Real em­pow­er­ment of SME sup­pli­ers crit­i­cal

The Star Early Edition - - FOCUS ON AFRICA -

SMALL and medium-size en­ter­prises (SMEs) are ex­pected to cre­ate 90 per­cent of the 11-mil­lion jobs en­vis­aged by the Na­tional De­vel­op­ment Plan (NDP) by 2030. Yet re­search in South Africa shows that 56 per­cent of new busi­nesses close their doors within the first 12 months; by year three, 72 per­cent have gone un­der; and after five years, only seven per­cent will still be go­ing. How can we pos­si­bly cre­ate enough jobs and en­cour­age sig­nif­i­cant black own­er­ship of new busi­nesses against th­ese odds?

Speak­ing at a Con­sumer Goods Coun­cil of SA sum­mit re­cently, Small Business Min­is­ter Lindiwe Zulu ex­pressed gov­ern­ment frus­tra­tion at the high fail­ure rates of small busi­nesses. She listed a num­ber of in­ter­ven­tions that would en­able small, medium and mi­cro en­ter­prises (SMMEs) to evolve into sus­tain­able busi­nesses, as en­vis­aged in the NDP. Th­ese in­clude: pref­er­en­tial pri­vate and pub­lic-sec­tor pro­cure­ment, and in­cu­ba­tion support pro­grammes.

Many en­ter­prise de­vel­op­ment pro­grammes (ED) cover this ground. When re­cently re­leas­ing Hu­lamin’s En­ter­prise De­vel­op­ment Sus­tain­able Re­port 2014, Reginald Nyan­deni, Hu­lamin En­ter­prise De­vel­op­ment Leader, put it in the con­text that the Broad Based Black Eco­nomic Em­pow­er­ment (BBBEE) Codes of Good Prac­tice on En­ter­prise De­vel­op­ment pro­vide that com­pa­nies make mon­e­tary or non­mon­e­tary con­tri­bu­tions ei­ther re­cov­er­able or non-re­cov­er­able for de­vel­op­ment, sus­tain­abil­ity and fi­nan­cial and op­er­a­tional in­de­pen­dence of ben­e­fi­cia­ries. In or­der to achieve the max­i­mum 15 points, the Depart­ment of Trade and In­dus­tries (DTI) has set out a tar­get of three per­cent of a company’s net profit after tax (NPAT).

Hu­lamin is the JSE-listed Pi­eter­mar­itzburg-based alu­minium semi-fab­ri­ca­tor.

Nyan­deni says: “In line with the DTI’s Codes, Hu­lamin’s ED ob­jec­tive is to fa­cil­i­tate the de­vel­op­ment of sus­tain­able busi­nesses that will cre­ate jobs and add stim­u­lus to the econ­omy. Hu­lamin is com­mit­ted to this process by pro­vid­ing business op­por­tu­ni­ties to new en­ter­prises and support for SMMEs through the pro­vi­sion of pro­fes­sional, fi­nan­cial and lo­gis­ti­cal support as well as var­i­ous start-up support ser­vices. An im­por­tant el­e­ment of ED is the em­pha­sis on the value chain, where Hu­lamin has in­flu­ence to cre­ate op­por­tu­ni­ties for new busi­nesses as cus­tomers or sup­pli­ers,” says Nyan­deni.

ED de­vel­op­ment strate­gies and ac­tiv­i­ties are man­dated by the BBBEE Re­view Com­mit­tee at quar­terly in­ter­vals, where feed­back is pro­vided on ED per­for­mance against tar­gets. Re­sources are al­lo­cated and fresh man­dates are pro­vided.

“Wholly African-owned en­ter­prises had lagged be­hind those of other races in terms of Hu­lamin’s pro­cure­ment spend in relation to their pop­u­la­tion pro­por­tion in the coun­try. Hu­lamin de­cided to ear­mark var­i­ous business op­por­tu­ni­ties within its sup­ply chain to grow its spend within the ED frame­work. Tar­geted op­por­tu­ni­ties in­clude: fork­lifts and equip­ment, lo­gis­tics, skid cov­ers, air con­di­tion­ing, pal­lets and but­tons, pest con­trol ser­vices, hazardous clean­ing and en­gi­neer­ing ser­vices,” he says.

In 2014, Hu­lamin pro­vided business ad­vice and coun­sel to its African-owned en­ter­prises whose business spend with Hu­lamin reached a record R82 mil­lion from R1.3 mil­lion in 1996. Th­ese en­ter­prises em­ploy 350 work­ers on a per­ma­nent ba­sis which cor­re­sponds to 18 per­cent of Hu­lamin’s to­tal staff com­ple­ment of 2,000.

“For the past two years, cer­tain strate­gic in­ter­ven­tions have re­sulted in Hu­lamin scor­ing max­i­mum points in its ED score­card.

