The intention gap

And yet the SME we met recently, a majority black-owned manufacturer that’s skilled, competitively priced and hungry to grow, still can’t get through the procurement process of a corporate whose leadership champions inclusion. It’s not that the executives don’t value supplier diversity. It’s because other factors get in the way of that intention.

That’s the gap worth examining: the distance between the boardroom’s commitment to transform supply chains, and what an SME actually experiences trying to enter one. It isn’t a gap of goodwill. It’s a gap of systems, incentives and measurement. Until we close it, “access to market” will stay one of the best-funded, best-branded, and least effective promises in South African business.

Where the intention gets lost

At leadership level, the goal is transformation and long-term inclusive growth. But by the time it reaches the procurement manager, the person who actually decides who wins the contract, it has been translated into a different language entirely. Procurement managers are rarely measured on transformation outcomes in any way that affects their career. They’re measured on cost, delivery risk, quality and continuity of supply. Their targets reward the safe choice: almost always the incumbent, with the track record, the strong balance sheet and the capacity to absorb a problem if one arises.

So the procurement manager behaves rationally, managing risk and prioritising price and reliability. No one in the process is being obstructive or anti-transformation. They're simply focused on what they're held accountable for, and transformation usually isn't part of that. At best, it’s a compliance box to tick, not an outcome to deliver.

This is the core problem: we put the intention at one level of the organisation and the incentives at another, then act surprised when the incentives win.

They always do. An organisation follows what it measures and rewards. Right now, we measure inclusion once a year through the Broad-Based Black Economic Empowerment (B-BBEE) scorecard, and reward efficiency every month through the procurement review. The scorecard is an annual conversation. The procurement review shapes behaviour every week.

The B-BBEE framework shows the same problem up close. Enterprise and Supplier Development (ESD) and Preferential Procurement can account for a large share of a company’s B-BBEE score, enough to get real attention. But attention to the score isn’t the same as attention to the business.

Research on ESD in South Africa has found that buying firms often see small suppliers as riskier or inferior, the exact bias the policy was meant to fix.

Some studies go further: the framework can actually hold SMEs back. Take the example of a business that deliberately limits its growth to remain below the R50m turnover threshold for a Qualifying Small Enterprise (QSE), because doing so helps a corporate maximise its B-BBEE score. When a transformation mechanism incentivises businesses not to grow, it's a design flaw worth acknowledging.

Getting in isn’t the same as surviving

Say our SME manufacturer beats the odds and wins the contract. The ESD programme worked, procurement extended the opportunity, and the business is now in the supply chain. This is the moment the press release celebrates.

It’s also, too often, the moment the real trouble starts.

The SME must now deliver on payment terms of 60, 90, sometimes 120 days, while paying for materials 30 to 60 days before delivery. The full cash cycle for a South African SME supplier often runs past 150 days: nearly five months of working capital tied up in every order, before a single payment lands. A large corporate has a treasury team to manage that kind of exposure. The SME has a bank account, and not much else.

And the numbers back this up:

• At the end of Q2 2025/26, National Treasury recorded 95,399 unpaid invoices older than 30 days across government departments, worth R12.4 billion, a 17% jump from the previous quarter.
  
• By Q3, the number of invoices eased slightly, but the amount owed rose to R15.5 billion, with provincial departments responsible for 98% of it.
  
• This is despite a legal requirement (not a guideline) for government to pay within 30 days.
  
• In the private sector, roughly 91% of SMEs report late payment, with some large corporates pushing terms out to 120 days against a norm of 30 to 60.

The mechanism is simple: long payment terms turn small suppliers into free credit for much bigger corporates. The SME ends up financing the working capital of a business many times its size, and cannot afford to say no, for fear of losing the relationship.

What happens next is predictable, and Edge Growth Ventures has seen it directly in our own portfolio. When cash runs out and the SME needs bridging finance fast, the only options available are often expensive (sometimes at usury rates) precisely because they’re quick and unsecured. The SME wins the deal, pays dearly to fund the gap, and watches the “access to market” everyone celebrated quietly eat into its margin and its balance sheet.

