Overview on partnering opportunities for SMME’s from a large firm’s viewpoint CESA Conference 11 November /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 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.