Good news is hard to come by these days and this blog doesn't exactly stand out as the great good news blog. At the moment the mining industry is not happy with our esteemed leaders' incompetence (that's plural) that manifests itself in (this list in not exclusive) mixed messages, inconsistent BEE policies and the application thereof and the perpetual threat of licence withdrawal by the ANC (read government because they are unable to differentiate between the two). At long last certain miners are starting to tell these myopic politicians that there polices aren't nice and that they won't invest in South Africa whilst they are in place.
In spite of all this there is some good news. Those with a keen BEE eye might view this story as even better than the article makes out. Business Day ran a story about Woolies' ED programme last week.
Johannesburg-based Classique Bags and Boxes is one of 40 small businesses that have benefited from Woolworths' enterprise development programme, producing and supplying recyclable paper shopping bags for Trenery and Country Road stores. Through the Woolworths enterprise development programme, Classique received a R100,000 loan to secure separate premises and additional equipment (to manufacture paper bags). "The programme boosted our business and helps us manage our monthly cash flow since beneficiaries of the programme are on shorter payment terms and invoices are settled within seven to 14 working days. We can also lean on them for business advice and guidance relating to anything from finance to improving eco-friendly practices."
For those who are new to the concept of ED then you'd do well to look at this paragraph critically. Pay special attention to the following
-
A R100,000 loan
-
Purchasing from the ED beneficiary (yes this is Rob's wish – but Rob has missed most of the point with his supplier development concept)
-
Shorter payment terms
-
On-going assistance and guidance
All of these make for an effective ED programme. The codes are desperate for companies to dish out money to beneficiaries for free in the form of grants. This is plainly counter-intuitive. Nowhere in the world does money come for free. It is a pity that the codes reward interest free loans without any security more than other loans. But in this case the story tells us that Woolies loaned money to gear this company up to deliver the products. Woolies now has a bunch of skin in the deal – they require the merchandise otherwise they'll have a bunch of unhappy customers so they go to extra lengths to ensure that this company's cash flow remains optimal.
I love this. However we cannot assume that it will work in everybody's case. It was Anglo American who aptly explained that mines are not well suited to supplier development because they mine stuff out of the ground. They know nothing about supplying Caterpillars or toilet paper or guards (which mines need in abundance now). But they do know how to get raw material out of the ground. They would therefore have a much more interest in beneficiating that raw material and developing those companies is more akin to the nature of their business. At the very least it involves their basic product so they will have a basic understanding of some of the beneficiary's business. We need this type of flexibility in our ED programmes.
Comments