Rivals to allies: Supplier competition fuels progress, beats unemployment

SA’s national unemployment rate is a tragedy. Here's how fostering competition and cooperation among suppliers can drive SMME growth.

It sounds counterintuitive in the highly competitive capitalist business world, but big manufacturers should not insist their suppliers work only for them.

Allowing suppliers to also work for the competition – or even insisting on it – not only ensures small and medium businesses will be more sustainable, but also that they can scale up their systems to the level where prices can come down.

Small, medium and micro enterprises (SMMEs) are acknowledged to be the global drivers of employment growth for the future, rather than major corporations.

The World Bank estimates that SMMEs represent about 90% of businesses and more than 50% of employment worldwide.

Formal SMMEs contribute up to 40% of GDP in emerging economies, a proportion that increases significantly higher when informal SMMEs are included.

The bank forecasts that 600 million jobs will be needed by 2030 to absorb the growing global workforce, which makes enterprise development a high priority for many governments around the world.

In emerging markets, most formal jobs are generated by SMMEs, which create 70% of new jobs. That’s not to say that international employers don’t have a role; quite the opposite.

Well documented, too, is the impact of the Covid pandemic and its aftermath on many SMMEs. And like any concerned citizen, individual and corporate, we in the automotive manufacturing sector are painfully aware of the tragedy of our unemployment rate.

It’s been said that competition is the oxygen in the lifeblood of business: it’s a driver of our constant quest for – and investment in – innovation and refinement of products, operations and services.

Competition benefits consumers and end users.

But there are also ample examples of where cooperation trumps competition: the obvious example is specialist industry organisations like the National Association of Automobile Manufacturers of South Africa.

Another example is my area of work: supplier development.

There’s an industry-wide push to grow its supplier base and Ford Motor Company is investing heavily in that, with demonstrable results.

There are useful lessons from this initiative. The first is that scorecards are a gauge of our efforts’ effectiveness, rather than a tick box.

The second is that we must never forget humanity is at the centre of our work. Each livelihood created means a household has a breadwinner.

It’s a step towards financial security and a step away from generational poverty. I’m always amazed by the forbearance and courage of our people and how they grasp opportunities.

That often happens out of sight, to the extent that we don’t always realise the impact of what we do.

A few examples: a supplier started a modest operation making number plates and sanitising fleet vehicles but, with a little support, expanded into fitting windscreens.

Importantly – and here’s the third, crucial component of our approach – the operation began servicing other car brands.

In doing so, the operation tripled its personnel, from 10 to 30. Another example is a supplier for whom we secured warehouse space and who established and rapidly expanded a plastics moulding operation.

We insist that the suppliers we support must have clients other than Ford because it makes their businesses more scalable.

The Covid pandemic taught us some hard lessons, not least of all the need to ensure that businesses across the automotive sector and, indeed, the economy must be shockproofed.

Having a growing corps of SMMEs that can serve the Tshwane automotive special economic zone, for example, can provide a hothouse of stable growth for a new generation of entrepreneurs.

These efforts are never more important than in the current economy, where a suite of factors of which we’re all painfully familiar – the aftermath of the Covid shutdown, our energy crisis, the impact of Russia’s invasion of Ukraine – continue to throttle our prospects.

SA’s economy grew by just 0.4% from January to March and asset management firm Futuregrowth recently warned the factors I’ve listed have combined to quash investors’ appetite for risk in SA: the foreign shareholding of SA government bonds declined to 25.1% by the end of May, the lowest level in more than 12 years.

There are no quick fixes but succeed we must. And a key to growth remains the role of major business players in ensuring the sustainability of entrepreneurs and the SMMEs they helm.

There’s no silver bullet for SA’s unemployment, inequality and poverty, but support for emerging suppliers can contribute greatly to much-needed socioeconomic development.