ENTERPRISE development (ED) may be one of the most noble of all the elements on the BEE scorecard – because it helps black entrepreneurs get support and funding – but how do small and medium-sized enterprises (SMEs), with limited time and resources to run their own ED initiatives, go about scoring ED points?
The answer is that SMEs can make contributions to various ED funds, which will in turn invest in training programmes and funding on their behalf.
Companies can score ED points if they support black empowered businesses or black-owned small enterprises through measures such as mentoring, preferential payment terms and interest-free loans or grants.
Qualifying Small Enterprises (QSEs) currently only have to choose between four of the seven elements on the scorecard.
But Sipho Zikode, the Department of Trade and Industry’s deputy director-general of enterprise development, said the Presidential BEE Advisory Council is considering amending the BEE codes so that entities with an annual turnover of R5 million or more will have to carry out all of the seven elements.
This month the National Empowerment Fund (NEF) launched a fund which allows companies that make contributions to the fund to score ED points.
NEF investment analyst Portia Maseogane said contrary to media reports, the new fund is aimed at both large as well as SMEs who want to make ED investments.
The first investment round closes on September 30. The NEF is seeking R50m from the private sector for the first fund, with a further R75m to come from the NEF.
There are also other ED funds. The Tourism Enterprise Partnership (TEP) has been operating one since last year and TEP chief executive Salifou Siddo said so far R2m had been invested in the fund by four large corporates.
He said the fund was open to any size business that wished to make ED contributions to help fund small black tourism operators. The intention is to get at least R15m a year through ED contributions, he said.
Both the Cape Regional Chamber of Commerce and the Johannesburg Chamber of Commerce and Industry (JCCI) have set up ED funds.
Viola Manuel, executive director of the Cape Chamber of Commerce and Industry said during the last financial year the Cape Chamber Enterprise Development Fund – launched in 2008 – had accumulated R650 000 from businesses, including R400 000 from Productivity SA and the University of Stellenbosch Business School. Some of the funds have already been allocated to black-owned firms in various training programmes.
JCCI chief executive Keith Brebnor said the chamber’s fund, launched earlier this year and managed by Gestalt Fund Managers, had so far been capitalised to the tune of about R1m by about eight investments from SMEs.
Modelled on a venture-capital fund, companies can invest in black-owned or empowered firms through the fund, with the aim of making dividends on any profits the beneficiary makes, he said.
Enterprise Development Services, which falls under BEE consultants the Beesa Group, also recently started a venture capital fund which makes equity investments in black-owned or empowered businesses.
Andrew Bizzell, director of the Beesa Group, said the new fund would complement Enterprise Development Services existing fund portfolio of over R200m, which is managed by Investec. Enterprise Development Service also trains entrepreneurs using the ED contributions.
“ED is a key element of the BEE scorecard as it is the only element which can create more jobs,” said Bizzell, who added that although a lot of SMEs contributed to the funds, Bizzell said the majority of the actual value of investments were from larger companies.
Finally, Sanlam Investment Management has developed a unique model which allows companies to score enterprise development points if they invest in enterprises – which the insurance giant’s investment arm helps set up.
Pieter Joubert, legal advisor of Sanlam Investment Management, said the enterprises are managed by a board of directors, appointed by trustees of a trust which oversees the board and that the profits generated by the enterprises are channeled to community projects that will benefit poor black beneficiaries.
He said three such enterprises – including a property rental as well as a distribution agency – had been set up and that seven companies had so far made contributions totaling R5m.
Though the model affectively supports community members and not entrepreneurs – Joubert said it is in line with code 600 on enterprise development in the BEE codes.
This article appeared in Business Day on 19 July 2011.
Stephen Timm is a