Attitudes stifle development
Done correctly enterprise development can improve the bottom line
AS ONE OF THE KEY PILLARS of black economic empowerment codes, Enterprise Development Initiatives (EDI) may be vital in enabling previously disadvantaged people to meaningfully participate in South Africa’s economy. However, EDI remains a major stumbling block, says KPMG’s empowerment advisory services, which advises and consults numerous South African companies operating in various industries and sectors.
“We see that companies are still struggling with the EDI portion of their empowerment compliance while other categories – such as employment equity, skills development and ownership – have proved much easier to execute,” says Moses Kgosana, CE of KPMG.
Kgosana says there are currently some gross misconceptions about EDIs and Government’s true objectives in that regard. “We’ve seen many companies just throwing money at the problem, dishing out bundles of cash to start-ups without providing the necessary tools and resources to make those ventures sustainable,” says Kgosana. “We’ve also seen companies ignore EDI for fear of creating new black competitors in their industry.”
That’s the rub. Kgosana warns such attitudes to EDI are ill conceived. “Engag- ing meaningfully in enterprise development doesn’t mean your own business will suffer as a result. Done correctly, enterprise development can enhance your business and even improve the bottom line.”
His point? Unlike some categories of SA’s empowerment codes, sustainable EDI companies will require a medium- to longterm vision and approach and are unlikely to yield results over the short term. Fortunately, progress with regard to EDI isn’t all bad news. To illustrate the point, Kgosana cites the successful SA Breweries programme in the early Nineties that saw it giving trucks to drivers to allow them to start their own beer delivery businesses and outsourcing much of SAB’s transportation needs to them.
“SAB knew that managing fleets of trucks wasn’t its core business. It was making and marketing alcohol. So the company decided to empower its drivers to become suppliers of a service it needed. And by providing contracts to those drivers it was able to ensure sustainability and improve its bottom line costs,” says Kgosana.
The SAB case study contains all the necessary elements of a sustainable EDI project: it’s not threatening to the existing business, it improves its bottom line and it creates real business opportunities and provides the
“SA companies really need to think out of the box,
especially those who operate in professional services-based industries
like our own.”
necessary resources for sustainability.
There are other large companies that also provide useful working examples of first-class enterprise development that others would do well to learn from and emulate. For example, Anglo American has one of SA’s most successful EDI programmes – Anglo Zimele. It has seen it develop countless enterprises involving mining-related activities ranging from recycling mine water for bottling, cleaning services, mining equipment repair and manufacturing, bus transport for mine workers and platinum beneficiation. Last year alone it invested in nine new empowerment ventures and another four through its junior mining investment arm, Anglo Khula.
In her explanation of its concerted effort with regard to EDI, Anglo American CEO Cynthia Carroll recently said: “What I like about Anglo Zimele – which has been something of a pioneer in the small business development space in SA – is that it creates real jobs through the creation of real opportunities in the real economy. An integral part of the unit’s work is the transformation of our supply chain.”
Kgosana warns that to ignore EDI requirements would be a fatal mistake for any SA company, regardless of which sector it operates in. “SA companies really need to think out of the box, especially those who operate in professional services-based industries such as our own. But there are still real opportunities there too. It just requires some creativity.
“For example, KPMG has planned an EDI day where all the professionals of the group will donate an entire day to entrepreneurs and small business owners by providing all our services free of charge to SMMEs throughout the country.”
Fear of black competitors the problem. Moses Kgosana