At the heart of trans­for­ma­tion

The unit has been in­stru­men­tal in help­ing set up busi­nesses and job cre­ation as part of Woolworths’ BEE com­mit­ment

Financial Mail - - CORPORATE REPORT WOOLWORTHS -

Woolworths has a fairly good idea of how many man­goes it will need in three years’ time, so right now it has a small black-owned en­tity grow­ing man­goes to help meet that need.

The po­ten­tial sup­plier was not in the mango-grow­ing busi­ness but pre­sented a good case to the Woolworths food-buy­ing team, and to Zinzi Mgolodela, Woolworths head of BEE and trans­for­ma­tion.

Pre­sent­ing a good case to Mgolodela and en­ter­prise and sup­plier de­vel­op­ment (ESD) team is in­volves a process, which seeks to em­power even the black en­ti­ties that are turned down at the end of it. The process could also lead to the equiv­a­lent of a “boot-camp” for a small black busi­ness. It is not for the frag­ile. Bring a busi­ness plan but don’t be sur­prised if it is fun­da­men­tally re­vised. “We in­ter­ro­gate all the as­sump­tions with the sus­tain­ably grow­ing busi­nesses as an end in mind,” says Mgolodela. The buy­ing group has spe­cial­ists who would know when growth pro­jec­tions are too am­bi­tious, or cash­flow likely to be tighter than es­ti­mated.

“We have plan­ners who know what sort of vol­umes we will need, we have tech­nol­o­gists to ex­plain what tech­nol­ogy and skills will be needed, and we have buy­ers who know what’s needed to de­liver prod­ucts and en­sure profit for ev­ery­one in the chain,” says Mgolodela.

Quar­terly meet­ings be­tween Mgolodela’s team, the buy­ing group and the sup­pli­ers pro­vide the op­por­tu­nity to iron out chal­lenges timeously.

“It’s not char­ity. Ev­ery­one has to make money. We of­ten have to say no be­cause we have tested the vi­a­bil­ity of the busi­ness and know that the busi­ness can­not be sus­tain­able,” she says.

Once a de­vel­op­ing sup­plier has made it through the strin­gent process — in­clud­ing guar­an­teed sales to Woolworths — ac­cess­ing fund­ing be­comes con­sid­er­ably eas­ier.

In this crit­i­cal early phase it also helps that Woolworths’ pay­ment terms are seven days. De­spite the strin­gent process, Woolworths’ en­ter­prise de­vel­op­ment unit is cur­rently nur­tur­ing 48 com­pa­nies that em­ploy over 500 peo­ple.

Lance Luiters, CEO of Sea­son’s Find, which is one of the largest of the 48 com­pa­nies, has reached the R50m cut-off level and, af­ter six years, is pre­par­ing to exit the pro­gramme. He and his wife set up a pro­mo­tional cloth­ing com­pany in their garage back in 1998 with fund­ing of just R2,750.

Over the next sev­eral years, though the com­pany’s em­ploy­ment num­bers grew to 35, fi­nan­cial sta­bil­ity eluded it. The 2010 soc­cer World Cup proved to be the big break. Woolworths was look­ing for a lo­cal sup­plier with a quick turn­around time to as­sist with the man­u­fac­tur­ing of the World Cup mer­chan­dise.

Luiters, who had been sup­ply­ing the group in­di­rectly, grabbed the op­por­tu­nity. Within two months he had dou­bled his staff and was able to pro­vide over 75,000 units of kids wear and menswear, se­cur­ing the com­pany’s po­si­tion as an of­fi­cial sup­plier to Woolworths. By 2015 em­ployee num­bers had in­creased to 120. At that stage Woolworths was keen to de­velop its lo­cal sup­plier ca­pac­ity, and Luiters was equally keen to take his com­pany to the next level.

With a R1.9m loan from Woolworths’ ESD pro­gramme, he was able to add the in­fra­struc­ture and em­ploy­ees needed to take on more or­ders. Sea­son’s Find cur­rently em­ploys 216 peo­ple and boasts an an­nual turnover of just over R50m.

A rel­a­tive new­comer to Mgolodela’s pro­gramme is K9 Pet­food, set up and run by Fazielah Alie, who in 2014 ap­proached Woolworths to sup­ply frozen pet­food. Woolworths was at the time look­ing for lo­cal sup­plies of wet pet­food to re­place the cur­rent im­ported prod­uct. Alie re­alised meet­ing this or­der would re­quire a lot of new equip­ment, which meant lots of in­vest­ment. Over sev­eral months they ham­mered out the de­tails of a R61m in­vest­ment plan, which in­volved Woolworths pro­vid­ing a con­tract as well as tech­no­log­i­cal ex­per­tise.

The de­part­ment of trade & in­dus­try and the In­dus­trial De­vel­op­ment Corp (IDC) stepped in with the nec­es­sary fund­ing. “The IDC’S due dili­gence was ex­tremely tough,” says Alie, “They didn’t just in­ter­ro­gate my fi­nan­cial model, they drilled into ev­ery­thing, even the recipes. But with sup­port from Woolworths, I was pre­pared.”

In May trade & in­dus­try min­is­ter Rob Davies opened the new fac­tory, which em­ploys 45 peo­ple. Alie is fore­cast­ing it will reach full ca­pac­ity util­i­sa­tion in six or seven years and em­ploy 80 peo­ple at that stage. She’ll have Mgolodela and her team help­ing her for much of that time, in a process that looks just like real eco­nomic trans­for­ma­tion.

Zinzi Mgolodela: Sup­port for busi­nesses in

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