Enterprise and Supplier Development
How Enterprise and Supplier Development Works as Part of the B-BBEE Scorecard
Enterprise and Supplier Development, also known as ESD, is an approach followed by many governments around the world to effectively stimulate their economies and to create greater diversity in supply chains. The aim of Enterprise and Supplier Development is to furthermore create sustainable jobs and businesses. The Amended B-BBEE Codes of Good Practice, which came into effect in 2013, places significant importance on Enterprise and Supplier Development.
With ESD, as stipulated in the Amended Code of Good Practice, the aim is to help qualifying businesses through the provision of relevant business and financial support.
The business entity that contributes to the qualifying enterprise can improve its own B-BBEE score by doing so. Such contributions can be made by means of financial or non-financial contributions. The Measured Entity, through its contributions, gains Enterprise and Supplier Development points and thus benefits from helping qualifying enterprises to overcome challenges and to become more competitive in the business world. A secondary spin-off is that of sustainable job creation. With the latter comes the benefit of being able to reduce poverty.
Under the Amended Codes of Good Practice, Supplier Development and Procurement and Enterprise Development are grouped into one section. ESD accounts for 36% of the scorecard points with the breakdown as follows:
- Procurement – 25 points.
- Supplier Development – 5 points.
- Enterprise Development – 5 points.
The Measured Entity must reach a minimum score of 40% for each of the above sub-elements if it wants to avoid a penalty on its overall BEE score. The Measured Entity must contribute to a Qualifying Enterprise in the particular period of the scorecard measurement and the contribution must be qualified as an ESD contribution according to the B-BBEE Benefit Matrix.
An enterprise, in order to qualify for Enterprise Development contributions, must be a business with an annual turnover of less than R50 million, must be 51% or more black-owned, and must be an operationally, as well as a financially independent entity. The beneficiary business must be able to provide the necessary proof of the above to the contributing company. It can be an independent competent entity’s report, a B-BBEE auditor limited assurance report or a sworn affidavit.
A difference exists between Supplier and Enterprise Development as can be seen from how the points are awarded in the Amended Codes. Supplier Development entails the contributions made towards the beneficiaries that make up part of the supply chain of the particular Measured Entity. With it, the Measured Entity can extend a contract or give a new contract to the beneficiary, which helps to increase the beneficiary company’s income stream for the period.
Enterprise Development contributions are made towards beneficiaries not forming part of the Measured Entity’s supply chain. The aim is to help in the development of potential suppliers to become part of the supply chain of the particular Measured Entity.
Let us help your company to increase your B-BBEE Enterprise and Supplier Development score and thus ensure compliance with the Amended B-BBEE Codes of Practice. View our range of services in this regard.