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BBBEE mining supplier development faces challenges

17th July 2015

By: Schalk Burger

Creamer Media Senior Deputy Editor

  

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Supplier development of small businesses to provide services for mines – in line with the new broad-based black economic-empowerment (BBBEE) regulations – faces significant challenges, says supplier development consultancy Economic Development Solutions (EDS) MD Janine Espin.

Large corporate companies, including mining houses, have a history with their suppliers and they do not always want to take the risk of using a smaller, lesser known and/or younger company, thus limiting the opportunities for small emerging black-owned businesses, she says.

In addition, these small businesses lack experience and often do not have the capital to support large-scale supply and long or inconsistent payment terms, which large corporates often impose on the small suppliers. This has a negative impact on small business cash flow and thus impedes its ability to grow or to sustain itself.

Furthermore, specifically with regards to the mining industry, the requirements to become a supplier often include a large monthly investment for liability and business insurance, which further impedes the sustainability of these small businesses. This also makes it more difficult for small businesses to provide services and products to the sector.

The growth of small businesses is also limited by the availability of opportunities. For example, they might not have the funds to market their business to gain new clients and, even if they do, they might not be able to afford more resources to serve new customers or contracts.

Another challenge specific to the mining industry is the requirement for the development of black women-owned businesses in this predominantly male environment. For example, only a few women-owned engineering companies are reflected in mining industry supply chains, notes Espin.

“These are the main challenges that supplier development in the mining sector must deal with, but they are not insurmountable.”

EDS reports progress on two supplier development projects in the Limpopo and Northern Cape provinces.

The project in Limpopo involved EDS identifying existing micro and emerging businesses in the Phalaborwa area to be developed into service providers for local mines. EDS facilitated the development of the skills levels within these selected beneficiaries (small businesses) through the training of welders, and others, to allow these small businesses to compete for business within the region.

EDS acts as a go-between by acting on behalf of its client to meet its enterprise development and supplier development objectives. It provides expertise, such as research, consultation and the facilitation and management of appropriate delivery partners and outputs, to develop the skills of the selected beneficiaries.

“Our goal is to develop sustainable, viable and independent small businesses, which we achieve through suitable mentoring and coaching programmes. This includes specific business training for the small businesses to develop business plans in line with the opportunities they have identified and beyond, to then sustainably deliver services to business.”

“Simultaneously, EDS is involved in implementing a much larger-scale enterprise development intervention, which is a community-based intervention in the Northern Cape,” says Espin.

“In this project, we identify potential entrepreneurs for development. There is a rigorous training and assessment process to determine whether the applicants have the entrepreneurial spirit and the required know-how.”

EDS then works with the selected entrepreneurs to interrogate their business ideas and explore potential business opportunities, assist them to research and assess whether these concepts are viable and sustainable, and identify whether there is a suitable or limited market for their ideas, she adds.

“Once they have established a firm business plan, which includes the potential market size and demand, we provide ongoing support through mentoring and coaching services,” Espin states.

The cost of the project is provided for by funding from a company within the renewable-energy sector. The reason for this intervention and strategy is to allow for the development of local service providers to the various sectors in the region, which include the numerous mines operating in the Northern Cape.

Creative Solutions
Espin notes that there are a number of unexplored opportunities to support the broader development of small business.

“We have legislation galore around job creation and BBBEE; but, when it comes to other aspects pertaining to small business development, such as taxation or labour laws, government regulations are often obstructive.

“For example, while it is crucial for small businesses to pay taxes, such as unemployment insurance, PAYE, VAT, et cetera, it is believed that tax incentives and the general taxation regime should allow for more solutions to enable these small businesses to employ more people and grow.

“South Africa must explore broad and innovative ways of developing small businesses, including using tax incentives to enable established small businesses to hire more people,” concludes Espin.

Edited by Leandi Kolver
Creamer Media Deputy Editor

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