Enterprise & Supplier Development Compliance. Does it fit into your business plan?
- October 14, 2019
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The Enterprise and Supplier Development element on the B-BBEE scorecard includes the three sub-categories of Preferential Procurement (25 points), Enterprise Development (5 points) and Supplier Development (10 points). The B-BBEE Codes require measured entities to achieve 40% of each of these sub-categories as part of the scorecard’s priority requirements. If you fail to do this on any one of these, you are penalised by one B-BBEE level on your scorecard.
- The purpose of ESD and the impact of ESD in the bigger economy
- The role of Impact Investment Funds with an ESD nature.
- The risk of fronting within ESD
- Risks for ESD companies taking on too much ESD support
- Optimising ESD points, Options and aligning it with policy and business strategy.
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Good scoring within the ESD element is, therefore, a critical requirement for any medium and larger company if they aim to achieve a good B-BBEE level, but beyond B-BBEE points, this element may also just hold the secret to getting the SA economy growing again and creating the much-needed jobs for our people.
The three sub-categories are grouped into one element for good reason:
- Black companies need assistance to grow and become a part of the mainstream economy, this usually requires cash, skills, experience (ie. operational capacity) as well as opportunities (access to market).
- Enterprise and Supplier Development contributions assist with the capacity, and in most cases, this points to capital requirements in the form of grants or loans.
- Commitment from larger enterprises to procure from these beneficiary entities in terms of Preferential Procurement can then complete this picture by providing them much-needed opportunities to grow their sales.
However, taking on ESD initiatives cannot be a short-term solution and needs to be approached with a long-term view that will not only be good for the B-BBEE scorecard but also good for the bottom line of the measured entity. The question is whether it is at all possible to find the golden path where good ESD compliance can also lead to better profitability for the contributor.
The answer is yes, and it is all about careful alignment between compliance and business objectives. But it will require some significant planning and effort to research the right ESD opportunities and beneficiary candidates who could fit into the procurement and business model of the contributor. Once each party understands what their responsibilities are in the relationship and how the ESD plan will eventually benefit their bottom line, a committed partnership is formed. The latter leads to the next level of co-existence. This path often comes with some potholes, and contributors need to make particularly sure that their initiatives do not run the risk of being perceived as a form of fronting while beneficiaries must also not be over-burdened by unrealistic levels of debt funding.
By: Johan Giliomee
Transformation Strategy Specialist
Alternative Prosperity Advisory and Products (Pty) Ltd is in the business of enabling organizations to make decisions that will create wealth for its stakeholders within an economic reality of corporate responsibility and B-BBEE. Our vision is to help shape organizations that contribute to a prosperous society. Our full company profile can be viewed at www.alternativeprosperity.com