Enterprise development, or ED, is the act of investing time and capital to help people establish, expand or improve business. Enterprise development helps people earn a living or find a way out of poverty, and leads to long-term economic growth for themselves, their families and their communities.
Enterprise Development (ED) and Supplier Development (SD) is one of the three priority elements of the Broad-Based Black Economic Empowerment (B-BBEE) Scorecard. The aim is to strengthen local procurement, enhance local supplier development programmes and increase financial support towards black entities.
HOW IMPORTANT IS THIS?
Enterprise and Supplier Development is one of the three Priority Elements of the B-BBEE Scorecard.
A Measured Entity is required to achieve a 40% sub-minimum of each of the categories on the Enterprise Development and Supplier Development element (excluding bonus points). This sub-minimum amounts to 4 out of 10 points for Supplier Development, and 2 out of 5 points for Enterprise Development. Failure to comply with any one of the two sub-minimums will result in a drop of one level on the Broad-Based Black Economic Empowerment (B-BBEE) scorecard.
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It is important to note
the Enterprise Development beneficiary cannot be a supplier to the Measured Entity, unlike Supplier Development which is specifically a contribution that the Measured Entity must make to a black-owned business within its supply chain.
The following bonus points are available under the Enterprise Development sub-element:
- One bonus point for graduation of one or more Enterprise Development beneficiaries to the Supplier Development level
- One bonus point for creating one or more jobs directly as a result of the Supplier Development or Enterprise Development initiatives by the Measured Entity.
How can Enterprise Development points be earned?
In order for the Measured Entity to obtain the available points on the Enterprise Development element, the Measured Entity is required to spend 1% of their Net Profit After Tax (NPAT) on enterprise development. This is applicable to the Generic scorecard as well as the QSE scorecard. Should the Measured Entity not make a profit for the particular financial year, or if its NPAT does not exceed a quarter of the industry norm, a calculation will be made to reach a “deemed net profit”.
The contribution must take place during the Measured Entity’s financial year. No contribution made after the financial year will be taken into account for the verification applicable to the relevant financial year.
Our strategy is to convert enterprise beneficiaries into supplier beneficiaries for your company
Why is Enterprise Development important?
Besides contributing positively to the GDP, new enterprises create jobs and establish increased entrepreneurial opportunities. This, in turn, contributes to economic transformation in South Africa. A more direct benefit to the Measured Entity would be that they can strategically develop their supply chain by choosing Enterprise Development beneficiaries as their suppliers. This will benefit the Measured Entity on the Preferential Procurement element of the scorecard as they can earn points by procuring from QSEs, EMEs, 51% black-owned suppliers and 30% black female-owned suppliers.
Given the current state of the economy and more recent job losses due to Covid-19, Enterprise Development can be seen as having a positive impact on the South African economy and can assist in creating sustainable businesses and contributing to job creation.