Developing small businesses through supplier development can result in major economic change

By Prudence Gololo - Managing Director at Barloworld Siyakhula (Enterprise and Supplier Development)

The importance of advancing Small, Medium and Micro Enterprises (SMMEs) as key drivers of economic growth in Africa was brought into sharp focus with the launch of the African Continental Free Trade Area (AfCFTA) in January 2021. The AfCFTA with its 54 member states is the largest free trade area in the world and it is anticipated that it will boost intraAfrican trade by 52% by 2022.

Addressing owners of Small, Medium, and Micro Enterprises (SMMEs) during a webinar hosted by the Department of Small Business Development (DSBD) earlier this year, South African President, Cyril Ramaphosa, said that SMMEs are set to play a critical role in South Africa’s economic recovery post-pandemic. He highlighted that SMMEs were set to be instrumental in the country’s bid to create at least 11 million jobs by 2030, and therefore focusing attention on their development is critical.

World Bank data suggests that small and medium businesses constitute up to 60% of all employment globally and as much as 40% in emerging economies. To fulfill their potential as engines for significant economic change not just in South Africa, but the broader continent, SMMEs need substantial financial investment and capacity-building coupled with enabling policy frameworks and the inculcation of a culture of entrepreneurship. It is here that Supplier Development (SD) initiatives come into play as instruments to facilitate radical economic transformation.

As South Africa and the rest of the continent begin to slowly emerge from the economic devastation wrought by the COVID-19 pandemic and the measures put into place to curb the spread of the virus, South Africa stands poised to take advantage of the enormous opportunities presented by the AfCFTA. Central to this project will be building capacity in the country’s SMME sector through strategic supplier development aimed at positioning businesses in this sector to increase their manufacturing capacity to supply the market of 1.3 billion-plus people with a gross domestic product (GDP) of $3.4 trillion.

Supplier development allows for the cultivation of relevant skills and talent and the provision of opportunities, partnerships, and access to finance which is vital to the growth of SMMEs. The World Bank says the AfCFTA “presents a major opportunity for African countries to bring 30 million people out of extreme poverty”. SMMEs and strategic SD are integral to making this a reality. In the words of Rwandan President Paul Kagame, “Africa’s story has been written by others; we need to own our problems and solutions and write our story”.