Articles by Marlese von Broembsen
‘You can’t bite the hand that feeds you’: Contracts between SME suppliers and the large supermarkets
This article examines the implications of the contracts between the four main South African supermarkets and their SME suppliers. Supermarkets’ procurement practices, in particular their practice of charging suppliers a substantial ‘rebate commission’ as well as requiring suppliers to comply with private, rather than public, production and health standards, have a significant impact on the ability of new SME suppliers to enter the market and to create jobs. This has important policy implications.
Government’s vision for the development of informal business is that, with the right support, these enterprises will achieve formal status, contribute to economic growth and create jobs. However, few informal businesses produce goods for which the formal economy has any a demand. Moreover, informal producers are structurally prevented from accessing the formal economy without the facilitation of intermediaries. This implies the need for an enabling institutional and legal environment which (a) supports intermediaries that assist informal producers to access formal markets and (b) provides incentives for formal-sector retailers to enter into contracts with intermediaries on more equitable terms. BEE is a possible way to provide such incentives.