As the most significant contributor to a business’s B-BBEE scorecard, it’s no wonder that Enterprise and Supplier Development is high on the agenda of any South African enterprise. More often than not, corporates now require their suppliers to be B-BBEE compliant, and stipulate this requirement in their tendering processes. Supplier compliance is no longer a “nice-to-have”, but an essential box to tick if a business is to reap the benefits of ESD, in terms of both compliance and competitive advantage.
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Your Exco may be aware of this, but many Transformation Managers struggle to convince them to commit the ESD budget to initiatives that will help to accomplish these objectives – potentially due to a lack of communication and clarity on the part of the Transformation Manager in convincing the Exco of ESD’s many benefits. Below, we list three of the most common misconceptions, and how to address them appropriately to ensure your ESD strategy gets signed off, first time.
“It’s too risky to work with smaller, less well-established suppliers.”
The assumption that working with smaller, emerging suppliers come with risks to the reliability of the value chain is a common one. Most decision-makers in large enterprises prefer to work with suppliers that have a decent track record and experience in managing large orders and short turnaround times.
It is the Transformation Manager’s mandate to challenge this belief and help the Exco to understand the myriad of advantages that these small suppliers can bring. With the right support, strategic investment and assistance from a reliable ESD supplier, SMEs can add great value to an enterprise. Such suppliers are often more flexible, agile and responsive, able to keep their fingers on the pulse of their customers’ needs and very often more in touch with local markets. In addition, working with SMEs that create employment opportunities and uplift their local communities can only be of benefit to the enterprise’s reputation as a responsible corporate citizen.
It is vital to remember that SMEs are the disruptive competitors of tomorrow, stimulating the economy and preventing complacency in well-established suppliers. In such competitive environments, new products and services are brought to market more quickly, prices are driven down, and innovative collaboration thrives – stimulating a vibrant economy that all South Africans can take part in.
“Who really benefits, the ESD service provider or the SME beneficiary?”
Many Excos are understandably sceptical about enlisting the aid of an ESD service provider and prefer to tackle ESD in-house instead. A common misconception among corporate stakeholders is that the ESD provider executing on the programme absorbs so much of an enterprise’s ESD budget that the intended beneficiary – the growing, black-owned business – rarely sees significant advantage.
While some ESD providers simply pass on the funds (after taking their sizeable cut) to their beneficiaries, many others (like Edge Growth) include value-added business development support to remove stumbling blocks to meaningful growth. For this reason, it isn’t always easy to pinpoint exactly where ESD budgets are going, and who is directly benefitting. There are, however, several indicators that the SME beneficiary is actually reaping the rewards of an open, honest, and well-run ESD programme, that should set Excos’ minds at ease.