Embracing enterprise supplier development benefits all

It was Don Ncube, one of the pioneers of black economic empowerment (BEE), who once quipped: "You cannot talk about South Africa without talking about the mining industry." He made this comment at the launch of a BEE vehicle he led, Real Africa Investments Ltd (RAIL), in 1994. His comment was in response to a question why RAIL had identified mining as an area of focus when it was a "sunset" industry. At the time, gold was sitting at below $350/oz and the obituary of the industry was already being written.

Fast-forward to two-and-a-half decades later and the prices of gold and other precious metals have risen exponentially, with gold hovering just under the $2,000 mark, and mining remains as integral to SA's economy as it was when diamonds were discovered in Kimberley in the 1860s.

So, Ncube was right, mining and SA are joined at the hip. But since he made that bold statement, which appeared to be against the tide at the time, times have changed, new mining companies have been formed, assets have changed hands and new rules have also been enacted.

Perhaps one of the most important enactments, which affects all businesses in the country, including the mining industry, is the issue of enterprise supplier development (ESD) as defined in the amended Broad-Based Black Economic Empowerment (BBBEE) Act. This legislation contains a set of affirmative action and local content development measures to foster economic transformation.

The purpose of ESD is for big companies to hold the hands of small and medium-sized enterprises (SMEs) to break into the mainstream of the economy through commercially viable supplier agreements. These tie-ups are not only mutually beneficial to parties to the agreement but also have a multiplier effect in the form of job creation in communities where the mining takes place.

Beyond the commercials of broadening the supplier base while earning valuable BBBEE points, there are even bigger societal objectives that embracing ESD can broadly achieve, and these are the constitutional imperatives of:

• promoting economic transformation to enable meaningful participation of black people in the economy;
• increasing the extent to which communities, workers and other enterprises access economic activities;
• focusing and increasing the extent to which black women own and manage existing and new enterprises; and
• empowering communities by enabling access to economic activities.

Awarding an ESD contract to SMEs helps to solve one of the key impediments to SME growth - access to markets. However, that is only one solution. SMEs also need support in areas such as ESD policy and strategy review, viability study, SME application screening, financial support, non-financial support and fund management. Given that companies are not equipped with an ESD bureaucracy, it is important that they seek help from third parties to assist with the above.

For SMEs, tapping into the supply chains of the big mining companies will:

• enable them to grow and sustain themselves beyond the life of mines while assisting in social-economic development;
• address poverty reduction, income generation and job creation;
• enable SMEs to participate in their own communities and open opportunities to grow tentacles into other communities; and
• help eliminate social ills such as crime and substance abuse in the communities due to increased economic activity.

To use a cliché, this mutually beneficial "win-win" programme could also have a positive impact on mining companies, where they would be able to:

• procure quality and cost-effective products and services (local content) from their targeted communities;
• improve their legitimacy (licence to trade) within communities in which they operate, serving as a catalyst for sustainable socioeconomic development; and
• lastly, as mentioned earlier, accrue Mining Charter and social labour plan benefits, thus retaining good corporate citizenship and compliance.

• Motloba is group CEO of Tysys Capital Group