20 April 2020

Big Companies Should Be Using Their ESD Targets To Save SME's

Submitted by Yasmine

The SME sector is experiencing a crisis bigger than it has encountered before thanks to the Covid-19 lockdown. Sim Tshabalala, a member of the CEO Initiative, and chief executive officer of Standard Bank, said: “These are extraordinary times that require extraordinary commitment from CEOs and large corporates. The Government has asked South Africans to stay home under a 35-day lockdown. This is tough for every individual, and every business, but most especially difficult for small and medium enterprises.”It is vital that the SMME sector is strongly supported through this crisis in order to prevent large-scale liquidations, and the loss of thousands of jobs.

Now is the time for the ESD pillar of the B-BBEE Codes to come into its own. The element was designed to support previously disadvantaged businesses to allow them to actively participate in the formal economy, and to support the SME sector in general. It is said that the ESD landscape that has become predictable and stale, with an over-reliance on business incubators, for example. ESD beneficiaries receive all sorts of business training, and often hop from one incubation programme to the next in the hope of receiving funding or procurement contracts. However, these have generally not had much impact.

What is needed now are innovative, creative approaches for supporting the SME sector in general, and ESD beneficiaries in particular. ESD contributions can change from being a grudge purchase, or just the price of doing business in South Africa to becoming the mechanism to save the small-business sector and, ultimately, the economy.

Some examples of assistance that can be given include:

  • Shortening of payment terms to paying on invoice,
  • Relaxing of procurement policies to allow more SME’s to enter the supply chain,
  • Actively pursuing policies that allow for procurement of designated goods and services from small suppliers,
  • Implementing Supplier Development initiatives according to the substance of the pillar i.e. helping businesses to optimize their processes (which will ultimately benefit the corporate sponsor),
  • Giving small business owners access to professional services that are essential to running a business. For example, accounting services to assist small business to fulfill funding criteria, and IT services to help them transition to digital platforms will be of enormous benefit,

Taking the time to ask small business owners about their pain points to assess where assistance can be given.Hundreds of small businesses are going to close their doors as a result of this pandemic, but large corporates should be doing all they can to ensure that they do their bit to lessen the number as much as possible.