South Africa is entering a second phase of black economic empowerment and big business has an important role to play in contributing to transformation. There’s also big potential, especially for job creation, in the informal economy.
“So far the focus of economic empowerment has been limited to what you can do with public procurement processes and people sitting on boards of big companies…. that can’t be significant empowerment,” said Gauteng premier David Makhura. He was speaking at the official launch of the Barloworld Siyakhula Incubation Hub on Tuesday.
“We are entering a phase where government must do something through public procurement, but big business must do a lot more. Eighty percent of the South African economy is essentially in the private sector – so even if government were to [put in 100% effort], it would only be contributing 20% to transformation and empowerment.”
Makhura, along with the Department of Trade and Industry (dti), is encouraging big corporates to incorporate SMMEs and “township enterprises” along their entire supply and value chains.
This month, the dti launched the Strategic Partnership Programme (SPP), which aims to encourage large private sector companies, with government, to support and develop SMEs within their supply chains or sectors, to manufacture goods and supply services sustainably.
Siyakhula (‘we are growing’ in Zulu and Xhosa), established in 2007, partners with the dti and Standard Bank to provide financial and other support to small business suppliers in its value chain, including enterprise development, skills transfer, supplier development and marketing opportunities. It aims to support 20 to 40 SMMEs a year, over three years, helping up to 120 SMMEs to become sustainable suppliers.
The hub, based in Sandton, Johannesburg, targets Barloworld’s existing black-owned SMMEs and supports eligible SMMEs within its larger value chain to navigate common business challenges. To date, it has helped its small business ‘incubatees’ to create about 670 jobs.
“If we were to have ten big corporations in SA over the next two years, that work to replicate what Barloworld Siyakhula is doing, we’d have a huge impact on transformation of the [province’s] economy,” said Makhura.
Second wave of empowerment
In his February State of the province address (Sopa), Makhura said that we are now moving towards the ‘second wave’ of empowerment, “which will ensure that black businesses and township enterprises that we are currently empowering become more sustainable by participating in other sectors of the economy.”
Where big corporates have regional or even global value chains, opportunities should be opened to SMEs for procurement.
“It’s that approach to empowerment that we say is the second wave of empowerment, because it’s more sustainable. But it also opens up opportunities for small businesses to grow in a way that’s unimaginable.”
At the launch, he emphasised that big corporates must find the right BEE partners. “Economic empowerment must also help you to increase value to your shareholders and not subtract from that. Find the right partners that will help you to address a fundamental problem in our economy: your partners must increase employment.”
They also need to be business people, informed about the sector.
[To foster transformation] big business must have bold leadership and vision, but be patriotic.
He said the term ‘radical economic transformation’ is used to scare away white businesses, which shouldn’t be done. “We must embrace partnership with business – we mustn’t scare them off; we mustn’t attack business.
“Of course government must do its part. The regulatory environment must be supportive of inclusive growth and the way we govern and run institutions of government, [must be done] in a way that leads to business confidence….But to achieve economic transformation, you are going to need every player.”
The Gauteng Township Economy Revitalisation Strategy 2014 states that government is committed to ensuring the township economy contributes at least 30% to Gauteng GDP by 2030 (2014 estimate: 10%).
According to Sopa, provincial government increased spending on the township economy from R600 million in 2014 to R6 billion in 2016 – 22% of the 30% target that is set for 2019.
The number of township enterprises benefitting from government procurement increased three-fold, from 800 in 2014 to more than 2 800 by January 2017.
In 2016 there was a “huge spike” in employment in the informal sector, with 150 000 jobs in one year “…because of interventions supporting SMEs,” says Makhura. However, the premier is concerned that these enterprises may not be sustainable without government tenders.
Thus, he encourages big business to also open opportunities for township SMMEs.
He said his office has approached every major sector in the province, including mining, food and beverages, capital equipment manufacturers, defence and aerospace and automotive – to extend opportunities to black-, women- and youth-owned companies in their value chains and to support them as they grow.
— GautengGov (@GautengProvince) March 14, 2017