Increasing competition within the worldwide economy has for many years been forcing South African companies to reduce their costs and improve their BBBEE scores. However, traditional approaches have been limited to eliminating wastage within companies, improving efficiencies through outsourcing of non-core functions and concluding BEE ownership deals.
However new studies have shown that Enterprise Supplier Development (ESD) programs that encourage cooperation with small black-owned suppliers and emergent entrepreneurial companies can make them more competent and thus enable goods or services to be procured at lower prices while increasing BBBEE points for the sponsoring companies.
That said, for Enterprise Supplier Development (ESD) programs to be effective, suppliers and companies have to address specific problems relating to their transformational goals, sectors of activity, special fields and working practices.
To ensure successful integration of Enterprise Supplier Development (ESD) projects with core business activities companies should implement projects that impact BBBEE scorecards, lower procurement costs, promote growth in innovation, enhance operations, seek to capture new markets and foster synergistic relationships.
In order to make a more meaningful and sustainable contribution to black-owned SMMEs that are located in the areas in which they operate companies need to take cognisance of the following:
- A fundamental pre-requisite to Enterprise Supplier development (ESD) is that companies must analyse, evaluate and appreciate their own business and BBBEE objectives and needs. Then the Enterprise Supplier Development (ESD) projects which are undertaken must be in support of the organisational strategy;
- Enterprise Supplier Development (ESD) requires the team responsible have technical BBBEE skills as well as contract management and project management skills. It also demands excellent interpersonal skills as this will be very useful in opening up communication between the sponsor organisation and the beneficiaries;
- A formal, clearly defined mandate should be agreed upon to specify the types of businesses and type of help that the company intends to target and provide rather than trying to be all things to all types of businesses. This should be done via a Enterprise Supplier Development (ESD) plan with clear objectives, priority interventions, KPI’s and implementation milestones;
- Effective governance mechanisms should be in place to ensure the ESD projects are compliant, monitored and measured;
- It is critical to understand the resources and time required for the alignment of ESD projects with existing supply management processes and systems;
- Good knowledge of the South African SMME landscape is essential to the success of ESD projects;
- Companies must understand that you cannot manufacture entrepreneurial passion in somebody that they have decided should be an entrepreneur. ESD projects cannot surgically implant entrepreneurial thinking. They have to find this entrepreneurial drive where it already exists and work with it.
The codes allow for outsourcing of Enterprise Supplier Development (ESD) projects to qualified, experienced and competent 3rd parties to conduct ESD on behalf of companies.
With the new BBBEE codes focusing on Enterprise Supplier Development (ESD) there is bound to be a lot of rogue ESD service providers cropping up and making all kinds of promises.
If a company decides to outsource its ESD projects it must do its homework on the potential 3rd party provider, insist on contactable references and call them, insist on empirical evidence of the impact of previous ESD projects and most importantly conduct site visits to see if the 3rd party is BBBEE compliant, has the infrastructure and capacity to deliver on ESD requirements.
I am a certified, qualified and experienced Professional Empowerment Advisor (Pr EAd).
I can assist you and your company develop, activate, implement and report on ESD projects that deliver real business and social benefits while maximising impact on the ESD pillar of the B-BBEE scorecard.
Call me today on 073 880 2947 for reliable help.
……By Nelson Sebati