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ALP

ALP. Cohort 1 The Amazing SA Syndicate. Evaluate the challenges and opportunities faced by Manufacturing and Producing SMMEs to become suppliers of Major Retailers in South Africa. The Amazing SA syndicate Cohort 1 Syndicate 2.

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  1. ALP • Cohort 1 • The Amazing SA Syndicate Evaluate the challenges and opportunities faced by Manufacturing and Producing SMMEs to become suppliers of Major Retailers in South Africa

  2. The Amazing SA syndicate • Cohort 1 • Syndicate 2

  3. Evaluate the challenges and opportunities faced by Manufacturing and Producing SMMEs to become suppliers to Major Retailers in South Africa

  4. Introduction • Setting the scene • Final Recommendation • Solution to the business problem • Business problem & Objectives • Reason for the study • Research • Research methodology, challenges and opportunities • Research results • Discussion of findings • Alternative Solutions • Based on research findings Table ofContents

  5. Introduction

  6. Introduction • Challenges and Opportunities SMMEs face in the SA Retail environment • SMME (Small, Medium & Micro-enterprise) • Consist of less than 50 employees with an annual turnover of less than R30,000,000 • SMMEs underwrite 90% of all business opportunities • Contributing 50% of employment and GDP growth in a fiscal year

  7. Business problem & Objectives

  8. Business Problem • The purpose of this research study is to provide recommendations and possible solutions on how manufacturing and producing SMMEs within the FMCG industry in South Africa can develop a sustainable route to market that enables them to navigate through the challenges in the industry and become reliable and consistent suppliers to Major Retailers. • Evaluate the challenges and opportunities faced by Manufacturing and Producing SMMEs to become suppliers to Major Retailers in South Africa • Problem statement

  9. Key Objectives • Challenges and Opportunities SMMEs face in the SA Retail environment • Current Retail environment • Determine the current retail environment that SMMEs operate within South Africa. • Factors influencing SMMEs • Factors influencing the ability of SMMEs to start up new businesses and to be sustainable • Opportunities for SMMEs • Finding opportunities for SMMEs to become Suppliers to Major Retailers

  10. Inclusions & Exclusions • Manufacturing & Producing • Focus was only on Manufacturing and Producing SMMEs • Formal sector • The study only included SMMEs within the Formal retail sector • South Africa • The study was conducted within the South African retail environment and excluded international data • FMCG • All other retail sectors were excluded for the purpose of the study • Challenges and Opportunities SMMEs face in the SA Retail environment

  11. Research

  12. Retail stakeholders Interviewed • Research methodology 2 Financial Managers 4 Executives & Business leaders 5 Key account managers 5 National buying managers 10 Store managers The following Major Retailers participated in the interviews: Shoprite, Pick n Pay, Spar and Clicks.

  13. Other stakeholders Interviewed • Research methodology 1 Dept. of Trade and Industry 2 Supplier 2 Sales agent 5 Franchise owner 3 Case studies SMMEs 10 Survey & Interviews SMMEs Stakeholders outside the Major Retailers that were interviewed and include stakeholders from Smollanand the Department of Trade and Industry.

  14. Research discussion

  15. Macro environment • Opportunity • Unemployment • Current retail environment SMMEs operate within South Africa • Total Turnover • 60% large companies • 10% medium companies • 30% small companies • Small companies contributed 39.27% to the Trade industry • 22.91% Small companies contributed to the Manufacturing industry • Industry contribution • 22% employment opportunities from Wholesale & Retail sector • 12% generated from the Manufacturing sector • 2017 South African Retail industry generated R1 trillion in sales = R31,900 per second • 44% FMCG market • Across all firms • Area of focus • Opportunity • Retail Landscape 28.5% Manufacturing 35.2% Trade 26.7% Unemployment rate R1 trillion Retail sales R2,483 trillion 2017

  16. Competitive Retail landscape • Current retail environment SMMEs operate within South Africa • Shoprite • 20% market share • +2378 stores • 7.8% sales growth • Pick n Pay • 13% market share • +1685 stores • 6.3% sales growth • Clicks • 20.8% market share • +646 stores • 14.3% sales growth • Spar • 9.5% market share • +2184 stores • 5.6% sales growth • Woolworths • 3.7% market share • +1400 stores • 9.4% sales growth • Dis-Chem • 22% market share • +129 stores • 15% sales growth

  17. Case Studies • Challenges & Opportunities faced by SMMEs • Challenges • Insufficient capital to expand • Insufficient knowledge about retail & trading terms • Insufficient skills • Opportunities • Access to capital • Major retailer assistance Poultry farmer Limpopo Poultry farmer Mpumalanga Natural hair care Gauteng

  18. Key Takeout • Challenges & Opportunities faced by SMMEs • Financial backing • Government assistance • Trading terms • Lack of Knowledge & Skills • Assistance from Major Retailers • Competitive advantage • Route to Market & • Legislation

