How SMES can benefit from Enterprise Supplier Development programmes

SOUTH African small businesses face a myriad challenges, not only rooted in the precariousness of the country’s current economic climate, but due to South Africa’s turbulent history.

Since the inception of democracy, the government has implemented initiatives, through social and legal means, to boost the small and medium-sized enterprise (SME) sector in light of its importance as a key contributor to gross domestic product with varying success.

BBBEE’S and its Programmes

connection to ESD

In 2003, by means of the ratification of the Broad-based Black Economic Empowerment (BBBEE) Act, government extended a helping hand to SMES with the ultimate goal of bridging the gap between large South African corporates and small businesses.

The act gave rise to Enterprise Supplier Development (ESD) programmes – initiatives owned and run by corporates to promote a conducive environment for the creation of sustainable partnerships between corporates and SMES.

It is in the interest of large corporates to establish and drive the success of ESD programmes. This is because BBBEE scorecards include enterprise development as one of its key elements: ownership, management control, skills development, employment equity, preferential procurement, enterprise development and socio-economic development.

ESD Programmes vary in prerequisites and objectives

Some of the country’s largest companies have fully-fledged ESD programmes. South African Breweries (SAB), for example, has a long-standing one that provides support for black business owners who can supply goods and services across the SAB supply chain. Another example is ICT leader Telkom. Its ESD programme, launched in 2015, provides support for start-ups in the technology sector and uses preferential procurement methods to give small businesses the chance to gain a competitive edge by becoming a Telkom supplier.

Look beyond capital

In the quarter 3: 2021 Business Partners Ltd SME Index – a survey measuring the attitudes and confidence levels of SME owners – the top three challenges impacting small businesses were cash flow, economic conditions and funding.

Predictably, all three relate to a small business’s financial position, but the struggle extends beyond rand and cents.

A lack of ongoing support and access to networking opportunities and expertise pose a significant threat to the growth of small businesses. This is where a well-structured ESD programme can provide a viable solution.

Tips on choosing the right ESD

For small businesses looking to increase their market share, boost revenue and become key players in the local SME environment, an ESD programme could serve as a stepping-stone to success.

The key to choosing the correct one is to refrain from looking for a “quick fix” in the form of a capital injection.

The most viable ESD programmes are always geared towards “bigger picture thinking” and long-term growth, and include components such as mentorship, a focus on skills development and support from experts in the field.

Today, most of corporate South Africa has active ESDS that are marketed aggressively, because their stance and position in the broader market rests largely on their compliance with BBBEE legislation.

The first step to finding the right ESD partner is to search for corporates within industries that depend on the goods or services your small business offers.

Furthermore, participation in an ESD programme assists SME owners to assess their progress, plan their future growth and become more disciplined about tracking, recording and monitoring the steps they are taking towards those goals.