BUILD SOUTH AFRICA THROUGH MEANINGFUL ENTERPRISE AND SUPPLIER DEVELOPMENT (ESD)
Enterprise and Supplier Development is arguably the most important element on the B-BBEE scorecard. The DTI recognised this by suggesting a higher emphasis on this element in the amended BEE Codes. Over 40 points of the BEE Scorecard are allocated to this element and it is one of the 3 “priority elements”. Enterprise and Supplier Development are qualifying contributions (such as equity investments) to a qualifying beneficiary (a 51%+ black owned company with a turnover of below R 50 million). This should be real meaningful support into the Small and Medium Sized Enterprise (SME) sector.
The intent of the element is to promote successful entrepreneurs. Most people will agree, South Africa needs more successful entrepreneurs that in turn start employing people. It so happens that it is the SME sector that employs more and more people as it grows. Unlike large corporates who typically outsource opportunity or invest in systems and automation, SME’s are best positioned to employ additional staff as they grow.
These type of enterprises could advance the South African economy in much the same way that Germany’s “Mittelstand”. The German “Mittelstand” is the breeding ground for innovation and future corporates. This segment is responsible for most of the upskilling and training of artisans and employs more than 80% of all employed people in Germany. More than 80% of German GDP comes from companies that employ less than 10 people. These small to mid-sized companies are typically family owned and are often based in small, rural communities. They drive Germany’s economic growth and demonstrate the kind of entrepreneurial spirit we need to inspire and incentivise in our own country which is what ESD intends to enhance and nurture.
Enterprise and Supplier Development is not a tax for conducting business in South Africa but an opportunity to participate in a meaningful way to grow our economy. The DTI proposes that industry creates a symbiotic relationship between the Corporate and the recipient of ESD contributions. A symbiotic relationship refers to a synergy where the sum of the parts is greater than its constituents.
This means that meaningful ESD contributions must introduce financial and social incentives to the parties involved. ESD can offer more merit and introduce more opportunity through social and commercial investment.