The current state of Enterprise and Supplier Development (ESD) related to Broad-Based Black Economic Empowerment (B-BBEE) in South Africa has been evaluated in a recent research report released by the B-BBEE Commission. This report provides insights into the effectiveness of ESD funds and their contribution to the development and growth of black-owned businesses. The research highlights the need for more strategic implementation of ESD, as it can significantly contribute to the sustainability, skills, and innovation capacity of black-owned enterprises, and create jobs. The report also validates the government’s policy of promoting small and medium-sized enterprises through targeted support and ESD 1 .

According to the report, a significant amount of resources is available for ESD. In 2021, the overall total for ESD was in the region of R26-billion. However, only 61% of the funds allocated to ESD were implemented, which is a continuing trend over the past five years 1 .

The study also showed that only 62% of participating entities confirmed having ESD strategies, most of which operate in the property, construction, and financial services sectors. This suggests the prevalence of ad-hoc approaches to implementing ESD, which reduces the intended impact of ESD as a B-BBEE lever 1 .

The report recommends that measured entities develop a long-term approach to ESD and calls for senior managers to commit to its realization. It also recommends reinforcement of the government’s commitment to B-BBEE and the implementation of ESD. The report emphasizes the need for collaboration between measured entities and the B-BBEE Commission towards the empowerment of exempted microenterprises and qualifying small enterprises through improved implementation of ESD funds 1 .

While there is no direct legal obligation for private sector participants to comply with B-BBEE policy, there is indirect legislative and commercial pressure to maintain high levels of B-BBEE compliance. This is due to the obligation placed on organs of state and public entities to apply the B-BBEE codes of good practice in relation to procurement and issuing licenses or authorizations. Consequently, private sector businesses, even those not directly dependent on the state for business, are likely to face commercial pressure from their private sector customers to have high B-BBEE compliance levels to remain competitive in the South African market 2 . The B-BBEE codes also apply to foreign entities that conduct business in South Africa through a branch office or a subsidiary 2 .

Determining the Effective Implementation of Enterprise and Supplier Development Funds Report 1.

South Africa: Broad-based Black Economic Empowerment Guide 2023 – Baker McKenzie InsightPlus 2.