Maximising ED points under new BEE Codes' tougher formula



EarlyPayment.jpgThe ease with which early payment options permitted Enterprise Development (ED) points to be attained under the previous BEE Codes (2007) has resulted in many companies currently finding themselves stranded for some of their BEE points: under the newly gazetted BEE Codes (2013) the formula for ED recognition has been updated, and no longer allows for early payments.

The obvious question arising from the amendment is what now? How do companies maximise their ED points with the minimum amount of associated time and expense? Sean Krige of ED organisation The Hope Factory discusses the implications of these ED changes, in this month’s SmartProcurement.

The changes

Previously, there were seven categories of codes of good practice to be adhered to for score points. Now, the codes have been reduced to five.

“A key change is the integration of ‘Preferred Procurement’ and ‘Enterprise Development’ into a single new category called ‘Enterprise and Supplier Development’. This comprises of ‘Enterprise Development’, ‘Supplier Development’ and ‘Preferred Procurement’, which means that companies that want to qualify for the maximum of 40 points allocated in this category will now be tasked with actively helping to develop the businesses they procure from,” explains Annie McWalter, CEO of The Hope Factory.

Similarly, where previously companies could invest in the development of any black-owned businesses to earn their ED points, they are now strongly encouraged to procure from these businesses too.

“This shift means that there needs to be a more concerted effort to ensure the long-term sustainability of these businesses – by investing in and up-skilling them to better able to provide services,” says McWalter.

Significantly, Supplier Development (SD) is now of greater importance (weight) than ED: ED points have a maximum of 15, while the SD points ceiling is 25.

The Current Reality in ED & SD


Sean_Krige.jpgTo talk about ED separately from SD now makes very little sense, especially if your company is aiming for a sustainable BEE strategy. Similarly to think of SD in the same light as ED, would be a grave mistake, says Krige.

SD requires your company to invest time or money (in different forms) into existing 51% black-owned “Empowering Suppliers” to your business. As Exempt Micro Enterprises (EMEs) and Start-Ups are automatically recognised as Empowering Suppliers, investing in and procuring from EMEs as much as possible will certainly help you score more points.

What this tells us immediately, is that gone are the days of corporates conveniently obtaining all their ED points through cash on delivery payments. With that, the days of strategically investing in and developing one’s supply chain (with a transformation mandate), are here to stay.

The merits and ethics of this updated approach continue to be hotly debated. However, for those companies that have ‘crossed the Rubicon ’and are transitioning to the new scorecard, the following points will be of value when considering an ED & SD solution.

ED & SD solutions unpacked

Over the past few years, a number of trends have emerged in the ED space, in particular the emergence of a number of ‘ED implementation specialists’. These specialists have made it possible for companies to outsource their ED development more easily and earn their points through them, explains Krige.

With the change in the BEE Codes, these specialists are required to update and re-align their solutions to meet the changes to the codes, that is, to invest in and procure from black-owned EMEs.

At the same time, a plethora of EME databases have emerged, seemingly benefitting both the EME and the corporate, by offering a search and matchmaking service.

However, the need to roll up one’s sleeves and proactively engage the transformational mandate of SD requires a good dose of vision, commitment and resources. While the vision and commitment are inherent to company-specific leadership, resources increasingly require interventions tailor-made to the specific needs of an existing (or potential) supplier.

Outsource or Do-It-Yourself

The Hope Factory has spent a great deal of energy perfecting our ED and SD Programme. Our set of strategic programme offerings may help you make an informed decision on whether you would prefer to use The Hope Factory for an outsourced solution for your Enterprise and Supplier Development Scorecard or not.

We offer the following support programmes to grow and develop EMEs: mentorship; training; industry expertise; networking; specialist training; operational investments; access to market opportunities; and Business analysis and development.

We can help you determine which of the above services you may want to outsource or handle internally.

Early payments are now no longer recognised for ED and the changes with the new codes require new ways of thinking and planning for your BEE strategy. If you need help to navigate the new Enterprise and Supplier Development pillar, why not consider looking at specialists in the field, such as The Hope Factory?

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