Enterprise Development Explained

The main aim of the Enterprise Development (ED) element is to encourage assistance of black owned enterprises through their creation and ongoing support.

The ED scorecard allocates points for the ED contributions made by the measured entity. Qualifying contributions are the contributions made within the measured period.

Recognizable ED contributions consist of both monetary or non-monetary, recoverable or nonrecoverable contributions initiated and implemented to assist the beneficiary(s) by the measured entity with the objective of supporting or accelerating the development, financial and operational independence, and sustainability of the beneficiary(s).

Qualifying ED beneficiaries fall into two Ownership Categories , namely:

• Category A
  
  • EME's or QSE's which are at least 50% black owned and/or at least 30% black women owned. Contributions made to these beneficiary entities (Category A) are multiplied by 1.25
• Category B
  
  • Any enterprise that is at least 50% black owned and/or at least 30% black women owned with a BEE status of between Level 1 And Level 8.
  • Any enterprise that is at least 25% black owned and/or at least 20% black women owned with a BEE status of between Level 1 and Level 6. 

There are different options to calculate the target spend of the ED scorecard (The target of 3% is replaced by 2% for QSE's)

• 3% of the Net Profit After Tax (NPAT)
• 3% average of the last 5 years NPAT
• 3% x “indicative profit margin” x Turnover (where “indicative profit margin” is NPAT/turnover) 
  
  • This method is used if the NPAT in the measurement period and average of the last 5 years NPAT at a loss or less than a quarter of the industry norm.

ED contributions include:

• grant contributions to beneficiary entities
• investments in beneficiary entities
• loans made to beneficiary entities
• guarantees given or security provided on behalf of beneficiaries
• credit facilities made available to beneficiary entities
• direct costs incurred by a company in assisting and hastening development
  of beneficiary entities
• overhead costs of a company that can be directly attributable to Enterprise
• Development contributions
• Enterprise Development or developmental capital advanced to beneficiary entities
• preferential credit terms granted by a company to beneficiary entities
• preferential terms granted by a company in respect of its supply of goods or services to beneficiary entities financial capacity or efficiency levels of a beneficiary entities
• payments made by the company to third parties to perform enterprise development on the company’s behalf
• discounts given to beneficiary entities in relation to the acquisition and maintenance costs associated with the grant to those beneficiary entities of franchise, licence, agency, distribution or other similar business rights
• creation or development of capacity and expertise for beneficiary entities needed to manufacture or produce goods or services previously not manufactured, produced or provided in the Republic of South Africa
• facilitating access to credit for beneficiary entities without access to similar credit facilities through traditional means owing to a lack of credit history, high-risk or lack of collateral
• provision of training or mentoring to beneficiary entities which will assist the beneficiary entities to increase their operational or financial capacity
• maintenance by the company of an enterprise development unit which focuses exclusively on support of beneficiary entities or candidate beneficiary entities.
• creation or development of the capacity of beneficiary entities which will
  enable them to manufacture and produce goods or provide services
  previously not available in the Republic of South Africa
• provision of preferential credit facilities to a beneficiary entity such as:
  
  • provision of finance to beneficiary entities at lower than commercial rates of interest
  • relaxed security requirements or absence of security requirements for beneficiary entities unable to provide security for loans
  • settlement of accounts with beneficiary entities over a shorter period of time in relation to the Measured Entity's normal payment period, provided the shorter period is no longer than 10 days
• maintenance of an enterprise development unit by the company (such contributions include the salaries and wages of staff and other expenses involved in operating the enterprise development unit). However, only that portion of salaries and wages attributable to time spent by the staff in and the other expenses related to promoting and implementing enterprise development constitute contributions
• payments made by the company to third parties to perform enterprise
  development on the company’s behalf
• provision of training or mentoring to a beneficiary entity (such contributions are measurable by quantifying the cost of time spent by staff or management of the company in carrying out such initiatives but any travel or commuting time is not recognisable). A clear justification must support any claim for such time costs incurred, commensurate with the level of seniority and expertise of the trainer or mentor.

The various ED contributions have various weightings according the ED Benefit Factor Matrix: