Transformation depends on making BEE business-critical

Transformation depends on making BEE businesscritical

By Terence Gregory, CEO of Ecsponent

Enterprise and supplier development has (quite rightly) been made the element of the BEE scorecard with the heaviest weighting. The intention is to encourage preferential procurement and diversify the supplier base of big business and the state, but also the economy at large. The current BEE scorecard affects even those businesses that do not deal directly with the state but engage elsewhere with the government’s vertical supply chain.

ith the scorecard structured as it is, failing to engage in meaningful supplier development means it is more difficult to make up ground through other elements, which should bring about more urgent supplier development throughout the economy. However, the evidence of preferential procurement increasing and diversifying the country’s supplier base is not growing as it should.

The reason is that there is a disconnect between the requirements for small business development and the actual needs of big business. Too often, the terms of supply contracts are limiting to suppliers, or they are unable to meet criteria for tendering, or fraud and fronting practices have prevented real transformation from taking place in the supply chain.

Frequently encountered challenges, such as lack of funding, informal accounting and financial practices and controls, a lack of skills and experience, can prevent vendors from getting the step up they require. For large corporates and the public sector, risk management in the supply chain has demanded ever-greater money and resources to overcome the constraints. Enterprise and supplier development have thus become a costly exercise. The result is often a lack of real transformation and empowerment on the ground, where emerging businesses are not able to meet the criteria for taking on business-critical tasks and are instead left with lowergrade contracts to supply basic goods and services. Large corporates also find it more difficult to meet their procurement objectives.

Upskilling vendors so that they can operate more formally The solution to this disconnect is to provide the necessary linkages. Many small businesses face growth constraints if they can’t meet the standards of large corporates, so we’ve taken on the task of intervening to upskill vendors so that they can operate more formally.

Ecsponent is able to leverage its balance sheet to secure preferential credit terms from suppliers for vendors. We assist by monitoring every aspect of a transaction when a purchase order is sent out. We work with the vendor to provide skills and training in managing the procurement process, and then we help to allocate funds correctly and formalise the process of delivering goods and services according to the specifications set by the large corporate. If goods are delivered to spec and on time, then both parties benefit.

This linkage solves a massive issue. Large corporates have been looking for ways to implement their supply chain programmes but are eating up valuable time, money, resources, and themselves missing business until they can rectify it. More importantly, they can allocate valuable business-critical supply chain functions to emerging businesses. The key is making sure that commitments are honoured and there is no break in production.

The intent of the legislation is in line with the constitution and will provide much-needed economic impetus if implemented correctly. It’s not just about having more suppliers being created. It’s about formalising the skills sets so that small businesses can begin to grow and move to the next phases of their evolution. That is where real job creation and empowerment will occur. n

It’s not just about having more suppliers being created. It’s about formalising the skills sets so that small businesses can begin to grow and move to the next phases of their evolution.”

About Ecsponent Limited

Ecsponent Limited (JSE:ECS) is listed on the JSE’s main board under the Financial Services - Specialty Finance sector. It has a growing footprint across South Africa, Botswana, Swaziland, Zambia and Zimbabwe. The Group creates wealth by investing in credit and equity opportunities in companies active in attractive and highgrowth sectors in select African markets. The Group’s credit activities are tailored towards enterprise development initiatives that improve financial inclusion for SMEs operating in its select markets in Africa. Its equity investment activities are sector agnostic and focused towards investing in influential holdings in companies with substantial potential to achieve above average equity returns over a medium to long-term holding period.