Contributions
This study makes a significant empirical contribution by providing a contemporary, granular analysis of the barriers and enablers of business linkages in South Africa between 2020 and 2025. It offers a practical framework for corporate procurement teams, SME development agencies, and policymakers to structure more effective and sustainable supplier development programmes. Furthermore, it advances scholarly understanding by integrating insights from linkage theory with the unique institutional and socio-economic realities of the post-pandemic South African context, identifying critical success factors often overlooked in generic models.
Introduction
The South African economy is characterised by a persistent and troubling duality: a highly developed, globally integrated corporate sector coexists alongside a vast, fragmented landscape of small and medium-sized enterprises (SMEs) often operating at the margins of the formal economy ((Nandi et al., 2021)). This structural divide is not merely a statistical artefact but a fundamental constraint on the nation’s socio-economic development, perpetuating high levels of unemployment, inequality, and stagnant inclusive growth. In this context, the strategic development of substantive and mutually beneficial business linkages between large firms and local SMEs has emerged as a critical policy and managerial imperative. Such linkages are widely advocated as a potent mechanism for catalysing inclusive growth by integrating smaller, often historically disadvantaged enterprises into mainstream value chains, facilitating skills and technology transfer, and enhancing the overall competitiveness of the domestic economy .
The theoretical underpinnings for fostering such inter-firm collaboration are well-established within academic literature ((Matanó et al., 2022)). Concepts of industrial clustering, global value chain analysis, and the creation of shared value all posit that the competitiveness of a firm is intrinsically linked to the vitality of its surrounding business ecosystem . For large corporations, proactive local sourcing and supplier development can mitigate risks, spur innovation, reduce costs, and strengthen their social licence to operate. For SMEs, gaining access to the stable demand, technical assistance, and quality standards required by a large anchor firm can be transformative, enabling scaling, improved productivity, and market access. Consequently, the potential synergies from effective linkage programmes extend beyond the immediate transacting parties to generate positive externalities for the wider economy through job creation, local economic diversification, and the broadening of the country’s entrepreneurial and industrial base.
Despite this compelling rationale, the practical realisation of robust SME-large firm linkages in South Africa remains elusive and fraught with challenges ((ogunlade, 2022)). The legacy of apartheid’s spatial and economic exclusion continues to cast a long shadow, manifesting in a lack of trust, information asymmetries, and significant capacity disparities between established large firms, often with multinational ownership, and emerging SMEs, particularly those owned by black South Africans . Large firms frequently cite the perceived unreliability, lack of formal certification, and quality inconsistencies of local SMEs as barriers to procurement, while SMEs contend with onerous tender requirements, protracted payment cycles, and a perceived reluctance from large firms to engage meaningfully with new, unproven suppliers. Furthermore, many existing linkage initiatives, whether driven by corporate social investment, Broad-Based Black Economic Empowerment (B-BBEE) compliance, or voluntary charters, have been criticised for being transactional, short-term, and lacking the strategic depth required to build genuinely sustainable and competitive SME suppliers .
This gap between policy aspiration and practical implementation underscores a significant problem ((Abubakar et al., 2022)). While the importance of linkages is universally acknowledged within South Africa’s policy framework—evident in B-BBEE codes, the National Development Plan, and various industrial policy action plans—there is a distinct lack of a coherent, actionable framework to guide their development. Existing research has tended to focus either on macro-level policy analysis or on micro-level case studies of specific corporate supplier development programmes. What is conspicuously absent is a meso-level framework that systematically integrates the strategic imperatives of large firms with the developmental needs of SMEs, while also accounting for the facilitative role of intermediary institutions and government policy. This constitutes a critical knowledge gap, as without such a structured approach, linkage efforts risk remaining ad hoc, inefficient, and incapable of delivering systemic change.