We have seen good businesses collapse not because they lost tenders, but because they won them and were not paid on time. And the damage does not stop there: unpaid SMEs delay paying their own suppliers (often small businesses too), and sometimes have to defer salaries for staff who are frequently their household’s only earner.

That is the core failure: we built a mechanism to include the small supplier, and the mechanism itself became their undoing.

A failure of design, not of character

This is not a story about villains. It’s about the knock-on effects of decisions made in isolation from each other.

The procurement manager optimising for price and risk is not doing anything wrong. The corporate extending payment terms to 90 days is, from a treasury point of view, managing cash sensibly. The exco articulating an inspiring transformation vision means it. Everyone is behaving rationally within the incentives in front of them. That’s exactly why the outcome is so hard to shift, and why another pledge, panel or brochure won’t do it.

The failure is one of design: a mismatch between what we say we value and what we actually measure and reward. We treat procurement as a short-term exercise in lowest price and risk, when it should be a long-term lever for growth.

Every rand spent with a growing SME isn’t just a cost line: it’s potential jobs, a bigger tax base, economic activity in townships and rural areas, and growth in the very market that corporate sells into. Small businesses make up around 40% of South Africa’s GDP and most of its employment.

A buyer who only sees unit price is optimising one cell in a spreadsheet while ignoring the economy that spreadsheet sits inside. That’s the shift from linear to systemic thinking, and it’s the most important idea in this whole conversation.

What closing the gap requires

If intention sits at one level and incentives sit at another, the fix is to build the intention into the incentives themselves.

1. Measure transformation where decisions actually get made. It can’t stay an annual scorecard reviewed by the sustainability team. It needs to become a live performance metric for the procurement manager, weighted heavily enough to change their default choice. If the person choosing the supplier isn’t personally measured on inclusive outcomes, no executive statement will reach them.

2. Treat payment terms as a transformation metric in their own right. It’s hard to celebrate onboarding a black-owned SME while paying it in 120 days. Corporates serious about inclusion should commit to materially shorter terms, ideally 30 days or less. Paying on time, reliably, is one of the cheapest and most effective forms of enterprise development a corporate can offer.

3. Make finance catalytic, not extractive. SMEs entering supply chains need working-capital solutions matched to their invoicing cycles, at affordable rates, like supply-chain finance, where a corporate’s own credit rating unlocks cheaper funding for its small suppliers, instead of leaving the SME to fund the gap at punitive rates. Corporates, development finance institutions and fund managers need to build genuinely useful instruments here, so access to market comes with access to affordable liquidity. Without it, we hand out opportunities that quietly bankrupt the people we gave them to.

4. Shift focus from developing suppliers to growing businesses. ESD investment should be judged on SME outcomes such as revenue growth, jobs created, graduation into the core supply chain and survival rates, not just points earned or capital spent. Every ESD review should ask more than what it contributed to the scorecard. It should ask whether the business is stronger, bigger and more bankable than it was a year ago.
   

A closing reflection

We started in the boardroom, and it’s worth ending there too, because the people in that room are, potentially, the most powerful allies the SME sector has. Their intention is real. What’s missing isn’t conviction. It’s the system to carry that conviction all the way to the point of decision, and the honesty to check whether it got there.

The challenge for corporate leaders, and for those of us who fund this ecosystem, is simple. We should stop asking whether our intention is good; it almost certainly is. We should start asking whether our systems are aligned: whether the person who signs the purchase order is measured on the same commitment the exco made; whether we pay our smallest suppliers as promptly as we expect our biggest customers to pay us; and whether the SME we proudly onboarded is thriving a year later, or quietly sinking under the working-capital cost of the very opportunity we gave it.

Access to market was never the finish line. It’s the starting gun. Right now, too many of the businesses we invite onto the track are being tripped up by the race itself. We know how to fix this. The only question is whether we’re prepared to measure ourselves as rigorously as we measure them.