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ESD Contribution Spending for Entrepreneurs

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In Part 2 of the Enterprise and Supplier Development Codes we will look at the amount you need to spend on ESD contributions.  The total number of points that can be achieved under the 2007 codes is 15.  In order to get 15 points all your Enterprise Development contributions should equal 3% of your Net Profit after Tax (NPAT).   If your Enterprise Development contributions are therefore 2% of NPAT your total points would equate to 10/15 points.

In order to gain points you therefore have to know what can be viewed as Enterprise Development contributions.  As a company you might already be doing activities and spending resources that could constitute enterprise development contributions.  We will cover the various different contributions in more detail in some of the later posts.

The codes do specify that you don’t always need do Enterprise Development and Supplier Development contributions.  The two cases in which you don’t need to do this is when your company makes a loss or when your net profit margin is less than a quarter of the industry margin.

In these cases you can go onto the Statssa website and look for your industry.  Table 10 of every year’s Quarterly financial statistics should provide you with the required information.

http://beta2.statssa.gov.za/publications/P0044/P0044December2013.pdf

Once you calculate the before tax figures back to the NPAT figure you now have the industry norm.  The codes see you as always having a profit margin of at least 25% the industry norm or your previous NPAT divided by your turnover.  To calculate the NPAT figure you now use the following formula:

Enterprise Development contribution target = 3% x (NPAT/Turnover) x Turnover

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