Procurement as a Catalyst: Building Small Business Capacity in South Africa

Procurement is often viewed narrowly as the process of acquiring goods and services. In reality, it is one of the most powerful tools available for transforming economies. In South Africa, procurement has become a strategic lever to develop small business capacity, integrate previously marginalised groups into the mainstream economy and drive long-term socio-economic growth.

Why Procurement Matters for Small Business Development

Small and medium-sized enterprises (SMEs) are the backbone of South Africa’s economy, contributing over 30% to GDP and employing the majority of the workforce. Yet many remain excluded from high-value supply chains, often lacking the scale, access or credibility to win contracts with corporates or government.

Procurement policy, when properly implemented, changes this picture by:

• Opening access to markets previously dominated by large players.

• Providing consistent revenue streams that allow SMEs to scale sustainably.

• Offering capacity-building opportunities through supplier development programs.

• Creating networks that enable small businesses to become long-term competitive suppliers.

The Transformative Role of B-BBEE

Broad-Based Black Economic Empowerment (B-BBEE) is often debated, but its impact on procurement is undeniable. By prioritising women-owned, youth-owned and Black-owned enterprises in procurement pipelines, B-BBEE helps shift economic participation toward groups historically excluded from mainstream commerce.

Thousands of previously disadvantaged and disenfranchised entrepreneurs and communities have holistically benefited from this shift. From job creation to financial independence, procurement has relieved generational burdens inherited from apartheid by enabling new wealth pathways, uplifting households and supporting education for future generations. In this way, procurement not only opens doors to business opportunity but also addresses deep structural inequities.

Tax Incentives & the Government as a Client

South Africa’s corporate tax rates remain relatively high compared to many Western economies. For small businesses, this can feel like a heavy burden. But here lies a unique opportunity: securing government contracts can offset this burden through participation in empowerment and economic development programs.

By supplying government, SMEs not only gain access to one of the largest buyers in the economy but also:

• Establish predictable cashflow that supports growth.

• Participate in national development agendas (healthcare, education, infrastructure, services).

• Reduce the proportional impact of corporate tax by leveraging state procurement as a growth engine.

This creates a cycle where SMEs both contribute to and benefit from the public sector’s purchasing power.

Challenges That Remain

Despite progress, barriers continue to hold back small businesses from fully benefiting:

• Bureaucracy and red tape in procurement processes.

• Payment delays from government entities, straining SME cashflows.

• Skills and capacity gaps, where small businesses may lack systems or compliance knowledge to qualify for tenders.

• Elite capture, where procurement benefits a small, connected group rather than broadening access.

These challenges make governance, transparency and advisory support essential to ensure procurement lives up to its transformative promise.

My Perspective

Procurement is not just a transactional function; it is a nation-building tool. For SMEs, especially those led by previously marginalised groups, procurement provides a pathway to scale, legitimacy and sustainability. For corporates and government, procurement is how transformation commitments become real.

As leaders, we must move beyond compliance and embrace procurement as an active strategy to grow the economy inclusively.

South Africa’s procurement policies are more than just regulations - they are opportunities to transform lives, strengthen supply chains and grow resilient businesses. By understanding the dual value of procurement - as a compliance necessity and as an investment in economic development - leaders and entrepreneurs can unlock new pathways for growth.

At Kulima Capital, I work with SMEs and corporates to design strategies that are not only compliant but also transformative. As a world-class African millennial, Masters-level, entrepreneurially experienced female advisor, I bring deep insights into how procurement can bridge opportunity gaps and help businesses thrive in South Africa’s evolving economy.