The new supplier development (SD) rules bring about changes to what was the norm for many years. While it was easy for companies to finance smaller businesses to earn points on their BEE scorecard without taking real responsibility for developing the supplier, the New Codes force companies to think outside the box and contribute to the success of their suppliers.
Under the New Codes, SD is all about established businesses working with their suppliers to assure success for both parties. To that end, the New Codes stipulate that recipients of investments must now be suppliers to the investing businesses.
Investors that develop and place enterprise development candidates into their supply chains can earn extra points on their BEE scorecard, says Buhle Moyo, a B-BBEE specialist at The Hope Factory, in this month’s SmartProcurement.
The Department of Trade and Industry recognised that under the Current Codes there is not enough transformation and, therefore, procurement structures need to change. Suppliers have to become the core of a business; they have to be integrated into an investor’s supply chain.
Supplier development and enterprise development contributeto 40% of the BEE scorecard. Earning the 15 points through supplier development and enterprise development are quick win if completed properly.
A black-owned business is one that is either 51% black-woman-owned or 51% of the shares are black-owned,” explains Moyo.
There are two options available for investors in order to meet the new requirements; either invest in existing black suppliers within the company supply chain or introduce new black suppliers into the company supply chain. Both options require investors to develop a supplier development strategy and get assistance from a business development company to meet the requirements.
The New Codes encourage established businessesto offer three-year contracts to their suppliers and to help the suppliers fulfil the terms of the contract during the contract period.
“Business success rates in South Africa are scary:only one in 10 businesses survive the first three years. Furthermore, we have found that more than 80% of entrepreneurs are struggling with basic accounting and tax compliance,” says Annie McWalter, The Hope Factory CEO.
In order to change this status, small businesses need help from reputable corporates to put the right building blocks in place to succeed.
However, despite the implementation of the amended B-BBEE codes on 1 May 2015, many established businesses are still in the dark as to how this affects them.
Established businesses can do more to support the improvement of financial management and operations of SMMEs. They can assist SMMEs to overcome challenges,for example if a supplier makes a mistake, it is not acceptable for a corporate to simply walk away and get the services from another company; SD requires that the small business receives help from the corporate to meet its own efficiencies,” says Moyo.
Government is unable to create jobs on its own; therefore, it has made provision with the New Codes that corporate South Africa plays its role in improving the economy. SD is one of those avenues.
“The Hope Factory can help!” says Buyo. Our team offers a fund-needs analysis on suppliers, which assists investors to find the most compatible service providers/suppliers for their businesses. Through planning and implementation, The Hope Factory team offers investors a seamless and holistic SD solution. More importantly, is its independent identification assessment of potential suppliers.
For more information on supporting or developing SMEs please contact Buhle Mayo on buhlem@thehopefactory.co.za.
