What is Enterprise Development?

  • Enterprise Development (“ED”) is an essential part of the Broad-Based Black Economic Empowerment (“B-BBEE”) program in South Africa.
  • The goal of ED is to help black-owned businesses grow and succeed, which in turn contributes to the transformation of the South African economy.

Who Can Benefit from Enterprise Development?

  • Exempted Micro-Enterprises (EMEs): Businesses with an annual turnover of R10 million or less and at least 51% black ownership.
  • Qualifying Small Enterprises (QSEs): Businesses with an annual turnover of between R10 million and R50 million and at least 51% black ownership.
  • Generic entities: Businesses with an annual turnover of R50 million or more that qualify as EMEs or QSEs when they are initially identified for Enterprise Development support.
  • Black-owned businesses that are in dire need of assistance, such as start-ups or businesses that have been negatively impacted by economic factors.
  • Black-owned businesses that are part of rural communities.

Examples of Enterprise Development benefits

Here are some specific examples of how businesses and individuals can benefit from B-BBEE Enterprise Development:

  • A small black-owned manufacturing business could receive a grant to help purchase new equipment, which would allow it to increase production and create new jobs.
  • A start-up black-owned IT company could receive mentorship and business support services from a more established company, which would help it to develop its business plan and secure its first clients.
  • A black-owned construction company could be given the opportunity to tender for contracts with government agencies or other large businesses, which would help it to grow its business and reach new markets.
  • A black-owned farm could receive training on new agricultural techniques, which would help it to improve its productivity and profitability.

Setting Targets for Enterprise Development:

  • Different industries have specific goals for Enterprise Development, and these targets vary. For instance, in the ICT sector, generic entities must invest 3% of their Net Profit After Tax (NPAT) into ED.

How to Identify Enterprise Development Beneficiaries:

  • As a beneficiary, you are a business that could become part of someone else’s supply chain. They want to help you grow and succeed.

Contributions to Enterprise Development:

Contributions to ED can come in various forms, such a:

  • Financial assistance, such as grants, loans, or equity investments.
  • Mentorship and business support services.
  • Access to markets and supply chains.
  • Training and skills development.

Using Intermediaries for Enterprise Development:

  • Companies supporting you might use third parties or intermediaries to help, but they need to make sure they follow the rules. They shouldn’t claim B-BBEE points until the help is in action.

What Beneficiary Entities Must Avoid:

  • As a Beneficiary entity, you should not participate in ED initiatives without understanding the terms of the agreement.
  • Avoid providing acknowledgment before you actually get the support.
  • ED initiatives should be meaningful, not just for the sake of compliance.
  • Remember, ED support is different from procurement.

Consequences of Not Following ED Rules:

  • Companies that don’t follow the ED requirements could face penalties, fines, or even imprisonment. If they’re convicted under the B-BBEE Act, they might be unable to do business with the government for 10 years.

Enterprise Development Models:

Companies in South Africa use various Enterprise Development models to fulfill their B-BBEE objectives. These models aim to support and develop black-owned businesses, fostering economic growth, and promoting inclusivity. Here are some different types of enterprise development models employed by companies:

  1. Financial Support and Investment:

This model involves providing financial assistance, such as grants, loans, or equity investments, to black-owned businesses. These funds can be used for business expansion, purchasing assets, or working capital.

  1. Mentorship and Business Skills Training:

Companies offer mentorship programs and training to emerging black entrepreneurs. These programs help enhance their business skills, knowledge, and capacity to manage and grow their businesses.

  1. Supplier Development Programs:

Large companies support their black-owned suppliers by offering guidance, training, and resources to meet quality and compliance standards. This helps these suppliers become more competitive and sustainable.

  1. Joint Ventures and Partnerships:

Collaborative efforts between established companies and black-owned businesses can lead to joint ventures. These partnerships allow for shared resources, expertise, and market access.

  1. Incubators and Accelerators:

Business incubators and accelerators offer a structured environment for black-owned startups to receive mentorship, access to resources, and networking opportunities to accelerate their growth.

  1. Infrastructure and Facility Support:

Some companies provide access to infrastructure, facilities, or production equipment to help black-owned businesses reduce operational costs and improve their competitiveness.

  1. Access to Markets:

Large companies may help black-owned businesses gain access to broader markets by becoming their customers or facilitating connections within their network.

  1. Capacity Building and Technical Assistance:

Companies offer technical assistance, expertise, and resources to help black-owned businesses build their operational capacity and competencies.

  1. Seed Capital and Grant Initiatives:

Seed capital programs offer small initial investments to black-owned startups, helping them kickstart their businesses. Additionally, grant initiatives provide non-repayable funds for specific projects or initiatives.

  1. Community-Based Initiatives:

Some enterprises focus on developing businesses within specific communities, aiming to boost economic growth and social development in these areas. They may offer support to businesses operating in rural or underserved communities.

  1. Access to Collateral and Relaxed Security Requirements:

Some enterprise development models involve assisting black-owned businesses in accessing collateral or relaxing security requirements to enable them to secure loans or credit more easily.

  1. Labour-Intensive Production and Construction Methods:

Businesses can support black-owned entities by adopting labour-intensive production and construction methods. This creates job opportunities and drives economic growth.