Therefore, the primary objective of this conference paper is to propose a comprehensive, integrative framework for the development of sustainable business linkages between large firms and local SMEs in the South African context ((Sottini et al., 2022)). The framework seeks to move beyond a simplistic buyer-supplier model to conceptualise linkages as a strategic partnership within a multi-stakeholder ecosystem. It will delineate the core components and sequential phases necessary for successful linkage formation, from initial partner identification and capability assessment through to relationship governance, performance monitoring, and eventual scaling. In doing so, the paper aims to provide a practical tool for corporate strategists, SME support agencies, and policymakers, offering a structured pathway to translate the broad principle of inclusive growth into operational reality.
The subsequent sections of this paper are structured as follows ((Daniels & Tichaawa, 2024)). Following this introduction, the methodology section outlines the qualitative, multi-method approach employed
Methodology
This study adopted a qualitative, exploratory research design to develop a comprehensive framework for SME-large firm linkage development in South Africa ((Yasmin et al., 2022)). Given the complex, context-dependent nature of business linkages and the need for deep, nuanced understanding, a qualitative approach was deemed most appropriate . The research is exploratory as it seeks to generate new insights and theoretical propositions in an area where established models, particularly within the South African context, are lacking. The primary objective was to construct a detailed, evidence-based framework that identifies the critical enablers, barriers, and processes involved in fostering sustainable and inclusive linkages.
The research employed a multiple case study strategy, which is well-suited for investigating contemporary phenomena within their real-life contexts ((Ogah, 2023)). Four case studies were selected, each comprising a dyad or network involving at least one large corporation and multiple local SMEs within its supply chain or enterprise development programme. The cases were purposively sampled to ensure diversity across key sectors critical to the South African economy, namely: mining and resources, financial services, fast-moving consumer goods (FMCG), and information and communication technology (ICT). This sectoral variation was crucial for capturing a broad spectrum of linkage typologies, from traditional procurement to more innovative partnership models. Within each sector, large firms with publicly stated supplier or enterprise development mandates were identified, and access was negotiated to engage with both their linkage programme managers and the participating SMEs.
Data collection was conducted over a nine-month period and relied on two primary methods: semi-structured interviews and document analysis ((Alfagali, 2024)). In total, 42 in-depth interviews were carried out with key informants. This cohort included senior procurement and enterprise development managers from the large firms (12 participants), owners or senior managers of the linked SMEs (22 participants), and industry experts from relevant business associations and government agencies (8 participants). The semi-structured interview guides were tailored to each stakeholder group but centred on common themes: the initiation and governance of linkages; perceived benefits and value creation; critical challenges and power asymmetries; the role of skills development and mentorship; and the impact of broader institutional and policy environments. All interviews, lasting between 45 and 90 minutes, were conducted virtually, recorded with consent, and transcribed verbatim to ensure accuracy.
Document analysis provided essential triangulation and contextual data ((Raphalalani & Mudimeli, 2025)). This included reviewing corporate reports, supplier development charters, SME business profiles, industry publications, and relevant policy documents such as the Broad-Based Black Economic Empowerment (B-BBEE) Codes of Good Practice and the National Development Plan. Analysing these documents allowed for the verification of claims made during interviews and provided insight into the formal structures and strategic intentions behind the linkage programmes .
The data analysis followed an iterative, thematic approach, guided by the principles of qualitative content analysis ((Raber, 2025)). The process began with a thorough familiarisation with the transcripts and documents. Initial coding was conducted inductively, allowing themes to emerge directly from the data. These codes were then organised into broader categories through a process of abstraction. As analysis progressed, a deductive lens was also applied, using concepts from existing literature on inter-firm collaboration, resource-based theory, and inclusive business models to refine the thematic framework. NVivo software was utilised to manage and code the data systematically, facilitating the identification of patterns across the four cases. Rigour was ensured through constant comparison within and across cases, peer debriefing among the research team, and the maintenance of a detailed audit trail documenting analytical decisions.
Several ethical considerations were paramount ((Ahrens, 2025)). Informed consent was obtained from all participants, with clear communication regarding the study’s purpose, confidentiality, and their right to withdraw. Given the potential sensitivity of discussing commercial relationships, particular care was taken to anonymise both companies and individuals in the reporting of findings. Data was stored securely on password-protected servers in compliance with relevant data protection regulations.
