Enterprise Supplier Development

While Economic Transformation remains firmly on the SA agenda with a target of creating 5 million jobs by 2020, businesses appear to be in a state of flux, waiting to hear not only how we as a country will reach the target but also on how the Amendments to the Broad Based BEE Codes of Good Practice will impact their businesses.

One gets a sense that the revised Codes of Good Practice will compel companies to take a more strategic view of how they implement B-BBEE in their organizations. The revised codes of good practice suggest three priory elements i.e. Ownership, Skills Development and Enterprise and Supplier Development. Not meeting targets for these priority elements will negatively impact a measured entities BEE scorecard.

Enterprise and Supplier Development is one of the elements that will fundamentally change how business address BEE. With this element, we see the merging of preferential procurement and enterprise development. This element also carries the heaviest weighting i.e. 40 points on the revised BBBEE scorecard.

In the current Codes of Good Practice, Enterprise Development is considered a “low-hanging fruit” element where it is easy to score 15 points through either a loan, grant or through the shorter payment terms, equivalent to 3% NPAT (net profit after tax). It also allows for businesses to take an arms-length approach to enterprise development.

Supplier Development, however will force a closer relationship with Enterprise Development Beneficiaries. It will mean, implementing programmes that will result in sustainable, financial and operational independence. The beneficiaries of the programmes will be exempt micro and qualifying small enterprises that are more than 50% black are owned.

Supplier Development is about improving the supplier’s performance. It is not about monopolizing the supplier or holding them ransom to supplying good and services at below market related value. SMME’s have become familiar with Enterprise Development and many are saying that they do not want hand-outs. SMME’s want to grow their business and the only way to grow their business is through sales.

They are also asking for developmental help in terms of skills development, particularly around back office support.

Large organizations often take a generic approach to supplier development, assuming that entrepreneurs all have similar needs. This is not so. Each business is unique with specific developmental areas and needs that will only be brought to the surface through active engagement. A more meaningful engagement will surface and determine their entrepreneurial spirit and appetite and more importantly to learn of Entrepreneurs business journey. Through this engagement process, entrepreneurs who are committed to growing their business can be invited to participate in the programme.

A sustainable supplier development programme should be mutually beneficial and should also result in the following;

Lower procurement costsIncrease in quality of productImproved service deliveryPositively impact BEE Scorecard

A supplier development programme needs to have key performance indicators as well as developmental programmes with milestones that will result in in business growth that will increase economic access of black-owned SMME’s. It is a known fact that jobs are created through new business ventures. In order to address unemployment and the skills shortage in the country, we have to ensure that our SMME’s growth is sustainable.

For more information on how to implement a sustainable Enterprise Supplier Development programme contact Brian Hendrikz at brian@transcend.co.za or 011 442 2433

“Growth is never by mere chance; it is the result of forces working together.” – James Cash Penney –