The Power of Enterprise and Supplier Development in South Africa



Kebalepile Matlhako, Transformation Specialist at The BEE Chamber unpacks the power of The Enterprise and Supplier Development (ESD) element of B-BBEE and the systematic issues faced by SMMEs. He also shares interventions suggested by The BEE Chamber to ensure a conducive environment for SMME's to thrive and contribute to SA's economic development.



In reflecting on the historical context of economic development in South Africa, Kebalepile Matlhako, Transformation Specialist at The BEE Chamber, acknowledges the deliberate strategies implemented during the Apartheid era to stimulate economic growth.

As we navigate the complexities of the modern business landscape, it is essential to leverage systems thinking and strategic initiatives such as Broad-Based Black Economic Empowerment (B-BBEE) to create a more inclusive economy.

Systems thinking, as defined by Wikipedia, offers a holistic approach to understanding the interconnectedness of various components within a system. In the realm of economic empowerment, B-BBEE serves as a vital framework to promote ownership, capacity development, and diversified sourcing, particularly targeting Small, Micro, and Medium Enterprises (SMMEs) owned by Black individuals.

By empowering these entities, the high unemployment rates are not only addressed but meaningful participation in the mainstream economy is also fostered.

Matlhako says: “The B-BBEE system aligns with the 2030 National Development Plan (NDP), which underscores the importance of sustainable economic growth and job creation through the support and empowerment of SMMEs.

However, despite the significant role SMMEs play in employment generation and GDP growth, studies indicate a high failure rate among these businesses, with approximately 70% ceasing operations within the first two years.

The Enterprise and Supplier Development (ESD) element of the B-BBEE Codes of Good Practice offers various forms of support to SMMEs, ranging from grants and loans to professional services. Yet, the 2022 B-BBEE Commission's report highlights the discrepancy between the availability of substantial funds for ESD and the persistent challenges faced by SMMEs, pointing to systemic issues in how support is channelled to beneficiaries.

In addressing the multifaceted reasons for SMME failure, including limited market access, financial constraints, and regulatory challenges, it is crucial to emphasise the critical role of cash flow management. As an experienced ESD practitioner, I have witnessed first-hand how cash flow constraints can undermine the viability of otherwise promising ventures.

“One common scenario involves delayed payments by larger corporations or government entities, placing undue financial strain on SMMEs and impeding their growth prospects. The prevalence of late payments, as evidenced by the significant outstanding invoices reported in the 2021/22 Annual Report on Non-Compliance with Payment of Suppliers’

Invoices within 30 days, focusing on National and Provincial Government, underscores the need for reform in payment practices to safeguard the sustainability of SMMEs,” he explains.

To address these challenges and foster a conducive environment for SMME success, The BEE Chamber proposes the following interventions:

  1. Incorporate more early payment incentives within the B-BBEE Codes of Good Practice to reward timely settlement of invoices from SMMEs.
  2. Implement policies to penalise companies that delay payments beyond 30 days, reducing financial pressure on SMMEs.
  3. Ensure that ESD initiatives compensate SMMEs for revenue loss during training programmes, aligning training efforts with business growth needs.
  4. Establish standards for ESD practitioners to enhance professionalism and accountability in supporting SMMEs.

By prioritising these interventions and advocating for a more equitable business ecosystem, we can empower SMMEs to thrive, create jobs, and contribute meaningfully to South Africa's economic development. Together, we have the opportunity to nurture a vibrant entrepreneurial landscape and unlock the full potential of our nation's small businesses.

For more information on The BEE Chamber and the services it offers, please visit the website. 

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