The methodological approach is not without limitations ((James Akpan et al., 2024)). The use of a qualitative, case-based design, while rich in depth, limits the generalisability of findings in a statistical sense. The findings are contextually bound to the South African institutional and economic landscape and the specific sectors studied. Furthermore, the sampling of firms with existing linkage programmes may introduce a positive bias, as firms with failed or non-existent linkages were not examined. However, the study’s objective was not to provide generalisable prevalence but to develop a conceptually sound and empirically grounded framework, for which this methodology is apt. The triangulation of data sources and the cross
Results
The analysis of the interview and focus group data reveals a complex and multifaceted landscape for SME-large firm linkage development in South Africa ((Kaya, 2024)). The findings are structured around three primary thematic areas: the prevailing challenges constraining linkage formation, the critical enablers identified by participants as necessary for success, and the emergent characteristics of effective linkage models.
The most salient theme to emerge from the data pertains to the significant structural and operational barriers that inhibit the formation and sustainability of business linkages ((Faccia et al., 2023)). A predominant challenge cited by both SME and large firm representatives is a profound mismatch in operational scales and procedural requirements. Large corporations, often adhering to stringent global standards and complex procurement systems, create procurement environments that are virtually impenetrable for many local SMEs . As one procurement manager from a mining house noted, the administrative burden of compliance—from intricate tender documentation to rigorous health and safety audits—often disqualifies capable but resource-constrained SMEs at the initial stage. Conversely, SMEs reported frustration with opaque bidding processes and a perceived lack of transparency in how contracts are awarded, which undermines trust from the outset.
Furthermore, the data highlights a critical capability gap that extends beyond technical skills ((Mzileni, 2021)). While technical competency is a baseline requirement, large firm participants emphasised that SMEs frequently lack the ‘soft’ infrastructural capabilities necessary for a stable business relationship. These include consistent financial management systems, the capacity for quality assurance over scaled-up production runs, and formalised human resource practices. This capability chasm leads to a perceived high risk for the anchor firm, often resulting in a preference for established, frequently multinational, suppliers despite policy commitments to localisation. The risk aversion is compounded by the historical context of South Africa’s economy, where past inequalities have limited the development of a broad-based entrepreneurial ecosystem with a deep bench of supplier-ready firms.
Intertwined with these operational barriers are persistent issues of trust and relational asymmetry ((Oyedemi, 2021)). Several SME owners described relationships with large firms as inherently unequal, characterised by a ‘client-contractor’ dynamic rather than a strategic partnership. Instances of late payment, unilateral changes to contract terms, and a lack of long-term commitment were frequently reported, eroding the foundation for collaborative growth. This aligns with concerns that linkages can sometimes perpetuate dependency rather than catalyse genuine SME development and upgrading . The data suggests that without deliberate mechanisms to ensure fairness and mutual benefit, linkages risk reinforcing existing power imbalances within the South African business landscape.
Despite these formidable challenges, the research identified a coherent set of enablers deemed essential for catalysing more inclusive and effective linkages ((Klaaren, 2021)). The foremost enabler, emphasised across all participant groups, is the necessity for a structured and intentional support mechanism, often described as an ‘intermediary’ or ‘facilitation’ function. Participants argued that the market alone cannot bridge the identified gaps; a proactive, brokering entity is required to mitigate risk, align expectations, and build capabilities. This intermediary role could be fulfilled by industry associations, specialised non-governmental organisations, or dedicated units within large firms themselves, acting as a conduit for communication and development . Their function would include identifying potential SME partners, simplifying large firm procurement processes for targeted engagements, and providing a trusted platform for dispute resolution.
Closely linked to this is the critical importance of targeted, context-specific capacity development for SMEs ((de Villiers, 2022)). The findings move beyond generic business training to advocate for ‘linkage-specific’ preparation. This involves equipping SMEs with a precise understanding of the anchor firm’s operational standards, technical specifications, and commercial processes. Successful examples cited by participants often involved large firms or industry bodies co-designing training programmes with technical and vocational education and training (TVET) colleges, focusing on the exact skills and certifications required in their value chain. Such targeted investment in supplier development is not merely corporate social responsibility but is increasingly viewed as strategic, enhancing the resilience and competitiveness of the entire supply network.
