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SME's - government purchasing opportunities

Written by: Dr. Rob Smorfitt

Article Overview: What are the options for government purchasing?

SME's - government purchasing opportunities

Governments in most countries have attempted to set aside business for SME's. In some countries they have set aside a fixed percentage of their purchasing, others have set aside certain products. South Africa is busy implementing a product based solution - they have selected 10 products for SME purchasing. Some do it through price preference.

Which is the better way to do this - products or percentage or price preference? Personally I believe percentage, if a choice has to be made at all. Once we remove large competitors from the mix using the product method, we remove competition which in turn leads to a lack of competitiveness of those businesses trading in the market. I believe that a product based solution skews the market, leads to a lack of competitiveness and then to a higher price.

Similarly, if price preference is used, competitiveness dwindles, as there is no need to be competitive.

What governments have to realise when attempting to solve the problem of giving SME's business, is that any efforts which skew the market will have detrimental side effects, either directly or indirectly. It is these skewing effects that caused many of the problems they are currently experiencing, caused in the main by poorly throught through selective interventions.

Governments have to accept that SME's cannot always be competitive, simply because they are SME's. Therefore they might not be able to get the business. This is the real world. However, how did all the world's SME's get to where they are today without government assistance. They got smart and found ways in. Why should this be different now?

Government must make an effort to force the market into competition, not remove the competition. This will lead to a stronger economy and SME's who will want to grow their businesses.

It may be difficult for government to sit back and watch, but this is what is needed. Let the market put pressure on the SME's, which in turn will make them more innovative. Innovation is often driven by necessity.
Rob Smorfitt

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Article Tags: competition, entrepreneur, entrepreneurship, SME, SME purchasing, SMME, Smorfitt



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