enterprise development sa

Can Enterprise Development help solve our environmental challenges?

Jules Newton
October, 2017

by Jules Newton, Managing Director at Avocado Vision

This article was originally posted on bbrief. You can read the original version of the article here.

The new BBBEE (Broad-Based Black Economic Empowerment) codes of best practice have challenged business in South Africa to focus on stimulating economic growth by supporting the small black business sector, emphasizing Supplier Development.

Client dependency

One of the key success factors for small businesses that survive past their first few years of operation is having at least one Anchor Client.

By having an ‘Anchor Client,’ businesses can depend on predictable cash flow, reliable revenue through offtake agreements, and access to skills and development for the beneficiaries. For larger businesses, BBBEE ‘compliance’ involves spending money on strengthening the suppliers within their own supply chains.

Moving forward

Using legislation to push businesses towards supporting small business within their own supply chains helps harness both corporate resources and talent to solve some of South Africa’s socioeconomic challenges.

Over the past year, corporate organizations who have put strategic thought into practice –the ‘tick the box’ spend-to-comply practices are all but gone – are leveraging solid processes to work toward long- term sustainability.

Once state thievery is eliminated and the state-owned enterprises stop draining economic growth prospects, expect solid growth as practices put in place begin to bear fruit.

Corporate support

Once corporate organizations are compelled to grow black companies within their own supply chains, it gets serious – sustainability is critical. Efficiency and quality are key.

Corporations develop insights into how to build shared value between company, supplier, and customer, while small businesses’ supply chains become more robust. Enterprise and supplier development operating within existing value chains provides an example of the best version of small business development happening so far.

The 4,000 ‘green’ businesses currently engaged in the supply chain of the Department of Environmental Affairs Natural Resource Management (NRM) are typically small and black-owned. Their primary business is clearing invasive plants from rivers and riverbanks. To complete this work, most small businesses own a bakkie, some clearing equipment, and employ up to 11 staff members. Some of these business people live hand to mouth – meaning they are employed by intermittent contracts followed by periods of zero economic activity, while others have been able to build business acumen and cash flow capacity, resulting in larger teams and larger, longer contracts.

What’s lacking?

Currently these small Green businesses are unsustainable. The businesses are overly reliant on government (NRM) to supply work packages, especially in remote and rural areas, and their inability to find alternative revenue streams results in intermittent work.

In addition, seasonal work has a negative impact on cash flows and managing debt commitments for business-critical assets. Low levels of financial and business acumen contribute to high failure rates of Green businesses.

The negative social impact of these unsustainable Green businesses is profound. 50,000 people and their families depend on this unstable revenue. Cost implications for NRM are also severe, as the government keeps investing in upskilling new Green Businesses and staff. Possible solutions need to address the lack of stability with repeatable and reliable income. This is critical since the success of Green Businesses affects the livelihoods of so many people and brings much-needed economic activity to rural communities.

Most of the small Green Businesses’ existing work can be described as ‘Cut and Go’: clearing swathes of invasive plants, leaving most of the remaining biomass on the land. The logistics of moving and processing the biomass makes further the activity unviable. Therein lies the golden opportunity: the biomass, depending on what it is, has value.

Alien biomass can be used in a wide range of products in energy, agriculture, and wood fiber value chains. Scientists have experimented with black wattle leaves, creating winter feed for cattle and fire-proof building materials for starter kits in squatter camps, as well as invasive gum trees, manufacturing school desks. With the proper incubation and commercial support, many of these ideas have the potential to create revenue flows into a sector that didn’t exist before.

What’s happening?

Green Business working groups are helping to make change. One of their functions is investigating the viability of existing and potential value chains. A key part of this is exploring the Alien Biomass economy.

This approach intrigues big business, and many are examining how they could integrate Alien Biomass into their supply chains.

The Green Economy is one of the fastest growing industries of the future – as forward-thinking companies across the world take advantage of the evolving opportunities, the challenge of creating sustainable Green businesses creates a golden opportunity to explore. The industry offers all the ingredients necessary for success: positive environmental impact, business growth opportunities, water risk management, small business enterprise development, economic development in rural areas, and blue-sky innovation space.

The only change required for success is developing the thinkers participating in the solution. If your company would benefit from being part of this conversation, join it.

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