Despite central government, local authorities and parastatals procuring from the Small, Medium and Micro Enterprises (SMMEs), capacity issues have time and again been raised, a recent study have shown.
A study ‘Government and Parastatals Procurement from SMMEs’ by Local Enterprise Authority, however, showed that Local Procurement Programme and the Reservations Policy is not being fully implemented.
“Overall, the government departments are content with the quality, pricing and adherence to delivery times of all the essential products supplied by the local SMMEs,” revealed the report.
The report went on to say that 85 percent of government departments interviewed indicated that they give preference to local businesses when they buy their products.
However, there are those who do not give priority to these local companies.
It was found out that local government departments procure items that are easily accessible, including stationery, printing services, cleaning services toiletry, furniture catering services and protective clothing.
“The challenges faced by councils when dealing with SMMEs are fairly similar to those experienced by central government and parastatals, with the underlying themes pointing towards poor business practices and capacity issues,” the report found out.
It has been revealed that parastatals combined spend billions of pula procuring their goods and services.
However, the parastatals do not have any formal and targeted reservations for small businesses in their procurement guidelines, policies or regulations.
“This could be a potential opportunity if SMMEs were to get preference for products/ services for which capacity to supply has been established.”
The majority of SMMEs enumerated are in the services sector (78 percent) and these businesses provide vehicle spare parts, cleaning services, security services and business process outsourcing.
The tender regulations and procurement procedures of the new parastatals the study managed to access, being LEA, WUC and UB do not demonstrate a deliberate effort by parastatals to purchase from SMMEs.
The study highlighted challenges that small businesses face including competition from larger and foreign companies, which have a better purchasing power, local business preferring imports compared to local produce and lack of proper infrastructure or operating space.
To help SMMEs become competitive, LEA has recommended that these busineses should form strategic alliances with larger enterprises and its peers when they have won tenders to learn from their experience in terms of pricing and quality.
It also recommended that through PPADB and BOCCIM, it should facilitate the improvement of the capacity of SMMEs participating in the procurement actions.
The capacity trainings should include skills development, pertaining to government and parastatals tendering procedures, technology improvements amongst others.
LEA also undertook to sensitise SMMEs on the importance of having a permanent/ known place of operation.
The basic requirements like permanent contact address, phone number and fax number are the things that most of the smaller businesses do not provide making it difficult to contact them.
It has also been recommended that SMMEs should be trained on how to negotiate with their customers once they are awarded a contract so that they set achievable delivery times that could easily be adhered to taking into account all the factors that they impeded their efficiency.