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Procurement is key to long-term regional wide Industrialisation, SMME growth and socio-economic prosperity

Globally it is now accepted that procurement, a sub-process of supply chain management plays an essential role in local and regional wide industrialisation.

Numerous independent research has shown that it has a direct impact on SMME growth, with procurement managers increasingly been held responsible by members of the C-Suite for the slow progress of industrialisation, local and regional wide, and SMME development. In a recent global study into the role of procurement practitioners in the supply chain process, it was found that significant gaps in knowledge and role understanding on the part of procurement practitioners exist. These gaps in knowledge continue to have a negative impact on not only supplier diversity and SMME growth, but also on economic growth, industrialisation, national development, and social stability.

Lack of knowledge of empowerment policies

In relation to locally owned SMME development, the study, which was based on a sample of companies operating in South Africa and across the continent, found that procurement practitioners were not generally aware of the local supplier development policies of locally owned companies, nor were they aware of the supplier development policies of their top 20 suppliers. That is, 86% of the procurement practitioners involved in the study were not aware of the developmental policies of their major suppliers, and as such, could not indicate the extent to which their procurement practices were supporting local suppliers and SMME growth. In addition to this, 80% of the research respondents were unaware of the skills development spend of their top 20 suppliers. As such, they were not able to determine whether or not their suppliers were supporting local initiatives within their organisations, thus contributing to transformation in the country.

Spend level knowledge essential to economic transformation

The study further found that procurement practitioners do not always have an up to date knowledge of the spend levels of their suppliers, especially when it comes to the spend levels associated with black suppliers. Indeed, the research revealed that 96% of respondents were oblivious to the spend levels between black buyers and black suppliers, and 85% were unaware of the spend levels of major local companies with black suppliers. Without access to, or knowledge of, such information, it becomes evident that procurement practitioners are not able to effectively fulfil their roles of contributing to economic transformation in the country.

Established locally owned businesses need to support local supplier development agendas

Despite operating as established locally owned businesses, the study simultaneously revealed that many of these companies spend very little with local suppliers. That is, from the data collected it was determined that locally owned companies tend to spend less than 3% of their overall procurement budgets on goods and services offered by locally owned suppliers. Additionally, 90% of the companies involved in the study indicated that they did not have an internal supplier development policy, and 88% admitted to being weary of the risk accompanied with supporting SMME and local suppliers. Consequently, notwithstanding the capacity of established local businesses to support and push black economic empowerment and SMME growth in the country, many are unwilling or sceptical about supporting these agendas.

Apart from spend knowledge, procurement practitioners consulted in the study expressed a general agreement that they are not collectively harnessing the power that they have to influence supplier diversity and SMME growth. This is largely because they do not believe that they can influence real change (76% of respondents agreed with this), especially when it comes to having the authority to instigate such change. With 74% of respondents viewing themselves as ‘buying administrators for finance,’ they are largely unaware of the direct link between their supply chain function, transformation and industrialisation in the country.

The procurement professional, empowerment, and SMME support

This relative lack of action on supplier diversity and SMME development on the part of procurement has potential long-term harmful effects for local economies and the rest of the continent. So how can procurement professionals begin to actively contribute to change in supplier development and diversity and SMME growth in Ghana?

To begin with, procurement practitioners need to accept the reality that as a procurement professional they play a key role in supplier development and diversity. As such, they need to come up with a plan of action to ensure effective support in this area. That is, they need to accept their weaknesses and work on them, do research and constantly update their knowledge on procurement best-practice and aim to be directional rather than managerial in their approach. It is important that they are clear on what they want and what change they want to positively effect. In addition to this, they need to make sure that all local suppliers are monitored for supplier diversity and SMME initiatives and empowerment. This is important as already empowered black controlled businesses must be held accountable for empowerment initiatives and SMME support.

The long-term success of supplier diversity and SMME initiatives largely depend on the procurement aspects of supply chain management. It is therefore imperative that procurement practitioners make use of the function afforded to them to encourage diversity in the supply chain, facilitate transformation, and support SMME growth and development at a strategic level. Procurement has the power to not only effect positive socio-economic change, but also support industrialisation, national development and Africa’s long-term economic potential.

Prof Douglas Boateng
Prof Douglas Boateng
(MSc, EngD FCILT, FCMI, FIoD, FIC, FIOM FCIPS) Founder AND CEO – Panavest International and partners and President of the Panavest Foundation

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