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Enterprise Development Agreements

Enterprise Development Agreements

Enterprise Development Agreements

The Importance of Enterprise Development Agreements for the Improvement of BEE Ratings

 

The Enterprise and Supplier Development category of the new BEE scorecard is a priority element and carries a total of 40 points out of the 105 scorecard points, with another four points to be gained if certain requirements are met.

Enterprise development agreements play an important role in enterprise development points, but more on the topic later. First, let us look at the core elements of enterprise and supplier development. Known as ED, it consists of two parts.

The first part is supplier development, which carriers 25 points, with nine points for procurement from 51% black-owned enterprises and four bonus points for purchasing from enterprises that have 30% ownership by black women. The second part is the supplier empowerment that carries 15 points. This entails ED or sector specific programmes for the mentoring of black-owned small to medium enterprises for which companies can get five points. Companies can get ten points for coaching and supporting these enterprises into viable companies. To reap the BEE scorecard benefits, companies must spend 3% of their profit after tax deduction on supplier empowerment.

Companies thus need to invest in the growth of black businesses if they want to improve their B-BBEE ratings. As such, it is imperative to carefully plan the empowerment strategy to gain maximum scorecard value and hence, the importance of well-structured enterprise development agreements.

A Better Understanding of Enterprise Development

It is about business to black business relationships where the goal is to ensure positive contributions regarding the operation, financial wellbeing, and improvement towards the development of black businesses. The aim is to create sustainable black businesses in the country.

One has to understand what is seen as black business, as investments must be made into the right businesses in order to reap BEE scorecard benefits. The enterprise development agreements must thus be with businesses that fit the definition of a “black business” in the context of ED regarding the new B-BBEE codes.

The first type of black business is the one where it is a 50% black business, which is a Qualifying Small Enterprise or is an Exempt Micro Enterprise. The second type is one that is a 50% black business that is Generic or is 25% black owned with a BEE certificate (Level 2 to 5).

Forms of ED Contributions

Companies can make ED contributions by means of technical assistance, knowledge transfer, and cash flow for operations, investments, or loans according to the requirements of the Codes of Good Practice Enterprise Development Matrix. Such contributions must best be made once relevant enterprise development agreements are in place. It is also essential to consider the percentage weighting of each type of contribution.

Enterprise Development Agreements

Companies can only claim ED points if they have valid supporting documents, which is where enterprise development agreements come in. These agreements must provide the details regarding the parties involved and forms of contributions to be made between the contributing party and the receiving black business.

How We Help

We assist with business development support by means of coaching, the implementation of relevant supplier development programmes, and guidance regarding enterprise development agreements. We conduct profiling and analyses of the company’s supplier database, and enable purchasing opportunities for EMEs by means of partnerships. In addition, we provide services related to the bettering of skills and knowledge of the relevant EMEs.

 

Jaco Fourie

administrator