Through financial services provider Sanlam’s enterprise and supplier development (ESD) programme, small and medium-sized enterprises (SMEs) have experienced an average of 19% growth in revenue in the past two years.
The programme, launched in 2014, is run in collaboration with the Association for Savings and Investment South Africa (Asisa) and, to date, has developed 111 SMEs, creating 75 new jobs in two years and supporting 658 existing jobs.
Sanlam business market head Jannie Rossouw notes that, since the launch of the programme, the total increase in rand value amounted to R22-million. “This success can be attributed to the programme’s taking a different approach to most enterprise development programmes by combining investment funding and business development.”
He says one of the projects in the programme requires SMEs to participate in financial planning. The SMEs were paired with selected third parties, such as accountants, and were upskilled to embrace professional practice management principles. “We provided 5 828 hours of business development to the value of R6-million.”
Moreover, Rossouw says SMEs face numerous daily challenges, including funding, cash flow – often getting paid after invoices for accounts of 30 days have been issued – management capacity, attracting and retaining skilled staff, inadequate marketing budgets and/or efforts, as well as building a reputation and credibility when still in the infancy stage.
Owing to this, the Sanlam ESD programme assists SMEs in taking control of their business processes. “We start with a business diagnostic, which aims to identify the lurking gaps in the business. An action plan for implementation is then presented and support is given to the business owner(s) to address the gaps and prepare the business for future growth,” he explains.
Rossouw adds that skills transfer – from Sanlam’s business advisers to the business owner(s) – is of paramount importance during this phase.
Tailored business development support, followed by financial support, is also provided according to the specific SME’s needs. Sanlam allocates procurement spend where possible, which helps with an SME’s cash-flow requirements. Those that qualify for funding are then provided with a further seven years of SME growth support through the Asisa Enterprise Development Fund, says Rossouw.
Sanlam has also assisted SMEs in increasing their black economic empowerment (BEE) rating, earning 150% in BEE compliance points and subsequently helping its participating SMEs to increase their scores by an average of 18%.
Big Business Relationship
The relationship between big businesses, corporations and SMEs is symbiotic; they need each other to exist, Rossouw says.
“Big business creates opportunities for the SME to produce a product or service they require and, in exchange, this ensures that the SME continues to exist.”
Big companies are continuously trying to manage costs downwards by “rightsizing” and outsourcing noncore operations, he says, adding that the partnership can also benefit not only these two parties but also other businesses in the value chain, such as procurement spend by a corporate directed at one SME spilling over to that small business’ suppliers.
“By providing a consistent income stream, big businesses can help SMEs stabilise their cash flow. SMEs can provide noncore operations at a lower cost to big businesses because it might be specialising in providing the services required to a number of other businesses and, therefore, benefit from economies of scale,” states Rossouw.
SMEs are also inclined to be more innovative in their processes when partnering with big businesses, as they can deliver a product or service faster and at a more competitive rate, he notes.
Inversely, the fixed-cost structure of bigger businesses sometimes does not “enable” SMEs to develop a cost-effective, competitive and timeous solution to meet their unique needs and requirements, says Rossouw.
“Partnerships with bigger businesses can sometimes be very fickle,” explains Rossouw, adding that, if a key contact in the partnership is promoted or leaves the business, it can leave a void.”
But, if an SME succeeds in forming a cohesive partnership with a large corporation, it can build a sustainable business that will have great opportunities for growth, he says.
Rossouw concludes that establishing the most favourable partnership also ensures that the SME is operating within best practice and is aligned to the relevant codes and regulations.