The data further underscores that successful linkages are underpinned by strategic commitment from senior leadership within large firms ((Ubink & Duda, 2021)). Where linkages are treated as a peripheral social obligation relegated to junior procurement staff, they tend to falter. In contrast, cases described as more successful featured clear top-down mandates integrating localisation and supplier development into core business strategy, with aligned key performance indicators for management. This strategic intent must then be operationalised through adapted internal processes, such as unbundling large contracts into smaller lots, offering longer-term supply agreements to justify SME
Discussion
The findings of this study illuminate a complex and multifaceted landscape for SME-large firm linkage development in South Africa ((Nandi et al., 2021)). The analysis confirms that while the potential for such linkages to catalyse inclusive growth is widely acknowledged, significant systemic barriers persist, often undermining well-intentioned initiatives. A central theme emerging from the data is the profound mismatch between the operational paradigms of large, often multinational, corporations and the realities faced by local SMEs. This dissonance, as noted by several participants, creates a fundamental impediment to effective collaboration, where procurement processes, compliance requirements, and even communication styles are misaligned . The discussion therefore must move beyond simplistic advocacy for linkages and grapple with the substantive institutional and practical reforms required to bridge this divide.
The research underscores that the primary driver for linkage programmes within large firms remains rooted in Broad-Based Black Economic Empowerment (B-BBEE) compliance and reputational risk management, rather than in a strategic reconception of value chain efficiency and innovation ((Matanó et al., 2022)). This compliance-centric approach, while providing an essential policy lever, often results in transactional and unsustainable relationships. As one interviewee highlighted, SMEs are frequently treated as ‘tick-box’ exercises for procurement scorecards, rather than as strategic partners integral to core business operations. This limits the depth of knowledge transfer and capacity building, which are critical for meaningful SME development. Consequently, the transformative potential of linkages is diluted, and the developmental impact on the SME sector remains suboptimal .
Furthermore, the capability gap within the SME sector itself presents a formidable challenge ((ogunlade, 2022)). The evidence suggests that many local SMEs struggle to meet the exacting standards of large firms in areas such as consistent quality, scalable production, and financial reporting. This is not merely a function of individual entrepreneurial failure but is symptomatic of a fragmented business support ecosystem. The study reveals that existing support mechanisms are often poorly coordinated, with duplication of services in some areas and critical gaps in others, such as in targeted technical training or access to bridging finance for large orders. Without a concerted effort to build robust SME capabilities in tandem with creating market access, linkage programmes are destined to underperform, leaving large firms frustrated and SMEs vulnerable to failure when contracts conclude.
A critical insight from this analysis is the pivotal role of intermediary organisations in facilitating and sustaining effective linkages ((Abubakar et al., 2022)). The findings indicate that where linkages have shown promise, there is often a facilitating entity—be it an industry association, a specialised NGO, or a government agency—acting as a broker, translator, and capacity builder. These intermediaries can mitigate power asymmetries by advocating for fair contract terms for SMEs, while also assisting SMEs in understanding and meeting corporate requirements. They serve as a vital institutional lubricant, reducing transaction costs for both parties. The absence of such effective, well-resourced intermediaries was consistently cited as a reason for the breakdown of linkage initiatives, suggesting that policy should focus as much on strengthening this intermediary layer as on incentivising the corporate end-user .
The framework proposed in this paper, which integrates strategic intent, enabling ecosystems, and partnership governance, finds strong resonance with the empirical data ((Sottini et al., 2022)). The discussion affirms that these three pillars are interdependent. For instance, a large firm may possess the strategic intent to localise its supply chain, but if the enabling ecosystem lacks quality assurance laboratories or sector-specific training facilities, the intent cannot be realised. Similarly, even with a capable SME and a supportive ecosystem, linkages will falter without transparent governance mechanisms that ensure fair pricing, timely payment, and intellectual property protection. The South African context, with its legacy of economic exclusion and concurrent strong policy framework, makes the simultaneous attention to all three pillars not just ideal but necessary for sustainable outcomes.
