In a free market economy any SMME that wishes to be sustainable has to leverage all available resources in order to compete; including having to ‘sleep with the enemy’ and/or establishing relationships with large corporate enterprises when such opportunities present themselves. While this does pose a number of challenges, the relationship can be mutually successful and both parties can derive significant benefit, providing of course that expectations, obligations, deliverables and outcomes are clearly defined and understood by all parties.
Operators in the small-to-medium category have their own take on this situation. Andre Fourie, Operations Manager at ICT services provider Network Alliance, does not subscribe to the idea that SMME’s necessarily need big business to thrive, as highlighted by the following statistic: SMMEs - which typically employee anywhere between five and two-hundred full-time employees – contribute approximately 45% of South Africa’s GDP.
At the same time Fourie believes there is no doubt that engaging with a large, well-known corporate enterprise can be lucrative and “has the potential to elevate an SMME from obscurity by catapulting it onto a national stage and identifying it as a credible role player.”
Fourie contends that a successful engagement with a large corporate enterprise immediately bestows credibility on an SMME, and is a clear and definite indication that it has the ability to operate at the same level as larger competitors.
“Every effort must be made to leverage such relationships in order to attract more talent, re-invest in the business and, ultimately, find, develop and nurture similar relationships, which invariably will result in growth,” he adds.
If an SMME decides to take this route, there must be an understanding of what it takes to develop a sustainable relationship and ensure that it is mutually beneficial.
The debate as to whether or not the larger, more established partners truly appreciate the challenges their ‘smaller’ counterparts have to face continues – and, as Fourie explains, the reality is that issues like regulation, legislation and compliance specifically present significant challenges to SMME’s, which typically have fewer human and financial resources to deal with such challenges.
“Onerous labour laws, compliance with BBBEE and other legislation, and a multitude of reporting requirements all impede the SMME's ability to do drive employment and economic growth,” Fourie says.
“Other challenges include access to technology, although the ever-evolving nature of technology and the emergence of ‘the cloud’ has made, and will continue to make, technology more accessible and affordable,” he continues.
Matching it up, playing it fair
Fourie continues saying that in today’s market SMME’s are forced to confront a variety of threats, including the emergence of disruptive technology, increasing competition and a changing legislative/regulatory environment.
“There is no doubt that big business has the financial, legal and other resources to pose a real and legitimate threat to SMMEs, and history is littered with examples of how big business has flexed its muscles and/or colluded to fix prices, amongst others, so the threat is very real. SMMEs are not immune to these threats; an argument can be made that by making it easier for SMMEs to do business, they can focus more on anticipating and mitigating risks,” he says.
How do ventures that differ in size, scope and in market standing end up being allies?
Fourie says legislation could be one approach worth considering; much like BBBEE legislation, larger enterprises could be incentivised to spend a percentage of their budget on purchasing from, and supporting SMME’s.
However, this involves government regulation, which, as Fourie says, has the potential to be perceived as unwanted government intervention and will thus be met with fervent opposition.
“A better approach would simply be to empower SMMEs by essentially making it easier for them to do business, which will create jobs and contribute even more to the GDP, which is line with the government’s mandate. It follows, therefore, that the government in general and the DTI need to take the lead by streamlining interaction between itself and SMMEs, which it can achieve by removing complicated, unnecessary and time-consuming compliance and reporting requirements, amongst others,” he says.
“At the end of the day, SMMEs need to realise that they are essentially in control of their own destiny, and, while there is a certain element of danger in partnering with corporate enterprises, such ventures also represent opportunities for growth. In order to earn the respect of larger corporate enterprises, it is imperative for SMME’s to be perceived as credible, respected and trustworthy, which in turn is achieved by offering innovative products/solutions and building a track record of excellence and demonstrated delivery.”