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Procurement corruption ‘killing’ SMBs

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Corruption within the public sector has had a devastating effect on small businesses.

This is the word from Lindiwe Zulu, minister of small business development, who told the Procurement Indaba in Durban that this was one of the factors that has kept small businesses from competing.

However, there are other factors too, with small businesses 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, she says.

“Big companies have for a long time managed to crowd out small businesses through their financial muscle, cash reserves and economies of scale,” the minister says, adding that it is 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.

She adds that corruption in procurement was also contributing to the failure of small businesses. “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,” she says.

“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 there are a few bad apples, but the vast majority of our public servants are people of integrity.”

She says 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 adds, depends 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.”

The Department of Small Business Development has identified procurement opportunities for co-operatives and small enterprises that could 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.