WHAT CONSPIRES FOR AND AGAINST A MORE ECONOMICALLY INCLUSIVE SOCIETY - By Eustace Mashimbye, CEO of Proudly South African
During this period of re building and regeneration of the country’s economy in the wake of the Covid-19 pandemic and the impact of the resulting lockdown period, economic inclusion is an important element in equalising our society in so far as it promotes growth and job opportunities. A number of business practices conspire either for or against inclusivity and it is worth having a look at just a few in their relation to localisation and its own role in promoting broader participation in our economy.
Local procurement has never had more important or relevance than it does now. But preferential procurement and enterprise development cannot be used merely as tools for your BEE scorecard. That isn’t sustainable and does little to entrench a culture of meaningful local procurement that truly benefits the business, the supplier, the growth of the economy and jobs. Enterprise and supplier development programmes, supplier pipeline initiatives, impact partnerships – these are some of the ways in which corporate South Africa has truly embraced the need to grow and nurture small, mostly black owned businesses and bring them into their supply chain. These small businesses have the biggest potential for job creation and must be nurtured.
A number of Proudly South African’s members and stakeholders have done this with great effect. SA Breweries, together with some of the companies that are part of the Market Access Programme, have created a database of pre-qualified SMMEs available to other companies looking for local suppliers. Absa has partnered with the Lionesses of Africa programme to grow and develop specifically female entrepreneurs. These and many more of our large corporates are playing their part in creating sustainable inclusivity programmes.
A critical component to be monitored consistently is to look at the value chains of our private sector companies, to ensure that the actual products they are sourcing from local suppliers are locally produced. It begins with raw materials and day to day consumables, bringing new entrants into the supply chain, in order that they, too, can drive economic inclusivity.
As part of our ongoing follow up since the October 2018 Presidential Jobs Summit, we have been soliciting localisation commitments and pledges from corporate South Africa, as part of our work in pushing the inclusivity agenda. By encouraging companies to commit to a specific Rand amount, or a specific part of their procurement process (sourcing only locally manufactured office furniture for example, or stationery) we are slowly but surely converting their supply chains to become more local, coupling this with their preferential procurement and ESD programmes, also making them inclusive.
We have worked over the past few years with the Franchising Association of South Africa (FASA) and taken smaller member companies to ‘elevator pitch’ type events in an effort to grow the levels of local procurement and inclusivity in that sector. Franchising is a massive business, and irrespective of the nature of the franchise (from fast moving consumer goods to hardware and everything in between) there is the procurement not only of the raw materials such as restaurant ingredients, but of the furniture, crockery, uniform etc that create the specific ‘ look and feel’ of that brand. Done correctly, and through fair import replacement sourcing strategies, franchise procurement can be a great driver of inclusivity.
However, done in an unfair and anti-competitive manner, it benefits only the few and can even lead to the downfall of small business owners, who buy a franchise believing it to be a ‘ safe bet’ only to find that prescriptive buying and even pricing regulations render the business unsustainable .
New anti-competition laws, which we are still studying, have stringent measures in place against ‘closed shop’ arrangements that work against economic inclusivity. The new legislation should support small business owners not only in respect of overly prescriptive contracts but also in allowing better access to markets as prioritising, favouritism, nepotism, collusion and all these variations of unfair business practices come under legal scrutiny.
Economic inclusion is an imperative for the country. It creates economically active citizens who are free to buy and sell how and where they wish, which in turn increases the tax revenue base putting more back into the fiscus. Localisation and inclusion can be synonymous. By practising the one, we are by default supporting the other and creating much needed jobs in the process. We therefore appeal to all members of the PBF to review their procurement processes and supply chains in favour of businesses that are manufacturing locally and who are therefore creating jobs.