It is no secret that South African businesses are in survival mode. In the latter half of 2025, the Absa/South African Chamber of Commerce and Industry (SACCI) Small Business Growth Index (SBGI) showed that 52.8% of SMMEs are in a state of contraction, difficulty, or risk of closure.

Even some of the country’s largest firms are struggling, with a legacy construction company undergoing business rescue that all but ensures it will not exist in its current form for much longer.

The current environment demands a fundamental rethink on how companies can overcome the pinch as well as what savings actually mean.

In a sub-1.5% growth environment, real savings are not once-off cuts or deferred spending. They are recurring, structural improvements that eliminate inefficiency across the value chain, optimise total cost of ownership and redesign demand based on actual need.

This thinking closely aligns with National Treasury’s shift toward targeted and responsible savings under the Medium-Term Expenditure Framework, which emphasises fiscal relief without eroding delivery capability.

There’s a clear distinction between reactive cost-cutting and sustainable value creation. While traditional cost-cutting often focuses on reducing budgets, headcount or supplier rates, it frequently weakens organisational capability over time. Sustainable value creation is proactive. It is rooted in strategic sourcing, strong contract management, supplier performance oversight and risk reduction. The difference shows up over multiple budget cycles, not just in the current year.

Despite mounting fiscal pressure, many organisations across both public and private sectors are still leaving significant savings unrealised. Common problem areas include weak demand management, limited strategic sourcing capability, poor contract management and inconsistent supplier performance monitoring.

These gaps mean negotiated value is often never realised. Without proper performance tracking and data, organisations cannot intervene early or recover lost value.

To move from once-off price negotiations to savings that hold up over time, procurement teams must adopt more systematic, data-driven approaches. These include multi-year category strategies, market-linked pricing mechanisms, enforceable service-level agreements and the use of analytics to anticipate cost drivers.

Globally, procurement is increasingly using data and AI to manage uncertainty and optimise costs. South Africa cannot afford to lag behind.

Improved spend visibility and data maturity are foundational to unlocking savings. While state-owned entities face challenges such as legacy systems and fragmented data, Treasury’s reform agenda increasingly promotes digital transparency through audits, data cleansing and system integration.

In environments exposed to maladministration and corruption risk, digital transparency is not optional. It is essential if savings are to be credible and auditable.

In a low-growth economy, procurement must also avoid transferring excessive risk onto suppliers or compromising service delivery. Diversified sourcing, strong contract management and a focus on total cost of ownership are critical safeguards.

False economies achieved through price pressure alone often come back as reliability failures, particularly in sectors already strained by energy and logistics constraints.

Procurement cannot deliver savings in isolation. Effective collaboration with finance, operations and end-users is essential to validate baselines, confirm feasibility and align specifications with real demand.

At the same time, skills gaps remain a major barrier. Strategic sourcing, data literacy, contract and supplier performance management, and ESG-aligned procurement capabilities are all in short supply.

Organisations need to invest deliberately in professional certification, analytics, category management and supplier relationship management. These capabilities are no longer optional if procurement is expected to deliver defendable savings.

Localisation, supplier development and ESG objectives can coexist with aggressive savings targets, but only if they are properly integrated into sourcing strategies. Short-term price comparisons often miss long-term national value. Life-cycle costing and clear weighting models are essential to balance fiscal discipline with South Africa’s constitutional procurement principles.

As CFOs, accounting officers and boards prepare for tightening budgets, the right questions are becoming increasingly clear: are savings structural and recurring, are they backed by credible data, and are procurement leaders equipped with the skills and systems to deliver them?

By Paul Vos, Regional Managing Director of the Chartered Institute for Procurement & Supply (CIPS) Southern Africa