As an executive in transformation or enterprise and supplier development (ESD), you may have been, or may currently be, in the position of not knowing what to ask for when approaching your executive committee (Exco) or decision-making entity to secure adequate budget for ESD.
While Exco generally understands that there is a need to expend their required percentage of NPAT to achieve compliance, there is little guidance on how this budget should be allocated to yield not only compliance benefits, but financial efficiency and community impact. The Exco, usually dominated by CEO and CFO profiles, often look for the most cost effective solution and are driven by compliance – not making the connection of how this can potentially play a role in driving the organisation’s business objectives, writes Amina Patterson, Head of Business Development at Edge Growth, in this month’s SmartProcurement.
Often, this is because they are not exposed to the benefits that enterprise and supplier development can bring to their organisation and as a result contribute to the betterment of South Africa as a whole. Thus, the Exco will expect you to look for quick “hacks” to achieve ESD compliance.
It is understandable that hacks, or quick wins, are not necessarily all negative; but hacks fail when they achieve the letter of the law, but not the spirit in which the B-BBEE Codes were intended. Essentially, the ESD pillar of the B-BBEE Codes intends to stimulate the economy by growing small black-owned businesses that in turn will create jobs for the country.
Some of these hacks include:
Never travel without a roadmap
Before taking on the task of presenting to decision makers, make an effort to define a clear strategy and roadmap, which shows what the ESD function primarily seeks to achieve. This needs to include:
- Compliance: The minimum ESD points must be earned to ensure a licence to trade and the organisation must then maintain a Level 4 rating, meaning that it must achieve 65% compliance across each element (enterprise development, supplier development and preferential procurement).
- Shared value creation: Enhancing integrated value to suppliers, customers, shareholders, consumers, employees, government and the environment.
- Reputational benefits: Using ESD to foster positive brand reinforcement and goodwill among stakeholders.
- Value chain sustainability: De-risking the supply chain by breaking existing monopolies; promoting localisation to reduce dependency on imports owed to volatility in the exchange rate; assisting distributors to become client centric; and improving service delivery.
The next step is for the strategy to feature initiatives that will be undertaken to meet the objectives. These initiatives must be prioritised against:
Once these initiatives are defined, key performance indicators and resources required to make them happen must be established.
This clear strategy and roadmap empowers the Exco with an understanding of how the ESD budget will be allocated, how it will add value to the organisation, what success will look like, how long it will take to implement and when to expect results.
Part of the process of attaining Exco buy-in is educating the forum on what ESD is and how it benefits business in the long run. An effective way to achieve this is by demonstrating a business case.
ESD goes beyond compliance with the benefit of ESD being the most “bang-for-buck” pillar of the entire B-BBEE scorecard for its cost-per-point efficiency. Demonstrating the impact that non-compliance could have on business strategy and ultimately the risk to revenue is the way to go. To remain competitive in the tendering process with parastatals, government and compliant corporates, your business must show their contribution to ESD and localisation. Failing to do so may result in the loss of customers.
Corporates should use ESD to build the future markets of South Africa. With the unemployment rate ever growing, who will buy the products and services of tomorrow?
Job creation and stimulating the economy is the role of everyone who lives, works, produces, and prospers in this country.
Once ESD is done and done well, the results will bring about visible positive change – an improvement in supply chain performance, genuine cost reduction by allowing new suppliers with superior quality and lower prices to enter the supply chain, brand loyalty, customer centricity, community goodwill, government buy-in and many more.
The place for all of this to start is with investing time and energy in developing a practical, meaningful, ESD strategy.