The enterprise and supplier development (ESD) pillar of the B-BBEE codes is intended to stimulate the economy by growing small black-owned businesses that in turn will create jobs for South Africa. However, executives in the transformation space are often in the position of not knowing exactly what to ask for when attempting to secure adequate budget for ESD and tend to go for quick implementation hacks to achieve compliance.
ESD hacks might spend your required percentage of NPAT, but your budget should be allocated to achieve not only compliance but also financial efficiency and social impact.
We’ve compiled a list of some common ESD hacks companies often use – and what to look out for.
|Hacks||+ Pros||– Cons|
|Poor due diligences on service providers- fund||A service provider is onboarded quickly to spend budget on the ESD initiatives identified.||The service provider’s offering is a poor match to the SMEs’ needs.
The service provider squanders ESD funds with little impact created.
|Applying a “compliance lens” with no intention to create impact||E&SD points are achieved.
Requires little effort from the organisation.
|Preferential procurement points are difficult to achieve.
Organisations miss the opportunity to create value for their business.
|Change year-end rating periods to double account points in both rating periods||The organisations get to count their points for one year across two years.
Financially efficient points.
|It is not in the spirit of the B-BBEE codes.
Does not contribute to enhancing the value chain in any way.
Deprives SMEs of much needed support.
In part two of this blog series, we look at another four hacks commonly implemented, along with their pros and cons.
Supplier and enterprise development can bring substantial benefits to your organisation if ESD is done well. And by supporting ESD, you’ll stimulate the South African economy, from the inside. That’s a win-win for everyone.