  19. Financial backing • Challenges faced by SMMEs 59% Loans Most challenging factor 33% Inheritance 17% Pension/Retirement Lack of security Credit history Education Business experience Company registration Unaudited accounts. Research indicating that finding capital was the most challenging part of setting up a new business 83%

  20. Lack of skills and knowledge • Finance • Challenges faced by SMMEs • 31% SMMEs • Are frustrated with the lack of skill and experience in the market place • Most important skills • Negotiation & Communication • Small business failure is often attributed by a lack entrepreneurial knowledge and skills such as innovation and risk taking and therefore should not be overlooked as essential ingredients for SMME’s success • Skills inhibitors to success • Leadership • Negotiation • Communication • Technology • Leadership 42% 33% 24%

  21. Terms imposed by Major Retailers • Challenges faced by SMMEs • These listing and ranging terms, makes it extremely difficult for an upcoming SMME to get their products listed in order for their business to be successful. • Cost implication to list products • 23% • Product • quality • 50% • Listing & ranging affective • 16% • Ranging not store specific • Back-end margins • Swell allowance • Listing & advertising fees

  22. Support Available to SMMEs • Opportunities for SMMEs • Government • Black Business supplier development programme (BBSDP) • Co-operative incentive scheme (CIS) • National informal business upliftment strategy (NIBUS) • During 2016/2017 the Department trained 7848 informal traders, established 27 co-location points, reduced the vacancy rate by 9.8% and signed 14 partnership agreements • Major Retailers • Assistance from Specialist food technologist • “Homemade” development programme, listing products in local stores • Assist SMMEs to comply to food labeling regulations and Consumer Protection Act • Assist SMMEs to improve packaging • Provide growing programmes • Access to centralised distribution centre

  23. Alternative Solutions

  24. Education • Retailers • Government • SMMEs have to take ownership over their own development and identifying the areas in which they lack. • Major Retailers can play an integral part in shaping the future and the economy in South Africa by simply focusing on assisting SMMEs to grow sustainable businesses. • Government plays an integral part when it comes to the ability of SMMEs to start new businesses. Funding is not the only assistance that Government could offer SMMEs, but rather a holistic approach to enterprise development

  25. Final Recommendation

  26. “One-stop” IT Platform • This would be an integrated portal which would bring SMMEs, Government, Financial institutions, Educational institutions and Retailers together to offer financial aid, advice, access to resources right through to investment opportunities and advertising.

  27. “One-stop” IT platform • Integrated solution • Financial • Education • Marketing • Government • Retailers • The “One- stop” IT platform would be an integrated web based platform for SMMEs to gain access to ALL the information, advice, training, opportunities and assistance they would require to start-up and grow sustainable businesses..

  28. Salaries Department of Small Business Development owning the Portal Software development Travelling Marketing & Advertising Leasing Stationary Low Cost R3,322,000 Start-up Capital High Cost R4,933,600 Private Company owning the Portal

  29. Income calculation • 213,729 active Manufacturing and Producing SMMEs - 2017

  30. Low Income –Profit Estimation • R0 • R10,936,450 • R16,297,175 • R21,659,125 • R4,933,600 expenses (start-up capital required) • R3,150,765 expenses (71% profit) • R3,371,318 expenses (79% profit) • R3,607,311 expenses (83%) • Income - expenses

  31. Project Timeline • “One-Stop” platform • Start • Create detailed business plan • 2018 September • Project scope & partnerships • Appoint project team and IT platform developer. Engage all relevant partners and sign-up agreements • 2019 May • Go-live • One-stop portal GO-LIVE • 2020 March • Secure funding • Engage stakeholders to secure funding • 2018 October • Pilot & final testing • Final testing of platform, piloting of platform and tying up lose ends & finalising advertisements • 2019 November

  32. Critical Success factors • Ability to bring Portal to life • 1 • Stakeholder buy-in • Without the buy-in of all stakeholders, the portal won’t be able to exist • 2 • Full participation of stakeholders • Each stakeholder to understand their role in the upliftment of SMMEs • 3 • Adequate marketing of portal • Both SMMEs and stakeholders should be fully aware of the product offering and the value gain from participating • 4 • Start-up capital • Necessary to start the entire project until income can be generated after which the project will be self-funding

  33. Trading terms • Resources • Mentoring • Online platform • Partnerships • Best practice • The time to act is now, it is up to each and every Retailer, including ourselves to believe in the potential of SMMEs and do everything in our power to start making a difference. What’s your next MOVE as a Major Retailer?

  34. UBUNTU “I am because we are” • If all the stakeholders involved would take an UBUNTU (“I am because we are”) approach in assisting and promoting SMMEs, we will most definitely see an uptake in sustainable businesses within the South African economy. The time to act is now, it is up to each and every stakeholder, including ourselves to believe in the potential our country has to offer. It is up to us to take the reins and make a difference, all that’s required is that we stand up and stand together as one.

  35. Thank you!

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