Localisation: Public-Private Partnerships play vital role
In an economy where the job market is unable to fully absorb all citizens who are of working age, entrepreneurship and small businesses have widely been accepted in our country (and in many others) as an incredibly crucial component of job creation and economic growth.
As successful small businesses grow and expand, they eventually become medium-sized and large companies, further contributing to much-needed job creation and economic development. Of course, more jobs mean more people with disposable income and the ability to take care of their households where the benefit at times extend to as many as five to six people per household.
As they grow, small businesses employ locals who in turn will ideally spend their earnings within the local economy, thereby supporting other local businesses and creating a positive economic and job creation cycle.
It is this localisation model that we believe can create the job opportunities our country so desperately needs - the model upon which Proudly South African is based.
In his 2022 State of the Nation Address (Sona), President Cyril Ramaphosa clarified to the nation that role of government in economic growth is not necessarily to create jobs, but rather “to create the conditions that will enable the private sector — both big and small — to emerge, to grow, to access new markets, to create new products, and to hire more employees.”
Government’s role, therefore, is to formulate and implement policies and programmes that help to industrialise various sectors, and to support local businesses while taking into account global trade policies and their implementation in other countries, as well as taking into account the cost of living for ordinary South African citizens.
With the required development and growth of small, medium-and macro-sized enterprises (SMMEs) being the proverbial light at the end of the tunnel for our unemployment woes, there have been an array of challenges faced by entrepreneurs and investors. One persistent challenge that too often has come to my attention during my tenure at the helm of Proudly South African, having interacted with a significant number of our members (some of whom are indeed SMEs), is the difficulty for new entrants to enter the various markets that they are targeting.
Taking into consideration the trajectory of our country from the dawn of democracy, South Africa’s economic composition includes an overwhelming majority of entrepreneurs and small businesses who are relatively inexperienced, with little to no business mentorship, and who have inherited a retail market saturated by business relationships and supplier-retail deals that are decades if not centuries old.
Interlinked with these market access challenges is access to sufficient funding, an important element of starting or running a successful business. In this chicken-and-egg situation, SMMEs struggle to get funding without demonstrating that they have a market to sell to which will enable them to repay the loans secured for their businesses, and equally, they can’t access markets without the funding to get their businesses off the ground, or without having working capital to fulfil orders if they were to secure these.
Recent history has shown the importance and efficiency of Public-Private Partnerships (PPPs) not only in solving and averting many socio-economic challenges and crises, but also to creating job opportunities in various sectors. An example is creation of the Riversands Incubation Hub in Diepsloot. The partnership between Century Property Developments and the National Treasury’s Jobs Fund, is now home to about 150 businesses and has created more than 1 000 permanent and 2 000 temporary jobs.
Another PPP success story is the one that assisted in the prevention of some parts of the country reaching Day Zero – the point at which municipal water supply would be shut off due to water scarcity, back in 2018. The partnership between South African Breweries (SA Breweries) and the municipalities of Cape Town and Tshwane saw an additional 4.67 million litres of water per day being supplied for residents – a total of 1.7 billion litres per annum, thereby averting the crisis.
The importance and role of the private sector in creating jobs as highlighted in President Ramaphosa’s 2018 Sona, therefore, cannot be overemphasized, and this includes big businesses working with and helping to develop small and medium sized businesses, as is often the case with SA Breweries.
A few years ago, SA Breweries set their localisation target to 95%. This seeks to ensure that the entire value chain from production right through to consumption, is entrenched locally. Included in the list of beneficiaries of their target are the farms that grow the barley, hops, and the maize required; the packaging of the product, the crowns (tops), labelling and bottling, as well as logistics and transportation, all contributing immensely to job creation.
Their impressive localisation target coupled with their procurement target of supporting historically disadvantaged groups and individuals has helped support new entrants and transformed entities. One such example is iSanti Glass based in Roodekop, Germiston, the first ever majority black-owned glass container manufacturer in South Africa.
At an event I recently attended celebrating a successful three-year partnership between SA Breweries and the iSanti Glass, I learned that the former played a significant role in funding the purchase of this Roodekop factory from packaging giant, Nampak.
Furthermore, SA Breweries committed to a 10-year agreement with iSanti Glass, and in so doing further securing funding for the glass manufacturer from potential funders including those linked and associated with the Black Industrial programme (such as the Department of Trade, Industry and Competition through the Industrial Development Corporation). Through this agreement, SA Breweries solved the chicken-and-egg paradox for iSanti Glass – a great story to tell.
It was heart-warming to hear the iSanti Glass chairman and co-founder also make a commitment that in turn they will also buy their raw materials locally, ensuring that their entire value chain is also entrenched locally, thereby opening other opportunities for other new entrants, as well possibly transformed entities, that stand to benefit from this localisation commitment. Through them giving long-term offtake agreements to other emerging businesses, they will have enabled an entrepreneur to enter an industry that was previously closed off to new entrants and transformed entities.
It is as clear as glass, therefore, that the more businesses commit to localisation throughout their processes and value chains, the more direct and indirect job opportunities emerge and the more our country’s economy stands to benefit and grow.
SA Breweries can confidently proclaim that “a’vulekile amasango” (the doors are wide open), like Ismail said in his hit song from the early 2000s, as they have surely opened doors for a multitude of farmers, industrialists, new entrants and transformed entities through their combined localisation and transformation (access to market) agenda.
Eustace Mashimbye is the CEO of Proudly South African
BUSINESS REPORT