in enabling me to compete with well-established businesses,” she said. Her company was the overall winner of the coveted 2020 Eskom Business Investment Competition. She scooped R300 000 in prize money, which enabled her to move to bigger premises, procure much-needed equipment, and recruit interns. “I believe the skills you give to others make a contribution to SMEs,” she said, adding that community outreach in the poorer, rural areas of the Western Cape allowed her to give back. “Around 90 percent of our workforce comes from disadvantaged communities and sharing our winnings with them was a blessing,” she asserted.
The companies she engaged with during the BIC supported her when she entered Africa’s Business Heroes, the flagship philanthropic programme of the Jack Ma Foundation, which supports entrepreneurs. “Without their assistance, I would never have made it into the top 20,” she explained. She is a firm believer in mentorship and coaching, which can help SMEs to deliver on client contracts. “The skills I learnt at the Contractor Academy have ensured that my doors are still open today,” she said.
Advice for SMEs looking for support
For SMEs that are not beneficiaries of specific programmes, the road can seem rocky. But opportunities do exist, according to Stroud. “Some employees can’t continue in their current role if they are involved in mining accidents,” he said. “Sibanye has formed smaller companies that manufacture personal protective equipment and we have brought them into the supply chain by adding these item to the list of items required by operations.”
Many opportunities are ringfenced for host communities to get them into the supply chain, but if skills and capabilities are lacking, the company needs to look elsewhere. It generally focuses on youth- and women-owned companies that are run by South Africans, in keeping with the Mining Charter. Sibanye’s ED centres accept business proposals and are open to new business ventures that make business sense.
For Eskom, CSI funds allow non-profit organisations to be capacitated through business incubation, while the supplier development and localisation side of the business allows Eskom to partner with original equipment manufacturers and maximise its BBBEE expenditure. “This is available to communities in which we operate, especially where most of the power plants are located,” Ramonotsi indicated.
Advice for big companies that want to support SMEs
- Ramonotsi believes partnership will play a major role in the future. “As a state-owned enterprise, we want to maximise opportunities with other public sector organisations, but we also want to partner with the private sector to make a difference to people in the country,” he said. Companies should focus on how to create impact in developing enterprises. For Eskom, this may be achieved by integrating its CSI and enterprise development initiatives, to avoid fragmentation and make the best use of procurement spend. “Consolidation may deliver a better return on investment and greater sustainability,” he explained.
- Stroud said companies that are willing to transform should partner with SMEs that have energy, even if they lack skills, as these can be taught. “People with energy can make a difference and if you marry the two organisations the partnership can bear fruit. It’s a lot of work, but worthwhile,” he asserted.
- Sotshongaye urged SMEs to commit and deliver if they win a tender or contract. “We keep saying we don’t have opportunities – but it is a risk for companies to back us, so we have to meet them halfway, at the very least,” she said.
Watch the webinar
- Peruse our Enterprise Development topic on the Trialogue Knowledge Hub, which is sponsored by the Eskom Development Foundation: https://www.trialogueknowledgehub.co.za/index.php/enterprise-development.
- Watch a panel discussion on supporting enterprise development held during Trialogue’s 2017 Business in Society Conference: https://trialogue.co.za/business-in-society-conference-2017/enterprise-development-business-society-2017/