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