A key role of the state is to protect the well-being of its people—most crucially and visibly during emergencies such as the recent outbreak of the Covid19 Pandemic. However, amidst growing uncertainty and the fiscal weakness that South Africa finds itself in, the state is unable to do enough to support industry and preserve consumer spending power.
“From spending on healthcare to stimulus packages to fund business continuity, government has its task cut out for it and without the support of our smart and well managed private sector, there is not much hope of recovery” said Peter Bruce, Former Editor-in-Chief of Business Day and Financial Mail, during a panel discussion considering recovery strategies for struggling supply chains post-Corona, hosted as part of the Absa Business Day Supplier Development Dialogue Series on 8 July 2020, presented by Fetola, Cold Press Media and Arena Holdings. “It is predicted that government debt will rise to 80.5% of gross domestic product in this fiscal year. Without being able to cut debt, lend money elsewhere, realise significant savings or literally print money, government’s role in softening the economic impact of Corona is severely hamstrung” added Bruce.
“It is evident that SMEs and the industrial sector have, and will continue to be hardest hit,” said David McGluwa-Head of Department: Small Business Finance and Regions for the IDC. A dramatic and sudden loss of revenue for SMEs severely affects their ability to function, and/or causes severe liquidity shortages. Considering the limited resources of SMEs, and existing obstacles in accessing capital, the period over which SMEs can survive the shock is more restricted than for larger firms. To help business weather the storm, the state has funded a R500 billion ($28.85 billion) stimulus package and functional state entities, such as the IDC has made available a R3 billion funding package to support Industrial Businesses directly affected by the Covid-19 pandemic. The IDC also established a fund for ‘Essential suppliers’ to assist the medical fraternity with goods, services, as well as PPE and have recently launched the Small Business Manufacturing Fund, which is offered at Prime minus 3%. But this is not enough….
Without partnerships between the public and private sectors, the opportunity to re-build the economy will be lost, agreed fellow panellists Vusi Fele – Chief Procurement Officer of Absa and Barbara Copelovici- Entrepreneurship Manager of SAB. Deloitte have even pointed out, in a recent publication titled ’Recovering from COVID-19 – Considering economic scenarios for resilient leaders, ‘ that decisions businesses make in the near term will drive how companies sustain themselves in the long term. It is critical that leaders take decisive action to soften the shocks we know are yet to come as they prepare for what may change in the months ahead.
So how might we do this? Panellists suggested that whilst times are challenging, supplier development presents a golden opportunity to develop resilience in supply chains and strengthen ecosystems, through partnerships between the public and private sector as well as to corporates and small suppliers , that will deliver long-term benefits for all. It starts with the development of a deliberate supplier development strategy, that aims to bolster small supplier resilience and bridge the divide.
Nine strategic imperatives were identified by panellists which draw on three levers, namely linkages, support and finance
Linkages are a way to leverage network capital, often at no cost to the corporate:
- Build solid partnerships with suppliers and support them in preparing for a competitive future
- Enable collaborative market access opportunities by referral of suppliers to other companies
- Help suppliers to discover other networks and re-build connections with former networks
Access to Finance, both relief funding and catalytic growth finance are critical:
- Share information with suppliers about funding relief schemes and offer support to access these by improving “Investment readiness” capabilities
- Take equity in value-adding small businesses in your supply chain – but have an exit strategy to reduce longterm dependency
Support in forms of non-financial assistance is also key:
- Help small suppliers to pivot and build lean, agile and resilient operations that can compete in global and local markets
- Support skills development – upskilling, multiskilling, and reskilling to prepare for the future
- Stratify support to match different growth stages of a business (from, start up to business maturity , growth and beyond), and lastly
- Commit to local procurement and support small manufacturers on the supply and demand side
‘This crisis is an opportunity to improve efficiency and competitiveness “ said moderator, Catherine Wijnberg, CEO of Fetola “Now is the time for a deliberate strategy of strengthening our local ecosystem with meaningful collaboration within and between sectors, and with government. The sooner we realise we are in this together, the quicker our turnaround will be” she concluded.