What constitutes ESD Contributions?
According to the Codes of Good Practice, Enterprise and Supplier Development contributions are monetary or non-monetary contributions carried out to beneficiaries, with the objective of contributing to the development, sustainability and financial and operational independence of those beneficiaries. So why is this so important?
SME’s have the potential to make a real difference to the economy. According to the Banking Association of South Africa, SME’s “make up 91% of formalised businesses. They provide employment to about 60% of the labour force and their total economic output accounts for roughly 34% of GDP”. Those sound like really great numbers, but approximately 70% of SME’s fail within the first 18 months.
It should therefore come as no surprise that Enterprise and Supplier Development are a priority element on the B-BBEE Scorecard. What is surprising is that these contributions are not in fact ensuring the sustainability of SME’s. If they were, we would surely see a much lower failure rate. The issue is two-fold. Corporates are not ensuring that their contributions meet the criteria listed above, and Government is not playing a big enough role. There is far too much red-tape, bureaucracy and regulations which hinder small business.
As corporate South Africa, there is little that we can do about the red-tape. What we can do however, is look a little deeper into the contributions that we are currently making. What sort of impact are they having? Do they ensure the financial and operational independence and sustainability of the beneficiaries? Although the DTI charter is a bit vague in terms of how to run or manage this, the Construction Sector Charter could provide a guiding light. This is the only charter that explains how to run a supplier development programme, what evidence is required, and has a non-exhaustive list of what constitutes a “contribution”.
Making a meaningful contribution to your ESD beneficiaries will ensure true transformation and growth of the South African economy.