BEE Enterprise Development to Radically Boost the Small Business Sector

Very few of the Top 100 JSE-listed companies currently procure core services from small, black businesses. This trend will shift under the new B-BBEE Codes of Good Practice, which are pushing company Enterprise Development programmes towards meaningful supply chain development.

Johannesburg, 16th July, 2013 – Very few of South Africa’s largest companies are currently working with small, black-owned businesses as key supply partners, according to Impact Amplifier and the NYU Center for Global Affairs’ first Enterprise Development report, which polled 60 companies on the JSE Top 100. The report identifies key trends in corporate Enterprise Development and finds that there is substantial opportunity in the ED space for corporates to support job creation and entrepreneurial activity by including more black businesses in their core supply chains.

“A lot of money is currently invested in Enterprise Development each year, but the programmes are not significantly impacting companies’ core business. There is a large potential for improvement,” said Pascal Fröhlicher, Partner at Impact Amplifier. “Scorecards can’t speak to how meaningful an initiative is. South Africa’s transformation potential through Enterprise Development lies in effective, meaningful programmes, aligned to key services in companies’ supply chains.”

Most of the participating companies reported that they are currently reviewing their ED strategies in light of the new Codes of Good Practice and are taking steps to move Enterprise Development closer in line with core business. Indeed, 66% of participants said they feel Enterprise Development is already a key component of the overall business strategy although they also acknowledge that without B-BBEE, most would not engage in Enterprise Development on their own accord. A number of ED representatives expressed concern however, that relying on Enterprise Development beneficiaries for critical goods and services would be too risky and they are more comfortable supporting non-core providers, such as office cleaning companies and event facility managers.

“Corporates’ hesitate to work more closely with Enterprise Development beneficiaries in key parts of the business because they are concerned about the lack of basic business knowledge and skills. This underscores the need for business skills training and incubation to play a more significant role in Enterprise Development,” said Jessica Pothering, lead researcher on the study with NYU’s Center for Global Affairs.

Other findings in the report reveal that:

 Financial assistance is the most common type of Enterprise Development, with 72% of participants offering some form of financial support to ED beneficiaries; most employ multiple strategies, including financial assistance, business development services and preferential services, rates and terms.

 73% of participants recognize the importance of impact measurement as part of ED strategy, though 45% of participants do not capture ED impact data outside of the amount of money spent; those that do often only look at the simplest or readily accessible data, not national socio-economic indicators

 75% of participants feel their companies have benefitted from their ED strategies and almost 90% believe the corporate sector will be better served in the long-run by implementing impactful Enterprise Development programs.

 80% of respondents believe the corporate sector would be better served by sharing Enterprise Development best practices and collaborating on new initiatives.

 The largest number of Enterprise Development leaders are white (49%) and male (32%); ED is not the primary job responsibility for 73% of participants polled.

The report also includes supplemental opinion segments by ED practitioners and experts on key issues addressed in the results. Contributions were made by Dr. Thami Mazwai, Executive Resident at Wits University; Sisa Ntshona, Head of Enterprise Development at Absa Bank; Suzanne Ackerman, Head of Transformation for Pick N Pay, and others.

The full Enterprise Development report is available from July 16th on Impact Amplifier’s website at: www.impactamplifier.co.za