The programme was established in 2012 following an intervention from the Minister of Economic Development, Ebrahim Patel, who has championed the development of local suppliers in the retail sector. To date the programme has invested more than R200 million in developing small local manufacturers and has worked with buyers across the Massmart group to ensure sustainable procurement of the products they produce.
Massmart also works closely with the Economic Development Department and the Department of Trade and Industry to identify new suppliers and help existing ones grow their businesses.
The Minister of Economic Development, Ebrahim Patel, says “We must foster greater levels of participation by small and medium businesses. The Massmart Supplier Development Programme provides an example of the role the private sector – with government's support – can play in bringing more South Africans into important value chains in the economy.”
The main aim of the Supplier Development Programme (SDP) is to develop and significantly increase the production scale of small local manufacturers. The work of Massmart’s SDP team typically involves assisting suppliers to meet regulatory standards, improve price competitiveness, build manufacturing capacity and develop retail and business management expertise.
The programme currently has a portfolio of 23 small businesses manufacturing a variety of products ranging from chefwear, cooking gel and instant noodles to charcoal, cooler-boxes, doors and paint.
“As a leader in General Merchandise and Home Improvement our focus is on developing manufacturers who produce hard goods and investing in products that add direct value to our own business. We focus on investment in machinery and industrial engineering – all of which improve supplier competitiveness,” says group supplier development executive Von Stander.
All the suppliers manufacture locally in South Africa across 7 provinces and the programme’s emphasis is on replacing products that were previously imported with local manufacturers. Exploring export opportunities is another key component of the SDP.
Of the 23 suppliers, 9 are exporting globally. Export countries include Australia, Belguim, Botswana, Chile, France, Mozambique, New Zealand, Switzerland, the United Kingdom and Zambia.
Massmart’s private-label brands, in particular, have provided new routes to market for small suppliers to produce for mass-markets which they may otherwise struggle to access given the cost and risks involved in developing a brand.
Ultrachem, a detergent manufacturer based in Modderfontein in Gauteng is a great example of how the programme assists SMMEs through private label development. The company manufactures a range of detergents under Builders Warehouse’s Clean Day brand as well as Makro’s M brand, Aro and First Value private label brands.
When the company became Makro’s sole supplier of private label detergent brands 7 months ago, their turnover was double what they generated for the 2018 financial period.
The SDP has not only benefitted the manufacturers on the programme, says Massmart, but has added value to the retail group as well. Through the Supplier Development Programme, Massmart has grown its existing local supplier base, maintained consistent availability of products that previously experienced shortages, extend selected ranges and provided the flexibility to create some innovative consumer-trend inspired private label products.
Stander explains, “Because we have an inside-out approach where we identify import substitution projects with our buyers and invest in products in which we are experiencing shortages, the programme is adding significant value to our business. For instance, we are able to better leverage buyer’s expertise, market insights and be price competitive which ultimately benefits our customers by offering them better products at better prices.
"Ikusasa Green, a plastic goods manufacturer that operates from Dimbaza Industrial Park in the Eastern Cape, developed our ammo crates, a utility box which was previously unavailable in Massmart strategy due to supply constraints. An impressive 150,000 ammo crates were procured in the first six months alone. This illustrates how we are able to innovate and be price competitive by manufacturing locally.’’
Ikusasa Green also manufactures a range of six cooler boxes to Builders, Game and Makro stores under Massmart’s trusted private label brand Camp Master, and recently began supplying Builders Warehouse with a range of DIY awnings. The company had 20 employees when they joined the SDP in 2014 and now employs 70 people.
In addition to accessing a broader market though the repeat business from Massmart stores, the Supplier Development Programme has assisted these local manufacturers with meeting ISO compliance and certification requirements and improving their packaging to meet labelling standards. SDP partners also receive financial advice and general business training.
“This is important because an effective programme results in bigger orders and greater business complexity for the entrepreneurs to manage in his or her business” concludes Stander.
