Small businesses have been historically shut out as a result of bureaucratic and costly procurement practices which favoured big suppliers. By failing to create a level playing field, smaller suppliers are excluded from procurement opportunities. This was said today by Small Business Development Minister, Lindiwe Zulu, at the Procurement Indaba held in Durban.
“Big companies have for a long time managed to crowd out small businesses through their financial muscle, cash reserves and economies of scale”, said Minister Zulu.
She said that it was much easier for big companies to sell products at lower prices and in the process squeeze out small businesses when competing for government procurement opportunities, because of the tendency to look at the lowest price over development considerations when procuring goods.
Minister Zulu said corruption in procurement was killing small businesse. “Among the many reasons for the collapse of small businesses is corruption. Small businesses are the hardest hit by procurement corruption. Their bids or quotations get overlooked by procurement officials because they cannot afford the bribe price”.
“Some of the small suppliers who get opportunities, it is largely on condition that they have to pay a bribe. This is unsustainable for small businesses because, in essence, they are made to pay tax twice – an official tax to SARS and plastic bag tax”.
Minister Zulu added:
“One of the key things we must address if we want to build thriving and sustainable businesses is to confront the issue of procurement corruption head-on. Having said that, however, we must caution against painting the public service as inherently corrupt. Indeed the are a few bad apples, but the vast majority of our public servants are people of integrity”.
She said that government, the private sector and other relevant stakeholders carry a responsibility to stimulate and support the growth and sustainability of the co-operative and small business sector.
“Together, we must address lack of business opportunities in both the public and private sectors. We must proceed from the premise that supporting small businesses and co-operatives is not a philanthropic gesture on the part of either government or big business. In fact, it is in our collective interest to help grow and sustain small businesses”.
The growth and sustainability of big business, she said, depended on a strong small business sector, both as consumers and suppliers. An inclusive economy that benefits all is also a guarantee for the social stability that is required for business to flourish.
“With, at least 42% of South Africa’s national budget spent on the acquisition of goods and services, South Africa cannot afford to squander the opportunity this investment affords to support economic recovery, and to ensure that all SMMEs benefits in the growing of the country’s economy”, she said.
The Department of Small Business Development has identified procurement opportunities for co-operatives and small enterprises that should be unlocked throughout government spheres. All economic-cluster Departments (both national, provincial and local), government agencies and state-owned enterprises will negotiate and sign transversal agreements with the department to ensure SMMEs have access to these opportunities.
Minister Zulu encouraged local municipalities to ensure that their procurement strategies explicitly recognise the significant benefits of procuring from local small businesses when tendering for goods and services without compromising their legal stipulations and quality of the products and services procured.
“Public sector procurement at Provincial and Local government should have local economic development strategies that take into account the needs of the existing local economy and inform procurement strategy based on a comprehensive analysis of spend”.