Financial services firm FNB and supplier development company Edge Growth on Wednesday launched the R200-million Vumela 2.0 enterprise and supplier development (ESD) programme, in Sandton, to help develop and grow sustainable small and medium-sized enterprises (SMEs) through the structured use of corporate procurement.

The aim was to increase the scope of the five-year-old Vumela ESD programme by augmenting the base of suppliers involved in the programme through partnerships with large corporate companies, said FNB CFO Gordon Little.

The programme subsidised the cost incurred by corporate companies to start and run supplier development initiatives and would bolster the existing supplier development initiatives of large companies to meet new broad-based black economic-empowerment accreditation criteria, added FNB Enterprise Development head Heather Lowe.

The aim was to help big business be more effective in executing their ESD strategies and could yield a sustainable growth model among participating companies, she noted.

The programme would align existing supplier development strategies with the companies' business strategies. Of the overall funds, R160-million would be directly invested in SMEs and R40-million would be used for post-investment growth.

"A supply chain is core to business operations, yet good alignment of supplier development and corporate strategy in a correctly structured ESD can generate commercial returns and create more efficient supply chains," commented Growth Edge MD Daniel Hatfield.

The Gauteng Provincial Government supported the initiative and was exploring ways of using its own procurement spend better to develop viable and self-sustaining SME suppliers, Gauteng Finance MEC Barbara Creecy said at the launch.

“Any SMEs developed must be able to function and grow in a broader marketplace. The sustainability of the SMEs developed is important to enable them to grow independently and employ more people. Supplier development cannot subsidise nonviable suppliers," she stated.

A key obstacle to broader SME supplier spend by government in areas targeted for development, such as marginalised and township economies, was that potential SME suppliers did not have all the accreditation required under the Public Finance Management Act regulations.

Support to help SMEs become formal and accredited to access broader markets and opportunities was a beneficial effect of supplier development initiatives and a core method of ensuring that supplier development leads to sustainable and efficient supply chains and, consequently economic growth and job creation, she said.