Enterprise and Supplier Development in South Africa (IMPACT)

Enterprise and Supplier Development in South Africa (IMPACT)

The days of implementing Enterprise and Supplier development as a tick box exercise are over. You can’t mention Enterprise and Supplier Development (ESD) without going into its impact.

The ESD objectives are clear: 

  • PROMOTING ECONOMIC TRANSFORMATION (Participation of black owned entities in the economy)
  • CREATING COMPETITIVE MARKETS (Compliance, Technical competence, Commercial competence)
  • JOB CREATION (Creating sustainable communities)

There are too many box-ticking Enterprise and Supplier Development programmes that add no value in the growth and survival of the small businesses. The corporates that sponsor these initiatives typically get the BBBEE points but the SMMEs on these programmes end up failing. The biggest cause of such failure is the lack of impact of the initiative, and that is in turn driven by the fact that most sponsors do not place a high value on impact, as the BBBEE Codes award points based on spend and not on impact.

At the Sanlam Gauge hosted by Andile Khumalo in May 2021, Lerato Ratsoma, Managing Director of ratings agency Empowedex says, ESD has the potential to make a real difference to everyone from an economic growth point of view. “But we need to look at the types of initiatives we’re concentrating on, we need to look at what is working- which interventions have produced more black businesses and do more of that”.

She lists barriers to entry for entrepreneurs: access to finance for start-ups and to take the business to the next level; getting onto large company supply chains; and enabling access opportunities to the right networks to grow your business. “There are a number of ways to make a real impact and move the needle. However, it’s also possible to do the bare minimum and focus instead of getting the most points, regardless of impact”. For the latter, a change of mindset is needed: “If you are going to be spending 3/% of your net profit after tax, wouldn’t you want it to actually make a difference? You’re spending it anyway.” Lerato concluded.  

I have spent more than 10 years in the SMME development industry. From my observation and research, most initiatives available have a pre-determined implementation plan for SMEs. The initiatives are not tailor-made to meet individual needs of each SME. The “one-size fits all” approach does not produce the results and impact required in ensuring SMEs remain sustainable. We therefore we see SMEs moving from one ESD initiative to another- seeking for the next best solution for their businesses.  At I AM AN ENTREPRENEUR, we are against a one-size fits all approach. With every SMME we engage with, we do a needs analysis which translates into a development plan for each SMME.  

Another key challenge is that there is limited monitoring and evaluation that measures impact during and after many of the initiatives in the market. Research from institutions such as SBI, GEM, and The World Bank show that because there is no actual review of the programmes, impact on the SMEs is therefore not monitored. 

There is no single approach to ESD. Companies select the most appropriate approach to suit their needs and their relationship with the beneficiaries that they select for development. It therefore becomes the implementors responsibility to integrate proper monitoring and evaluation activities to measure impact.   Whatever approach to employed to ESD, companies should ensure quantifiable and measurable results that lead to achieving ESD objectives.

Written by:
The Business Doctor, Keitumetse Lekaba 

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