Are major retailers doing enough to grow emerging businesses?
By Larry Claasen - Jan 24th, 10:22
Major retailers insist they’re doing their bit to help mentor emerging businesses. But are they really doing enough to help entrepreneurs overcome the many hurdles they face?
Shoppers doing the early rounds at a Woolworths store in Rivonia Village mall, Joburg, at the beginning of the year were in for a shock. They were greeted by a dapper man protesting against the retailer; he’d posted "Stop killing SMEs" on the back window of his Mercedes hatchback.
Marnus Broodryk, a former judge on M-Net reality series Shark Tank, got up early that Tuesday because he wanted to show support for Shannon McLaughlin, the founder of Ubuntu Baba. In late December, she’d accused the retailer of replicating her company’s baby carrier, and selling it for a third of the price.
McLaughlin’s dispute with Woolworths went viral on social media, eventually leading to a meeting with the retailer. Woolworths was forced to eat humble pie as it "acknowledged" the "striking similarities" between its carrier and that of Ubuntu Baba.
The dispute ended with Woolworths donating its stock of the product to under-resourced communities, with its branding removed.
Broodryk, an entrepreneur and the founder of The Beancounter, a financial management firm aimed at supporting small businesses, says that while showing support for McLaughlin was important, it was not the only reason for his protest. He says he’s tired of the lip service paid to support small businesses.
"Everyone agrees that small and medium-sized enterprises are the solution to many problems in our country," he says. "They say we are the only hope to restore economic growth. Everyone wants us to succeed, but no-one has our backs."
Research conducted by In On Africa backs up Broodryk’s claim. The company’s "SME SA" report notes that small businesses face a variety of hurdles, ranging from an inability to access funding to regulatory barriers. Of the business owners surveyed, 94% did not get funding from the government and only 20% got funding from banks.
The findings support those of the Global Entrepreneurship Monitor’s report for 2017/2018, which found SA to be one of the countries least supportive of entrepreneurs.
But the country’s large retail chains insist they are playing their part in developing small businesses.
The much-maligned Woolworths, for instance, says it has supported 49 small businesses, providing them with R73m in loans over 10 years, with R22m of that disbursed in the past three years.
It has also helped these businesses access funding from financial institutions. "In the past 10 years our beneficiaries of the programme have accessed funding in grants and/or loans in excess of R300m due to viability of the business cases we co-develop with them," the company says.
Woolworths says it has been backing small businesses since 1994, but it only started formalising a support programme — which includes facility sharing, business coaches and cash-flow support — in 2009.
Rival Pick n Pay also offers a broad range of support through its enterprise & supplier development scheme. It not only provides business support but also ensures businesses get shorter payment terms so as to improve their cash flow.
Several of the businesses supported by the scheme have gone on to become sizeable enterprises.
Portia Mngomezulu’s Portia M Skin Solutions, for instance, generated more than R20m in sales with Pick n Pay over a 24-month period and was awarded the small supplier of the year award by the retailer.
In 2017, Pick n Pay launched its Pick Local scheme, which showcases products sourced from nearby communities.
Suzanne Ackerman-Berman, director of transformation at Pick n Pay, says the group is well aware that it can play an important role in mentoring emerging businesses.
"By creating opportunities for small-scale farmers and entrepreneurs, we help them get into a position where they can service the formal retail sector — or even go out on their own. In the process, they create jobs and develop skills."
Walmart-owned Massmart’s supplier development programme, established in 2012, has so far invested R200m and is supporting 24 small businesses which manufacture a range of products, including chef wear, cooking gel, instant noodles, charcoal, adhesives, cooler boxes and paint.
Shoprite also supports a number of small businesses, including 69 small-scale farmers.
Though SA’s largest retailer offers a lot of support, it says it is in the process of developing a formal, sustainable supplier development programme that "encapsulates the principles of shared growth in transformation of the sector for small and medium-sized enterprises in SA".
Broodryk says there’s nothing wrong with what the retailers are doing — it’s just not enough. He believes they could be far more effective if they work together, share ideas, and formalise their support across the sector. In this way, all the retailers could offer benefits, like quick payments, to start-ups.
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