making business sense out of enterprise development

enterprise and supplier development

Enterprise and Supplier Development (ESD) is about growing new, and enhancing existing, small businesses.

In South Africa, it is about creating opportunities and access for Black entrepreneurs and Black owned businesses, ensuring greater economic participation and benefit, and in many cases, about complying with the ESD element in the revised B-BBEE scorecard.

For us it is about identifying those entrepreneurs and businesses that are overflowing with potential, but need support in getting those few steps up along their path to success. Sometimes these steps are simply about skills development or customer-supplier introductions. Sometimes it's a bit more complex – like re-organising cash flow or building systems and processes.

Often it's about increasing productivity, managing impact, securing finance and increasing capacity, being able to compete alongside the companies that have been around forever, and have the benefits of experience, scale, efficiencies and pricing that their longevity and networks have brought them.

Enterpriseroom works closely with these businesses to identify what's right for them, what's achievable, and what's appropriate within their particular context. And then we draw on what we have: knowledge of the best business development specialists and programmes, opportunities available in the market, understanding of small enterprise growth requirements, knowledge of the South African SMME and finance landscape, and extensive contacts and networks to convert the potential into real success.

enterprise and supplier development and b-bbee

The Enterprise and Supplier Development (ESD)component of broad-based black economic empowerment (B-BBEE) has been brought into sharper focus with the dti's Revised Codes of Good Practice. While it is still intended to drive the transfer of skills and resources from large companies to smaller black-run companies, the emphasis will now shift to black owned suppliers. The Department of Trade & Industry's (the dti) Codes of Good Practice rate a company on a mix of monetary and non-financial support of both small Black owned suppliers (2% of NPAT for 10 points) or emerging black owned businesses (1% of NPAT for 5 points). Spending the equivalent of 3% of NPAT gets a company 15 of the 105 points on the scorecard.

Further motivation for companies to assist the development of new and further develop their existing black owned suppliers is found in the preferential procurement section of the ESD scorecard. Here there is a target of 40% of total measured procurement spend on black owned suppliers - worth nine points!

ESD is also a priority element, in this case meaning that failiure to meet the minumum requirements of this element will result in a one level drop in the measured company's overall BEE recognition.

The motivation behind the B-BBEE ESD focus:

  • It propels corporates to double their efforts in finding and supporting small black and black women owned companies
  • It allows for the spread of investment to beneficiaries who were not part of the ownership and equity deals of the early drive to narrow based BEE
  • It stimulates support to smaller enterprises, recognising the growth of such enterprises as being crucial to job creation and economic growth
  • It encourages the transfer of skills from successful larger businesses to newer and less skilled enterprises
  • It creates more favourable conditions for a beneficiary's cash flow management and the securing of grants and loans
  • It allows corporations with restricted ability to transform at an ownership level other opportunities for BEE compliance