A large multi-bank SCF programme in Africa designed to support small and emerging businesses that are integral to the buyer’s supply chain.
Pick n Pay is one the largest and oldest retailers of food, general merchandise, and clothing in Africa. It was founded in 1969 and currently operates 2081 stores under three brands; Pick n Pay, Boxer and TM Supermarkets. It also owns a group of franchises. It has stores in South Africa, Namibia, Botswana, Zambia, Nigeria, Eswatini and Lesotho.
It originally set up its supply chain finance programme in 2016 and quickly decided to brand it as ‘Fast Pay’. The aim of the programme was in part to support and develop small businesses which are integral to the Pick n Pay business model.
“As a loved South Africa brand, we believe Pick n Pay has an important role to play in building and developing small businesses,” said Gary Lea, finance director at Pick n Pay.
“Creating opportunities for small scale suppliers, service providers and entrepreneurs is a fundamental part of Pick n Pay. Fast Pay Supply Chain Finance programme aligns 100 percent with these values.”
By partnering with Addendum Financial Technologies, Pick n Pay created one of the largest multi-bank supply chain finance (SCF) programmes in Africa that merges both an SCF platform and an invoice financing tool.
The programme positions itself as a more affordable financing option compared to traditional bank facilities, factoring or other forms of invoice discounting, helping ensure the financial sustainability of Pick n Pay’s suppliers.
It is funded by four of the largest commercial banks in South Africa; a move designed to make it easier for suppliers to chose which bank they want to work with to buy their invoices. In most instances, it is easier for the supplier to work with its existing bank partner making move to the SCF platform much more efficient and cost effective.
Supporting small businesses is central to Pick n Pay and in 2018 it launched its Enterprise and Supplier Development Programme which helps get new small businesses’ products in front of Pick n Pay customers. By June 2019, these emerging businesses were also given access to Pick n Pay’s ‘Fast Pay’ programme.
To date, Addendum has on-boarded 30 of these new emerging suppliers to the platform.
The additional invoice finance solution was developed for those suppliers unable to access the SCF programme, including suppliers in countries where invoices can’t be sold or where suppliers might be constrained by Shariah-compliance rules or other compliance or governance structures.
The Fast Pay SCF programme aims to give all suppliers access to capital within 24 hours. The programme works by simultaneously providing suppliers the best possible finance rate by leveraging on the creditworthiness of buyer, while also helping Pick n Pay free up working capital and become more efficient by shifting away from making daily payment runs.
To date more than 15 billion rand ($1bn) has been freed up for suppliers, with more than 300 suppliers having joined the Fast Pay SCF programme.
The programme was fully automated and went live in the second quarter of 2016. Since then, more than one million invoices have been processed and uploaded by Pick n Pay on to PrimeRevenue OpenSCi platform – Addendum sells PrimeRevenue’s solutions to the African market.
“The programme is of great relevance to the region and combines objectives of their own working capital improvement with the support of SME suppliers. Considering its size and relevance the group and its partners managed to establish an automated and yet flexible solution,” one of this year’s judges remarked.
