Thakhani Tshivhase knows first hand the experience of many South African businesses in ensuring that they comply with the requirements of the B-BBEE codes, particularly the enterprise and supplier development requirement which has the highest beneficial category in the revised BB-BEE Codes of Good Practice scorecard.
Tshivhase is currently the head of business optimisation at Lean Enterprise Acceleration Programme ( LEAP). The Johannesburg-based organisation provides enterprise supplier development (ESD) services and assists big corporates with their supply-chain management models as well as providing BBBEE advisory services.
Leap is tasked with helping big business to actively incorporate SMEs into their supply chain in order to receive these points and facilitates access to the right SMEs. This requires considerable engagement and buy-in from big business.
Tshivhase talks to SME South Africa about helping business to deal with the implications these codes will have on their existing business structures and more importantly, their bottom lines and the 5 do’s and don’ts every business should know when implementing an ESD programme.
When we tell our clients about the changes that the revised codes of good practice will present to them and their companies, we get to observe them go through something akin to the classic five stages of grief.
From denial through to anger and then bargaining (which happens to be my favourite stage as we get to watch them come up with various schemes trying to find ways they can avoid doing certain things) followed by depression and then finally acceptance. There are some big changes that need to be grappled with, so we always assure them that this is indeed a natural response.
“Don’t just throw money at the company and expect it to all work out”
Once the dust has settled and the reality of the situation has been accepted, the real work can begin. One of the new aspects of the revised codes is the element Enterprise and Supplier Development. The old codes only required Enterprise Development which is represented by any contribution either monetary or non-monetary that would assist or accelerate the development of an SMME. Supplier Development requires working with the suppliers from within one’s own supply chain to assist and accelerate their performance, this is for the benefit of both the contributing entity and the receiving entity.
This would ultimately benefit the beneficiary company as their product/service offering will improve as too will their business processes and delivery. So eventually the economy will have more robust businesses operating in it.
The B-BBEE codes stipulate that 2% of NPAT (net profit after tax) needs to be used to ensure maximum points for ESD are achieved, thus it is important for companies to ensure that they are spending in the right way to ensure not only maximum points but also maximum impact and return on investment.
Here are the Do’s and Don’ts to help you implement ESD programme:
Implement ESD Programme Do’s – Here are some of the best practice principles that I would apply for a successful and impactful ESD program
1. Ensure that you have chosen the right SMME’s to work with. Analyse your supply chain, work out what makes sense for you to invest in so that your company performs better as a result of the interventions as well.
2. If you are not able to carry out the needed interventions yourself, ensure that you get an implementing partner. It is hard enough to run your own business, make sure that you have the time you need to dedicate to helping someone with theirs and if you can’t rather outsource it.
3. Ensure that you have defined what success looks like and then work backwards. You essentially have to start with the end in mind.
4. Communication is key and you have to do this in order for both entities to achieve success! At every step of the way both parties have to be able to affirm their commitment to the process and vision.
5. The most important thing of all in my view, is to ensure that you give the right support for the entity at the right time. If an entity needs a business process improvement intervention in the first few months, but you decide to give the entity a legal intervention instead, you are likely to create disinterest and panic about how valuable this relationship is going forward. You are also likely to jeopardize the economic success of the company as well which is counter-productive.
Implement ESD Programme Don’ts
1. Don’t just graduate an Enterprise Development Beneficiary that has nothing to do with your supply chain, just to tick the box. You will need to invent things for them to sell in order to justify earning the graduation points.
2. When deciding on developmental initiatives, don’t just throw money at the company and expect it all to work out. Each year will become incrementally harder and you will have nothing to show for it.
3. Don’t do this without informing the supplier about what you have planned. Yes, you are about to invest in their entity but if you don’t tell them about it, they may actually have other plans in mind.
4. Don’t wait until verification date to get justifiable and verifiable documents signed sealed and ready. This will include contracts that govern your relationship. You have no idea what a headache this can relieve if you just ensure you do this on day one.
5. Do not forget that this is first and foremost a collaboration between you and the supplier. You need each other to summit the peak successfully.