When we talk about Broad Based Black Economic Empowerment (B-BBEE), our conversations are often centered around big businesses and their transformation initiatives. We tend to leave an important stakeholder out of the discussions, and that is the SMME.
In Enterprise and Supplier Development (ESD) terms, SMMEs are defined as at least 51% black owned companies with an annual turnover of R 50 Million and below. This means these entities should be involved in conversations relating to B-BBEE.
What does it mean in practical terms?
Big businesses need to spend a certain percentage of their Net Profit after Tax (or an equivalent of) supporting ESD beneficiaries. Wherever and whenever these conversations are taking place, businesses that qualify as ESD beneficiaries must plug themselves in for them to understand two critical things, namely, the B-BBEE language around ESD and secondly, current ESD initiatives and opportunities that can benefit them.
Social Media is a lovely place for information gathering and these days you see opportunities popping up in terms of the latest ESD programmes as well. In the last few years, we saw the rise of incubators which are often funded through ESD budgets. Also, we have seen an increase of events that aim to connect small businesses with ESD opportunities. However, to fully take advantage of ESD, small businesses will have to educate themselves on the ins and outs of ESD when it comes to the B-BBEE codes. There are hidden gems and quick wins which they can access to benefit their businesses.
A lot of small businesses still confuse ESD with incubators and that is because this has been a growing trend. However, the B-BBEE codes have a broader definition of what ESD is. This definition outlines some of the low hanging fruit. For example, if a company provides a discount (above the normal business discount) to a qualifying ESD beneficiary for goods and services, they will score their ESD points on their scorecard. Simply put, a small business can approach a big corporate and ask for a discount for their important materials, and this will score B-BBEE points for that big corporate. This will save the small business some money which can be allocated somewhere else.
Another example is that a big corporate can give a small business free office space and claim that as ESD. So, simply put, a small business can get a free office due to ESD. The same would apply for equipment, electronics, and other equipment. In these examples, everything has been simplified. The process is, however, a bit more complicated than this. There are documents that, as a small business, you would need to have in place. You will need to also write compelling proposals and ensure that they are received by the correct contact people. The timelines may also vary. Receiving the ESD benefit, from the day of proposal, could take anything from a few weeks to a few years. It all depends on the complexity of the request and the structure of the company.
At the end of the day, small businesses need to remain at the heart of transformation conversations in order to ensure that they benefit from the legislation.