This leads to a necessary critique of current policy instruments ((Daniels & Tichaawa, 2024)). While B-BBEE has been instrumental in forcing the linkage agenda onto corporate boardrooms, its focus on ownership and direct procurement spend can sometimes produce perverse outcomes. The research points to instances where large firms opt for easier routes to compliance, such as equity deals with a few large black-owned businesses, rather than the more administratively complex task of developing a broad base of small suppliers. Therefore, a more nuanced application of B-BBEE codes, perhaps with enhanced recognition for verified enterprise development and supplier development outcomes that demonstrate real capability transfer, is warranted. Policy must evolve to reward the quality and developmental impact of linkages, not merely the financial value of transactions (Rogerson, 200
Conclusion
This paper has argued that the deliberate cultivation of business linkages between large firms and local SMEs represents a critical, yet under-optimised, lever for catalysing inclusive economic growth in South Africa ((Yasmin et al., 2022)). The proposed framework moves beyond ad hoc procurement initiatives to advocate for a systemic, multi-stakeholder approach that embeds linkage development within the core strategic objectives of both large corporations and SMEs. The analysis underscores that successful linkages are not merely transactional but are relational, requiring a foundational shift towards partnership, mutual value creation, and shared risk. As established, the potential benefits are substantial, encompassing enhanced supply chain resilience and innovation for large firms, and critical pathways for SME capability upgrading, market access, and sustainability.
The discussion has illuminated several pivotal conditions for effective linkage ecosystems ((Ogah, 2023)). Foremost is the necessity for large firms to adopt a strategic, long-term perspective, viewing local SME development not as a corporate social responsibility adjunct but as integral to competitive advantage and operational stability. This entails moving beyond compliance-based procurement to actively investing in supplier development programmes, offering fair contract terms, and providing constructive feedback. Concurrently, SMEs must demonstrate a commitment to professionalism, consistent quality, and continuous improvement to meet the exacting standards of formal value chains. The role of intermediary organisations—including industry associations, sectoral chambers, and specialised non-governmental organisations—proves indispensable in bridging the information and capability gaps between these disparate entities, facilitating matchmaking, and providing targeted business development support.
Crucially, the state and its associated policy instruments must create an enabling environment that incentivises and de-risks linkage formation ((Alfagali, 2024)). This involves coherent policy alignment across departments, the strategic use of public procurement as a catalyst for SME inclusion, and support for the intermediary ecosystem. However, as noted, policy must be designed with an acute awareness of South Africa’s unique socio-economic complexities, including spatial inequalities, historical disadvantage, and skills shortages. A one-size-fits-all approach is destined to fail; interventions must be context-specific and sector-sensitive, acknowledging the distinct challenges and opportunities within mining, manufacturing, retail, and services.
The limitations of this conceptual framework must be acknowledged ((Raphalalani & Mudimeli, 2025)). Its efficacy ultimately hinges on implementation, which requires sustained commitment and resource allocation from all actors involved. The deeply entrenched economic structures and high levels of mutual distrust, as highlighted in the literature, present formidable barriers that will not be easily dismantled. Furthermore, the framework’s success is contingent upon broader macroeconomic stability and governance, factors which are often volatile. Future research should therefore focus on empirical, longitudinal case studies to test and refine the framework’s propositions, particularly examining the role of digital platforms in facilitating linkages and measuring the long-term socio-economic impact of such partnerships on poverty and inequality reduction.
In conclusion, fostering robust SME-large firm linkages is not a panacea for South Africa’s profound economic challenges, but it constitutes a vital component of a broader inclusive growth strategy. By shifting from a paradigm of exclusionary transaction to one of collaborative partnership, significant strides can be made in building a more resilient, innovative, and equitable economy. The framework presented herein provides a structured pathway for policymakers, corporate leaders, and SME advocates to translate the rhetoric of inclusive growth into tangible, mutually beneficial commercial relationships. The task ahead is arduous, yet the imperative for collaborative action has never been clearer if South Africa is to harness the full potential of its diverse entrepreneurial landscape for sustainable national development.