South African Supplier Diversity Council
The National Business Initiative (NBI) supports key national initiatives that make a significant positive contribution to sustainable socio-economic development, stability, and deepening of democracy in South Africa. One of the most important national initiatives is the integration of a growing pool of black suppliers and communities into the mainstream economy on a sustainable basis, through targeted procurement of goods and services and supported by enterprise development. This will in turn create jobs, broaden income distribution and improve the quality of life for all South Africans.
Supplier Diversity Development
The 2005 NBI research paper revealed that there is far greater scope for encouraging and strengthening business linkages between black enterprises and corporations in the entire value chain. The research findings revealed that corporations have set up programmes and structures aimed at meeting preferential procurement and enterprise development scores, with variable levels of success in achieving the right numbers. In most cases these are standalone programmes operating on the periphery of the corporation’s business strategy and mainstream operations. In addition, they are often seen as a cost of doing business rather than an investment in the corporation’s future competitiveness or sustainability. The questions that arise are: ‘Is this sustainable?’ and, ‘What would happen if the B-BBEE codes were discontinued?’
As such, and in April 2008, NBI teamed up with the Corporate Council on Africa and ECIAfrica Consulting, under the South African International Business Linkages (SAIBL) Project, to promote supplier diversity development as a more sustainable approach to economic integration and to achieving meaningful outcomes and impact under the framework of the Broad-Based Black Economic Empowerment (B-BBEE) codes of good practice.
Supplier diversity development is the process of integrating a growing pool of competitive black suppliers into corporate supply chains in a sustainable way, using both targeted procurement and supplier development. It is a strategic business approach that enables corporations to invest in their long-term competitiveness and sustainability whilst simultaneously meeting their B-BBEE compliance needs. As such, companies are able to derive the largest impact and benefit both for themselves and for their respective target groups. The key components of a successful supplier diversity development process are as follows:
Within this framework, corporations understand that procurement is one major area, within the elements of the codes, where they have the biggest opportunity, flexibility and control. Procurement and supplier development is thus the focus and “engine room” for successful supplier diversity development, as shown below.
In January 2011, through the Saibl initiative and under the NBI’s management, the South African Supplier Diversity Council (SASDC) was established, as a member-directed, not-for-profit organisation to further South Africa’s corporate supplier diversity efforts. The SASDC is the first of its kind in South Africa, and is affiliated with a global network of five supplier diversity councils (viz. in the USA, UK, Canada, China and Australia).
The SASDC’s 11 founding members are ABSA ,Barloworld, Cummins, De Beers, FirstRand, Foskor, Johnson Controls, Rand Water, SASOL, Standard Bank and Unilever, all of whom are committed to the SASDC vision:
To be the leading corporate council in South Africa dedicated to promoting sustainable supplier diversity value-add, through targeted procurement and black supplier development.
The Council enables members (like-minded private sector corporations, state-owned enterprises and universities) to practice supplier diversity as a strategic business objective. It does this through the maintenance of a database of certified bona fide black suppliers, through the sharing of supplier diversity knowledge, experience and best practice, and through supporting its members’ commitments in growing procurement and development opportunities for black-owned suppliers.
Studies undertaken by international organisations and the NBI have shown that corporations that embrace and engage in supplier diversity development reap the following benefits in the long-term:
- Growing a pool of competitive black suppliers;
- Cost savings/improved profitability due to improved supply chain robustness;
- Growing a pool of competitive black suppliers;
- Product innovation through interaction with diverse suppliers;
- Improved brand image with stakeholders (community, employees, shareholders, government);
- Better market intelligence through closer supplier relations;
- Increased market through increased purchasing power of consumers; and
- Access to public and private sector markets through black economic empowerment compliance.
The NBI has and continues to play the catalytic and facilitation role. The real success of the SASDC however rests with the corporates, and the degree to which they demonstrate active leadership, ownership and involvement in the work of the SASDC as it seeks to build on the efforts of corporations (individually and collectively) in making supplier diversity work for all stakeholders in a mutually rewarding, effective and sustainable way.
Acronyms and Definitions:
- Targeted Procurement (TP): the process used to create a demand for the services and supplies of, or to secure the participation of, targeted enterprises;
- Enterprise Development (ED): the provision of financial and non-financial support to build the competitiveness and/or growth of targeted enterprises.