The Department of Trade and Industry’s revised generic B-BBEE codes have many businesses carefully weighing their options to maintain compliance and competitiveness in the fast-moving South African market. And while many large corporates, who employ dedicated ESD managers, are homing in on Enterprise and Supplier Development as the most effective and affordable way to fast-track a more favourable score, mid-sized enterprises are frequently unaware of just how good an opportunity ESD presents.
Shifting codes may present a challenge to ExCos who simply want to ensure compliance and get on with growing their businesses, but the importance of the hefty new weighting of ESD in the overall scorecard cannot be overstated as a means of growing South African SMEs into powerful employers. Previously representing a modest 15 points (5 points for Enterprise Development and 10 for Supplier Development), ESD has now grown to encompass the practice of Preferential Procurement at a weighting of 25 points. The change means that the lion’s share of points – 40 of a possible 100 – are achievable through a holistic and effective ESD implementation.
And while some businesses may be frustrated at the seemingly constant movement of the B-BBEE goalposts, ESD’s increased weighting not only makes achieving maximum compliance easier for enterprise, it also makes overall empowerment efforts more effective for its beneficiaries. The merging of Preferential Procurement with the other elements of ESD is a logical way to integrate and streamline these aligned mandates, giving businesses renewed cause to think harder about where their money is going, and what it’s achieving.
The reason that ESD in its previous incarnation was unable to address the slow progress being made on Preferential Procurement is simple – with most Preferential Procurement spend going toward Original Equipment Manufacturers (OEMs) and very large, established corporate entities, ESD alone is insufficient to develop a small supplier into a significant player in the same space.
When businesses are encouraged to invest in SMEs that are directly involved in their supply chains, they understandably have a greater stake in ensuring positive results – a far cry from the unscrupulous, and sadly all-too-common practice, of giving money away in CSI initiatives that achieve little in the way of transformation. ESD is now a priority pillar – and the DTI wants all business to know it. On top of its 40% weighting, ESD also makes up the bulk of available bonus points for related outcomes, such as transforming existing suppliers and providing employment opportunities.
ESD is so central to transformation, in fact, that a failure to achieve the minimum threshold results in businesses’ overall B-BBEE rating dropping by a level. So, implementing an ESD programme is no small step. The latest regulatory changes make it one of the biggest leaps an organisation can take towards full compliance, providing critical points in a short space of time in a way that is cost effective for businesses, and powerfully transformative for the South African business landscape.
To get the ball rolling, of course, you will need the confidence and backing of your organisation’s ExCo – and the best way of getting it is to make sure you have all the facts and figures you need to make a rock-solid business case for the organisational advantages that ESD can provide.
Download our Infographic that lists the pain points faced by your ExCo and learn how to create the ESD argument for each C-suite executive.
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