Jules Newton | MD | Avocado Vision | jules.newton@bts.com | www.avovision.co.za |
The new BBBEE codes of best practice have challenged business in South Africa to be unequivocally focused on stimulating economic growth by supporting the small black business sector, with an emphasis on Supplier Development in the weighting of the codes within the SED section.
Client dependency
One of the key success factors for the low percentage of small businesses, that survive past their first couple of years of operation, is that they have at least one Anchor Client.
Within this ‘Anchor Client’ relationship lies the opportunity for predictable cash flow, reliable revenue through offtake agreements and access to skills and development for the beneficiaries; and for larger businesses, BBBEE ‘compliance’ involves spending money on strengthening the suppliers within their own supply chains.
Moving forward
Legislatively pushing businesses towards supporting small business within their own supply chains is a smart move that harnesses both corporate resources and talent to solve some of the tough socio-economic challenges our country faces.
I’ve been heartened in my conversations with corporate organisations over the past year who have been putting strategic thought into practice – all but gone are the ‘tick the box’ spend-to-comply practices – in their place are solid processes looking at longer term sustainability.
Once we’ve sorted out the state thievery and groaning SOEs that are draining our economic growth prospects, I think we’re going to see some solid growth strides as practices being put in place begin to bear fruit.
Corporate support
Once corporate organisations are compelled to grow black companies within their own supply chains, it gets serious – sustainability is critical; efficiency and quality are key.
Insights into how to build shared value between company, supplier and customer are growing with small businesses in their supply chains becoming more robust. Enterprise and Supplier development that operates within existing value chains is the best version of small business development that exists so far!
The 4,000 ‘Green’ businesses currently engaged in the supply chain of the Department of Environmental Affairs Natural Resource Management Department (NRM) are typically small and black-owned; with clearing alien invasive plants from the rivers and riverbanks their key activity and they own a bakkie, some clearing equipment and employ up to 11 staff members. Some of these business-people live hand to mouth – intermittent contracts followed by periods of zero economic activity while others have been able to build business acumen and cash flow capacity, resulting in larger teams and larger, longer contracts.
What’s lacking?
Currently these small Green businesses lack sustainability – an unhealthy dependence on government (NRM) to supply work packages, especially in remote rural areas and their inability to find alternative revenue streams besides the intermittent NRM work, exacerbates their instability.
Seasonal work has a negative impact on cash flows and managing debt commitments for business-critical assets; low levels of financial and business acumen contribute to high failure rates of Green businesses in the sector.
The negative social impact of these unsustainable Green businesses is profound when you think of the 50,000 people they employ and the families that depend on their unstable revenue. Cost implications for NRM are also severe as they keep investing in the upskilling of new Green Businesses and staff. Any solution within this sector has to address this challenge – creating more stable Green Businesses with repeatable and reliable income affects community livelihoods positively and brings much-needed economic activity to rural communities.
Most of the current work of the small Green Businesses could be described as ‘Cut and Go’: clearing swathes of alien invasive plants, leaving most of that biomass on the land. The cost of logistics to move and process the biomass further makes the activity unviable. Therein lies the golden opportunity: the biomass, depending on what it is, has value.
Alien invasive biomass can be used in a wide range of value-adding products in energy, agriculture and wood fibre value chains. I’ve seen scientists experimenting with black wattle leaves to create winter feed for cattle; making fire-proof building materials for starter kits in squatter camps; school desks being manufactured from invasive gum trees. Many of these ideas, with the proper incubation and commercial support, have the potential to create revenue flows into the sector that didn’t exist before.
What’s happening?
One of the functions of green business working groups is to investigate the viability of existing and potential value chains; a key part of the investigation is to see how Small Green business can participate in the Alien Biomass economy.
Big business is intrigued by this approach, and many are examining their supply chains and how they could be integrating Alien Biomass into them.
The Green Economy sector is one of the fastest growing industries of the future – as forward thinking companies across the world position themselves to take advantage of the evolving opportunities, this challenge creates a golden opportunity to explore. It has all the ingredients of success – positive environmental impact, business growth opportunities, water risk management, small business enterprise development, economic development in rural areas and blue sky innovation space.
All it needs is to grow the thinkers participating in the solution. If you think your company would benefit from being part of this conversation, join it.
