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Co-founder of OpenTenders Madoda Khuzwayo estimates that there are as much as R1.3-trillion worth of tenders being procured by government entities every year. However staggering and wonderful that figure may sound, a honey pot of this magnitude does not remain untainted. Fraud and negligence are common issues when it comes to government or big corporates putting out contracts in South Africa.
“If you have half a trillion [rands worth of] of work that government is procuring, you need to make sure that work is transparent and open to everyone. We’re advocating for that transparency,” Khuzwayo argues. The first way of doing this is that once a tender is fulfilled via OpenTenders, the name of the contractor gets displayed online.
The Johannesburg-based social network, with over R100-million at its disposal, has been connecting small- and medium-sized enterprises (SMEs) and procurement opportunities since June 2014. It’s introducing a much-needed accessible and transparent process that enables SMEs to meet the demands of government and large corporates.
Asked about why OpenTenders is exclusively focusing on SMEs, Khuzwayo explains that South Africa is at a point where most of our employment is coming from government and big corporates. “We want to grow our small business sector. We are addressing one of the key obstacles of the National Development Plan (NDP).”
South Africa’s NDP — the 2030 vision that’s meant to pave the country’s way forward — plans to increase employment by focusing on the SME sector, and has therefore set aside 30% of its procurement opportunities for this sector. This is the gap that OpenTenders wants to fulfill.
Although OpenTenders conveniently falls within this vision, the founders note that the startup is not backed by government. “We collect procurement opportunities, both in government and the private sector, to make opportunities available to all small businesses,” Khuzwayo explains.
The company today hosts over 18 000 tenders online and sees an average increase of 500 per day. Although about 99% of the tenders are from government, the startup hopes to increase the involvement of big business as well.
“There are around 150 000 procurement offices with jobs in South Africa,” Khuzwayo reveals. “The challenge is getting everyone involved. It takes long to build relationships and big businesses are slow.” He lambastes the slow yet necessary bureaucratic measures put in place, saying they are outdated.
Apart from meeting the CEO Sivu Maqungo, the Kickstart competition gave him the necessary capital and confidence to further fund his passion. In 2012, Khuzwayo took his first step in becoming a serial entrepreneur when he co-founded an online asset management service, BrandPark, together with Mnive Nhlabathi, who is also behind the founding of OpenTenders.
With these experiences under his belt, Khuzwayo soon discovered that there’s a communication and accessibility issue between government services and small businesses. “It was so difficult to find information for small businesses in the country and all the kinds of services out there,” he notes.
I thought that there must be a better way. Maybe I can build a platform to connect entrepreneurs with public, private and themselves. Something like LinkedIn, but specifically for entrepreneurs. Whatever entity you want to work with, you can find it on the smartphone.
And so, together with Mnive Nhlabathi, who is OpenTenders’ COO, the B2B social network was born. The idea is simple: similar to Facebook or LinkedIn, entrepreneurs create their own profiles and participate in popular, informative dialogue on topics that range from funding to training and tenders.
Bootstrapped and armed with R2-million from an anonymous Angel, procuring tenders soon became the company’s prime focus. “OpenTenders was born out of the frustrations we ourselves had as entrepreneurs seeking access to procurement opportunities especially in government and large corporations and raising finance,” Khuzwayo says.
Quite remarkably, OpenTenders saw over 3 000 members within the first few weeks after going live in June 2014. It’s been growing stronger ever since.
Members can choose to sign up for the knowledge hub while the premium account will give them access to the tender opportunities. Entrepreneurs pay R99 for the premium account. But given the amount of traffic that passes through the platform, Khuzwayo says that advertising as a revenue stream is in the pipeline.
Small startup, big money
OpenTenders’ premium subscribers have access to a nice total of R100-million.
OpenTenders has partnered with a local enterprise fund called Royal Fields Finance. The South African SME fund is made up of R50-million from the national Jobs Fund, R30-million from the Industrial Development Corporation and R20-million from a private partner. The co-founders are shareholders in Royal Fields, which helps a lot.
Entrepreneurs who have subscribed for the premium account, can access grants ranging anywhere between R70 000 and R2.5-million. “What we find is that many businesses get awarded the tender, though they don’t have enough capital to execute,” Khuzwayo says.
“Our vision for OpenTenders is that it shall be the No.1 platform for entrepreneurs to access procurement opportunities globally,” Khuzwayo tells us. “This is the platform that will ignite an entrepreneurial revolution throughout the world.”
He adds that OpenTenders has already started loading opportunities from other parts of Africa. Its next stop is the African continent, then BRICS countries and the rest of the world.