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Return on Investment

Make your investments work for you

Wed, 27 Jul 2011 14:57

Denvor Phokaners

By Denvor Phokaners

Return on investment is a growing and welcome focus of enterprise development in South Africa. The business sector is gradually coming to see that a holistic approach to investing in emerging enterprises will not only allow companies to score up to 15 points on their BEE scorecards, but also stimulate SME growth and bring significant development of their supply chains.

Most of corporate South Africa has been slow to accept the good business sense of investing in their own supplier base as part of their BEE compliance. Thus far we have seen far too many unconsidered investments such as cheques being hastily written at financial year end in the form of once-off loans or grants or pre-payments made without taking into account the more practical needs of the beneficiaries.

The Department of Trade and Industry is now pushing for companies to play a greater role in hands-on support of emerging entrepreneurs Indeed, the Codes of Broad-Based Black Economic Empowerment have been around since 2003 and with the huge pressure we are under to grow our economy and create jobs, it is time that corporate South Africa starts to get it right and come up with strategies that will allow our country to win.

Fortunately where there is a need the supply surely follows, and so we are seeing the beginning of a service sector that is driving new strategies for effective enterprise development. The incubation sector is now also beginning to accept that open-door policies do not work – not everyone is cut out to be an entrepreneur.

Other examples include the Johannesburg Chamber of Commerce and Industry’s dedicated fund for investment in professionally conceptualised and managed community ventures and the Afrikaanse Handelsinstituut’s partnership with enterprise development NPOs.

Companies that spend on enterprise development should ideally be seeking investment that will make a significant impact at all levels. Experience has taught us that there are a number of factors that should now be incorporated into our enterprise development models.

First is the principle that we need to create better suppliers who can deliver better products to the benefit of the investor. So it makes good business sense to develop a longer-term strategy aligned with, for example, a company’s five year plan, which will ensure significant development of its supply chain.

Second is that, when we identify potential suppliers for our supply chains, we need to apply robust entrepreneurial assessment and selection criteria.

Then we have to develop support mechanisms that will help our selected beneficiaries to get ready for market. Skills transfer cannot merely be a matter of providing workshops and mentorship. It is usually necessary to assign professionals to work within the new business to help guide it to sustainability. For instance, part of the investment could be to appoint accountants or managers to assist with running the business, or to bring in professionals who can install financial systems or set up operations systems.

Personal development is also a factor. In most cases emerging entrepreneurs have had very little experience of business or exposure to the workings of our economy and our interventions need to be appropriate for their needs. We also need to assist them to comply with regulations. So the overall strategy requires intensive teaching and facilitation to grow the capacity of our beneficiaries.

Our responsibilities may also extend to helping beneficiaries become integrated into the market – they need people to sell to. We need to offer them networking opportunities and help them to build their client base and break into the market. With comprehensive and strategic enterprise development models in place, we have a much better chance of achieving sustainable economic growth in South Africa and businesses across the board will benefit from a much more efficient and effective delivery of supplies and services.

Denvor Phokaners is the Chief Executive Officer of Enterprise Development Essentials, a turnkey solution to help companies achieve their transformational goal through the implementation of Enterprise Development and Prefferential procurement strategies. For more information, contact Denvor at 011 510 0352 or visit Enterprise Development Essentials