“Th­ese in­clude: the sale of some of Hu­lamin’s non-core as­sets to black busi­nesses; fa­vor­able pay­ments terms; mon­e­tary and non-mon­e­tary support for black en­ter­prise in­clud­ing the Business Support Cen­tre (BSC) in Pi­eter­mar­itzburg; and man­age­ment time de­voted to­wards con­cep­tu­al­is­ing, guid­ing and rolling out var­i­ous el­e­ments of the en­ter­prise de­vel­op­ment,” ex­plains Nyan­deni.

As a re­sult, he says, Hu­lamin’s ED score­card has risen (out of 15 points) as fol­lows: 2009 (0.04 points), 2010 (2.8), 2011 (12.54), 2012 (15), 2013 (15) and fore­cast for 2014 (15).

“Hu­lamin has played a key role in the es­tab­lish­ment of the BSC in Pi­eter­mar­itzburg, which has con­trib­uted enor­mously to the de­vel­op­ment of en­trepreneurs as well as job cre­ation in the re­gion. Since its in­cep­tion in 1997, the BSC has pro­vided business train­ing to ap­prox­i­mately 13,500 SMMEs, of the to­tal of 92,000 aspi­rant en­trepreneurs that have vis­ited the BSC.

“Cur­rently, the BSC reg­is­ters ap­prox­i­mately 75 new busi­nesses a year as well as men­tor­ing th­ese new en­ter­prises and inte- grat­ing them into Hu­lamin’s sup­plier chain pro­gramme. In 2014, the BSC co­or­di­nated in ex­cess of 50 BEE ver­i­fi­ca­tion cer­tifi­cates for SMMEs in support of Hu­lamin’s pref­er­en­tial pro­cure­ment re­quire­ment. Since 2005 the BSC, to­gether with the SMMEs, has been in­stru­men­tal in cre­at­ing more than 2,500 jobs.

“Of nearly 150 em­ploy­ees that have been re­trenched - and some took early re­trench­ments pack­ages in 2012 - Hu­lamin has ar­ranged that the BSC as­sist them through im­ple­ment­ing a wide range of business support pro­grammes to en­sure that they start sus­tain­able en­ter­prises.

“The in­ter­ven­tion in­cludes: sem­i­nars and one-on-one business coun­sel­ing, pri­mar­ily to as­sist them nav­i­gate through the early start-up business chal­lenges. Th­ese en­trepreneurs were also con­sid­ered, like any other com­pa­nies, for business op­por­tu­ni­ties within Hu­lamin’s sup­ply chain op­por­tu­ni­ties if they met Hu­lamin’s com­mer­cial cri­te­ria.

“Hu­lamin’s ex­pen­di­ture with th­ese en­trepreneurs has grown from zero in 2012 to over R5 mil­lion in 2014 and they col­lec­tively em­ployed 50 peo­ple on a per­ma­nent ba­sis,” says Nyan­deni.

In 2014, Hu­lamin and BHP Bil­li­ton col­lab­o­rated to form Alu­minium Ben­e­fi­ci­a­tion Ini­tia­tive (ABI), an eco­nomic de­vel­op­ment ini­tia­tive fo­cused on de­vel­op­ing and sup­port­ing high-level en­trepreneurs in alu­minium fab­ri­ca­tion or ben­e­fi­ci­a­tion. The ini­tia­tive plans to iden­tify, support, and train 100-150 en­trepreneurs and guide them into sus­tain­able busi­nesses within three years which will re­sult in th­ese busi­nesses con­sum­ing at least 100 tons of alu­minium each.

A key ob­jec­tive of the ABI is to grow lo­cal mar­ket us­age of alu­minium. The lat­ter will have a pos­i­tive im­pact on the lo­cal econ­omy by gen­er­at­ing job cre­ation and pro­vid­ing an op­por­tu­nity for skills trans­fer.

The value-add down­stream alu­minium projects en­vis­aged will ide­ally re­sult in prod­ucts which are ex­portable and which look at im­port re­place­ment. The project will com­mence in Q1 2015.

A foun­da­tional el­e­ment of en­sur­ing the suc­cess of the par­tic­i­pat­ing en­trepreneurs, and ul­ti­mately the suc­cess of this project, in­clude putting into place men­tors and coaches who will guide, ad­vise and pro­vide gen­eral di­rec­tion to the se­lected can­di­dates.

The alu­minium in­dus­try in South Africa de­picts an in­dus­try that ex­ports large vol­umes of un-ben­e­fi­ci­ated ma­te­rial whilst at the same time im­ports fin­ished prod­ucts. Through ABI, Hu­lamin and BHP Bil­li­ton want to pro­mote a business model for the in­dus­try that will en­cour­age lo­cal sales through sig­nif­i­cant ben­e­fi­ci­a­tion or value add.

The Small En­ter­prise Fi­nan­cial Agency has part­nered with ABI by putting up an Alu­minium Fund to the value of R80 mil­lion. In South Africa the per capita con­sump­tion of alu­minium far lags that of the de­vel­oped coun­tries. The ABI project seeks to in­flu­ence growth in lo­cal con­sump­tion of alu­minium through ben­e­fi­ci­a­tion.

Reginald Nyan­deni, Hu­lamin En­ter­prise De­vel­op­ment Leader.

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