Overview on partnering opportunities for SMME’s from a large firm’s viewpoint

CESA Conference 11 November 2014

2014/11/08

“If you can learn to stand on the shoulders of giants, you can get bigger, faster.”

Isaac Newton

Pro’s vs Con’s

Large corporations have a key role to play

Provide visibility and credibility. Address changes that improve organisational structures, management

practices, and operations. Upgrade technologies, increase efficiency, and most importantly, become

financially stable:

Revenue becomes greater and more consistent - add new jobs.

Offer customers a fuller and more complete solution.

Easier credit and other business opportunities.

Spill over of new knowledge, innovation, and business models.

Faster time-to-market - greater credibility.

More nimble development - reduced development costs.

The best way to make a partnership pitch is by approaching a company and telling them what you’re going to do for them.

What is in it for larger companies….?

More than "corporate social responsibility" - it is good business.

Benefits:

More flexible in providing innovative products and services to meet corporate

needs.

Quicker in delivering services locally, which saves on costs.

Knowledge of local markets can be extremely valuable for corporations trying to

enter those new markets.

Diverse supplier base also helps establish linkages between the big and small

businesses, enabling easier access to resources.

Corporations that restrict themselves to a small network of suppliers are also

vulnerable to supply chain disruptions.

Four key steps to identifying SME partner

1. Identify and support talent

Identify elite performers based on talent and operational readiness.

Mentor talented entrepreneurs through supplier development programs.

2. Provide financial help

SMEs need support to meet large corporations' needs.

Installing automated invoicing or payment processing systems can be a burden

for small companies.

A loan from a corporation or a community development institution could help

small companies with the capital to scale up their systems, enabling them to

accept their first big contract.

Four key steps to identifying SME partner (continued)

3. Transparent procurement process

Acquiring information on large businesses' procurement processes is a hurdle

for many small businesses.

Corporations that provide a simple website with basic information about goods

and services they need and the procurement officer's contact information would

help small businesses know where to start.

4. Simplify the application and selection process

Make the selection process more accessible and straightforward.

Make paperwork less burdensome.

Help small businesses collaborate to bid on contracts.

Red tape versus SME’s…

South Africa’s stringent policy framework and legislation is proving more

difficult for SME’s to grow, despite being identified as key engines for job

creation by the government. (SBP survey)

2013 was a good year for SMEs in terms of turnover, with nearly two thirds

of the sample noticing an average rise in turnover of 13%.

SMEs spend “eight working days per month” dealing with red tape which

includes frequent changes in the regulatory environment, lack of access to

information and South African Revenue of Services inefficiencies.

Impact of Government policy

SMEs are the lifeblood of a country's economy - essential to generating

good jobs.

Adoption of the National Development Plan (NDP) which targeted 11 million

jobs by 2013, which it says will be met by the private (including small

businesses) and public sector.

Curb South Africa’s unemployment rate (25.2% (2013)) Government has

legislated the Employment Tax Incentive Act in which SMEs have a part to

play.

Known as the youth wage subsidy, the scheme will compensate companies for

hiring young job seekers between the ages of 18 and 29 who receives a monthly

salary lower than R6 000 per month.

Some statistics

Description Black OwnershipCurrent - Average annual turnover

Average annual turnover

Number of employees

% of member firms

Micro (EME) < R1.5m < R5m 5 22%Small (QSE) > R1.5m & < R11.5m > R5m and < R20m 6-20 49%Medium 14% > R20m an< R50m 21-50 18%Large 'A' 3% > 50m and <R100m 51-100 6%Large 'B' 0% > R100m 5%

100%

10%

CESA member companies

Simon Sinek - Start With Why

Closing thought…

It is not the quantity but the quality of SMEs that will ultimately lead to job

creation.