VICTORIA STEPHEN: Opportunities must be created in informal sector for SMEs

In SA, small- and medium-sized enterprises (SMEs) generate about 34% of the country’s GDP and employ about 60% of its workforce. On a larger scale, these businesses are key drivers of business activity in Sub-Saharan Africa, making up 90% of businesses, 50% of GDP and 80% of jobs.

However, the SME landscape in SA faces challenges. More particularly, the failure rate for small businesses is one of the highest in the world, with about 80% of small businesses failing in the first five years due to challenges that range from a lack of access to tools and technology to a skills deficit, difficulties with market access and a lack of funding.

In these numbers lie the seed of opportunity for us as a nation to rise up and, as we rise, to uplift those around us. This means creating opportunities and inclusion for SMEs and the informal sector, where circumstance and lack of opportunity blocks the pathway to a better life.

By creating an environment of sustainable inclusion for all SMEs we can nurture this local ecosystem so that opportunities are available for the benefit of all, not just those businesses that are already well established.

Once we accomplish sustainable systemic inclusion we will achieve greatness as a nation and the healing of the foundation of our country can truly begin. We will create an interdependent economy that is sustainable, self-reliant and paves the way for other nations to embrace change. This will spur win-win co-operation and collaboration with other nations, for the greater good of all.

To achieve this economic transformation there needs to be a mechanism of collaboration at a community level within the country. This would enable the meaningful participation of the disadvantaged in the economy and support the growth and sustainability of SMEs within communities.

This starts with collaboration between industry, services providers with the necessary skill set needed and community leaders, to develop and implement a strategy for the sustainable development of local ecosystems that are tailor-made to meet the needs of each community and its benefactors. This will foster long-term relationships with communities that are based on trust and empowerment, creating a fountain of abundance for all.

The Bakgatla Ba Kgafela tribal community understands this need all too well. Situated in the north-eastern corner of the Pilanesberg in SA, where the Big Five roam the plains and an abundance of platinum lies, this community is at the forefront of innovation and collaboration.

The community makes great efforts to develop the wealth of the land under their stewardship together with mining companies so that all can prosper. They have taken strides to understand not only the needs and frustrations of their community, but that of the mining companies with mines surrounding them.

Mines often report significant local procurement, but in the case of the Bakgatla Ba Kgafela this isn’t necessarily true or as transparent as it could be. There is a disconnect between mines and the community in terms of data available for reporting to support the nature and value of local procurement. The key to mining companies maintaining their social licence to operate and meeting local economic development goals lies within the depth and transparency of this reporting.

Communities within Bakgatla are frustrated with the current way local procurement is implemented, because true inclusion, participation and trust are lacking. In most cases, goods mining companies purchase locally from companies in communities are not produced locally, but rather supplied from outside the community.

Merely buying products and services in this way is a good starting point. However, it means the opportunities generated are only available for the benefit of those businesses that are already well established. Meanwhile, most of the local community misses out.

Many existing and emerging suppliers and service providers have difficulty in understanding complex systems and meeting the stringent supplier registration requirements to access and participate in procurement opportunities. This potentially leads to preclusion.

To meet the requirements of mines with the capacities available in surrounding communities requires a thorough understanding of local companies and their capabilities. Additionally, identifying potential gaps where localisation, capability and capacity building may be required.

The Bakgatla community leaders and advisers are hoping to collaborate with mining companies and service providers to proactively address these frustrations and needs by implementing a phased solution, as laid out in their local economic development strategy:

• Establishing development hubs on the ground to offer incubators that focus on supporting less established start-up SMEs in the early stages of growth. Offering services aimed at strengthening the capacity of SMEs so that they can operate independently once incubation ends.
• Implementing a user-friend e-commerce technology solution that provides comprehensive data reporting, as an accelerator. This solution will centralise all community SMEs start-ups with a proven business model at different levels of capacity, in both the growth phase and stabilisation phase. The focus will be on providing meaningful participation in the procurement environment through exposure, access to market and finance which creates opportunities for growth.

While both phases support start-ups, they serve different purposes and work with start-ups at different phases. Fusing the two is the secret to success for all involved, forging sustainability around local economic development, which paves the way for economic growth.

In this way mining companies will unlock value from money invested into local economic development, knowing it is having a true effect on the lives of the people within the communities they operate in.

The ability to access SMEs in a centralised space within communities, and profile and track local procurement spend, will assist in matching the requirements of mines with the capacities available in communities surrounding each operation.

Furthermore, the comprehensive spend data available to mining companies through this solution will provide a better understanding of the community’s current capacity, participation and where the potential for growth and opportunity lies for localisation.

Understanding the true nature and value of local procurement within a community through comprehensive data reporting will assist mining companies in achieving the best result around local economic development initiatives. This will ensure that all goals for social responsibility are met to maintain a social license to operate. This win-win combination of collaboration, incubation and acceleration will ease local unrest saving mining companies considerable losses in productivity.

The ultimate goal of the Bakgatla tribal community is to collaborate with mining companies to build a local ecosystem that can prevail after mine closure, unlocking tremendous value in the long run for mining companies to stimulate local economic development. 

This tribal community sets an example for us all: that by working together to create sustainable localisation and inclusion, we can build a golden future for all.

• Stephen is founder of the N-Fuse technology solution and CEO of Bawn Holdings.