Tenderpreneurs, a result of a non-transforming private sector

We live in a period where jobs are no longer secure or plentiful so we have to be enterprising, to take risks and initiatives to generate our own income. Entrepreneurial activity has to become the cornerstone of economic growth in South Africa so as to be an important source of net job creation which the country needs. SMMEs do not always directly compete for the same scarce resources as established firms as small businesses have an inclination to employ more labour intensive production processes than large enterprises. As a result, they can contribute meaningfully to the provision of employment opportunities, to generate income and to reduce poverty. They can play a significant role towards narrowing the inequalities between the rich and the poor.

South Africa is fertile for entrepreneurial ventures because there are numerous problems required to be solved. When business solves a problem, it finds a solution. It makes a profit. Better products and services are developed inspired by recognising the interconnectivity of business and community. SMMEs have the potential to be the hothouse for the large firms of the future. With exceptions, many of the largest companies in the world began as small businesses which through a supportive economy, access to appropriate expertise, resources and capital became conglomerates. Lest we forget, Pick ’n Pay evolved from four stores with a turnover of R5 million in 1968 to the publicly listed company it is today with the turnover of R66.9 billion in the 2015 financial year. 

Small business in South Africa refers to firms with 200 or fewer employees and can be divided between established formal SMMEs in predominantly urban locales and the emerging SMME economy situated in townships, informal settlements and rural areas. SMMEs are expected to function as a driving force in South Africa’s both social and economic stability. South Africa is experiencing an expanding in the middle income segment with its buying power. Consequently there is increasing pressure on existing infrastructure such as healthcare, security systems, services, supply of electricity, clean water, recycling amongst many others offering opportunities for SMMEs to service this segment as well as markets around the globe. The growth of the Internet offers prospects for small companies to grow through becoming e-commerce enabled and to use technology in innovative ways. The geographical boundaries for business, including SMMEs, have become fuzzy.

Small businesses in South Africa contribute 30 percent to the GDP, however it is less than small businesses in developed countries which contribute around 50 percent to the GDP and those in Asia that contribute around 40 percent. If the South African government and the private sector do not become more resourceful in how they enable and do business with the SMME sector, respectively, the country risks becoming an uncompetitive ‘has-been’ on the African continent. Government policy such as the Broad-based Black Economic Empowerment, particularly its Enterprise or Supplier Development pillars can facilitate the realisation of increased economic growth coupled with appropriate tax policy to result in SMMEs making a considerable and important difference to the South African economy. The Ministry of Small Business Development, headed by Minister Lindiwe Zulu, has committed to a high level of support for small business through a mix of tax concessions, grants and free advisory services. However if the private sector does not embrace Enterprise and Supplier Development portions of the BBBEE Scorecard with the same vigour as it has done with ownership, regardless of the less than stellar quality of execution even then, measurable progress will not be made.

I believe that the private sector is an accomplice in the growth of tenderpreneurship in the SMME sector because of not embracing market access, particularly by the black-owned firms. As a result, public procurement becomes their bread and butter. Small business cannot thrive solely through doing business with government. The support of the private sector is crucial to the realisation of their potential by increasing consistent revenue and thus their financial stability, their efficiencies and investment in technology to ensure their continued competitiveness. Established firms spend billions a year on products and services. There could be increased opportunities for large enterprises to subcontract more to black-owned SMMEs. In South Africa, there remains a need to diversify the SMME economy, to enhance their productivity and contribution to South Africa’s international competitiveness.