Enterprise Development Agreements
How to Use Enterprise Development Agreements to Improve Your BEE Score
Enterprise development agreements are key elements in the relationships between businesses as relevant to the revised B-BBEE codes. Understanding what should form part of such agreements is essential, and we can help. Before we get to that, let us consider the essentials of enterprise development. The goal of black business transactions is to add value to the operations and financials of black business, ensuring business sustainability. This means that, through enterprise development agreements, businesses can contribute to the development of black businesses to grow them.
Enterprise and supplier development is a core element of the revised Broad-Based Black Economic Empowerment (B-BBEE) codes. It is one of five elements, and compliance with the minimum requirements of this element enables a company to considerably improve its BEE rating. It enables easy improvement of the BEE scorecard and it is an important element for larger firms and for those falling within the Qualifying Small Enterprises (QSE’s) group. Its purpose is to encourage the support of smaller black businesses to help grow such enterprises, ensure sustainability, and assist with job creation. It also helps with the transfer of skills.
What A Black Business Is
In relation to the enterprise development agreement, a black business is classified as a 50% black-owned business, which can be an Exempt Micro Enterprise or a Qualifying Small Enterprise, where a positive multiplier of 1,25 applies to contributions according to the requirements of the new BEE Codes. A black business is also defined as a 50% black-owned business at the Generic level, or a 25% black-owned business with a valid BEE certificate for Level 2-5.
How A Contribution Qualifies
When wording enterprise development agreements, consider the contributions that can be made to the black-owned business. Contributions can take many forms, such as technical assistance, skills transfer, cashflow improvement, investments, or loans. To this end, we recommend using the Codes of Good Practice Enterprise Development Matrix framework to determine which contributions qualify, as every type of contribution has a weighting percentage.
Enterprise Development Agreements
If your firm plans to contribute to black-owned businesses with the aim of improving your BEE score, it is essential to get documentation as proof of your contributions and pledges. The enterprise development agreements enable you to get such supporting documentation. In these agreements, it must be clearly spelt out which forms of contributions will be made, what the limitations are, and which prerequisites must be met. Both parties to an agreement must have a clear understanding of the relationship entered into through the agreement. We assist clients in choosing contributions according to weighting percentages, as well as help them set up the enterprise development agreements.
Our range of enterprise and supplier development services is extensive and includes:
- Coaching for business development support.
- Supplier database analysis.
- Developing and implementing sustainable programmes for supplier development.
- Creating procurement opportunities for Exempt Micro Enterprises.
- Improving the knowledge of the EME’s and assisting in the development of quality services.
Make use of our expertise to help improve your company’s BEE score through effective enterprise development agreements.