The B-BBEE codes and Supplier Development are powerful tools for procurement professionals experiencing increased supply chain risk due to COVID-19. It’s one that has been rarely used for its true intention but as the June corporate financial year end has past, this piece is aimed for those corporates with December 2020 and February 2021 year ends, to stretch the thinking of procurement professionals experiencing increased supply chain risk.
The current environment is a perfect storm for South Africa to re-industrialize whilst promoting a transformed and more equal economic structure.
On the one hand COVID-19 continues to disrupt global and local supply chains with and on the other hand the African Continental Free Trade Agreement (ACFTA) which is destined to increase demand from the region over the coming years.
South Africa’s industrial economy is structured with a handful of high volume manufacturers of goods being supplied by a handful of input suppliers. These suppliers of raw or semi-finished inputs are traditionally older and untransformed businesses. Sadly, we’ve been receiving an increasing number of enquiries from those who are cash strapped and in distress.
Unfortunately, many of these local suppliers will be restructured or closed, opening up markets and supply chains previously impossible to enter.
This is an unique opportunity for procurement professionals assessing their supply chain risk to consider strategic supplier development by finding ways to provide transformed businesses with letters of intent or offtakes to satisfy replacement of demand from its traditional suppliers who will be closing and new demand which is expected due to the ACFTA.
Furthermore, whilst Enterprise and Supplier Development budgets may have reduced in line with profits in 2020, procurement professionals should be looking to development and commercial financial institutions to co-finance the capacity of their suppliers.
These co-financing mechanisms include incentives for business and manufacturers: For example there is up to R50million in grant funding for black industrialists through The Department of Trade and Industry and Competition (DTIC).
As we move out of COVID-19 and look to economic recovery, it’s so important that every tool in the shed is used.