BSC General manager Di Gaskin attended the 2nd International Enterprise Promotion Convention in Harrogate, UK
Procurement spend represents one of the most effective ways to promote the SMME sector in South Africa. Using the example of JSE-listed Hulamin, Gaskin presented a compelling case for supporting a micro-business within a corporate strategic paradigm. The value of Hulamin’s engagement is evident in the success of NIP Pallets that had blossomed from two employees and zero turn-over to an enterprise with a turnover of R1.5 million and a staff of 45.
Making small business work for a large corporate
The objective was simple – to develop a black enterprise to the point where it participated in the corporate value chain of Hulamin, an aluminium semi-fabricator.
The context was Hulamin ‘s determination to re-direct its procurement spend from predominantly white-owned businesses to emerging black-owned enterprises. This was done by identifying certain commercial opportunities, and fast track micro-enterprises to fulfill these tasks.
To this end, Hulamin established a micro-business, NIP Pallets, in 2002. The enterprise was contracted to manufacture wooden pallets to transport Hulamin’s products.
Suffice to say that with the appropriate support and assistance, NIP Pallets has shown impressive growth – from two employees and zero turn-over to an enterprise with a turnover of R1.5 million and a staff of 45.
To monitor the initiative, Hulamin set procurement-spend targets, and appointed champions to drive the process internally.
Hulamin also enlisted the support of the BSC to mentor, advise, ensure regulatory compliance and promote commercial sustainability.
Hulamin kick-started the process by sourcing raw materials, negotiating favourable terms on behalf of the enterprise, and commit to early payment terms.
Several lessons were learnt:
- Critical to differentiate between opportunity and survivalist entrepreneurs
- Micro-enterprises must comply with regulatory provisions
- Large corporations in South Africa need to commit to interventions to facilitate a micro-enterprise’s entry into the mainstream economy
- Interventions and empowerment procedures must be documented to avoid internal misunderstandings
- All business arrangements, including mentorships and training, must be formalized in a legally binding contract between a large corporate and micro-business
- Financial education is key to a successful empowerment endeavour