Localisation Of The Supply Chain Supports SMMEs And Translates To Economic Growth

By Hepsy Mkhungo, CEO and co-founder of Linkage

Supply chain localisation could spell significant benefits for the South African economy, driving the development of Small, Medium and Micro Enterprises (SMMEs) – a sector that is central to the country’s economic recovery.

Localisation essentially requires corporates to provide business opportunities, within the sphere of their own business operations, to local players, thus demonstrating a commitment to transformation and SMME development.

The obvious broader benefit of this is economic growth, but localisation must ultimately result in job creation to have any real and significant impact. Any organisation – even a global enterprise – seeking to grow their market needs to start at home.

Wherever a business is located, if it cannot make an impact on the people around its operations, to what extent will it be able to make a global impact? Organisations tend to be scrutinised for their actions and the work they do in proximity to where they operate.

Secondly, in the South African context, if local players are not given opportunities, there is often a tendency to disrupt operations, usually out of a desperate need to uplift the local community. SMMEs want to be included in supply chain opportunities and if there is a barrier to participation, corporates are expected to demonstrate what they are doing to develop local small businesses to qualify.

Unwritten contract

Thus, aside from being a legislative “licence to trade” in many countries, localisation often becomes an unwritten contract between corporates and locals in South Africa. A community that is reaping opportunities from a corporate supply chain in a specific area will protect their livelihoods, by protecting what’s “theirs”. In the absence of this compact, we often witness destruction in our country.

However, corporate enterprises commonly face the problem of not having sufficient data to prove the extent of their involvement in the communities in which they operate. And while they may have some pockets of interaction with local SMMEs, these activities don’t necessarily yield significant results.

Furthermore, not having sufficient data, or having data in silos, with regards to their Enterprise Supplier Development (ESD) initiatives, means that many organisations miss out on leveraging insights that can inform decision-making and provide meaningful feedback to the community.

When corporates start to digitise this information, even just automating and digitalising it, they begin to build an arsenal to prove their value in the community. This value becomes clear only when data is consolidated across various departments and used to provide a transparent and accurate snapshot of the processes undertaken and number of SMMEs supported.

Thus, the digital supply chain is key to the operations of companies as it ties together relevant players through a network of sensors and social technologies, overseen via a central control hub, and managed through an overarching data analytics engine.

Providing transparency

Digitalisation of an organisation’s operations, including its localised supply chain, provides the transparency that enables workflows through multiple stakeholders who share the goal of working together. Additionally, data-driven insights facilitate decision-making that is critical to creating access to opportunities for stakeholders that typically lack this access.

To effectively manage the localised digital supply chain, enterprises need to streamline procurement opportunities, funding, and supplier development to a central point. This will ensure that this information, as well as how to access it, is shared openly and not owned by commodity managers with lists of preferred suppliers.

This removes a major barrier to entry, creating access to supply chain opportunities that are standardised, fair, transparent, and clear, with a well-defined scope and criteria, and propped up by a willingness to bring SMMEs on board that have never enjoyed opportunities before. This will also enable enterprises to find new talent and abilities, instead of restricting themselves to what they already know.

We are starting to see a positive trend among corporates that are increasingly looking beyond the gaps. Critically, these large enterprises are no longer seeking to exclusively partner with   small businesses that tick all the boxes, but are increasingly willing to provide development, procurement and funding opportunities to support emerging SMMEs.

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