Professor Kerrin Myres | Emeritus Professor | Gordon Institute of Business Science (GIBS) | mail me |
There is a problem with Enterprise and Supplier Development (ESD) programmes in South Africa. We are finding out the nature of the problem and what can do about it. South Africa has a strong financial and capacity development landscape for Small, Medium and Micro Enterprises (SMMEs).
For over twenty years, various ESD programmes have been implemented by multiple stakeholders across the country. These initiatives aim to support SMMEs, particularly those owned by historically disadvantaged individuals, and drive inclusive economic growth.
Despite this investment, which totals R20 to R30 billion annually, the sustainability of SMMEs remains questionable. This concern led our partnership with Edge Growth and the Responsible Finance Initiative to conduct thorough research.
Enhancing the development of black-owned SMMEs
The research focused on whether ESD programmes enhance the development of black-owned SMMEs as intended. A white paper titled “Enhancing Enterprise and Supplier Development Ecosystem Effectiveness in South Africa” was officially launched.
Authored by our researchers, the paper highlights the urgent need for impact measurement metrics and stronger benchmarks for success. The cross-sectional qualitative research involved 41 interviews conducted between October 2023 and March 2024. Key findings revealed varying commitment levels to transformation, influencing compliance and engagement with ESD programmes.
Some respondents viewed transformation as essential for economic growth, while others approached it with a compliance mindset. Effective ESD starts with a corporate philosophy that values transformation as a tool for creating a more equitable society. Organisations that aligned ESD with core strategies achieved better long-term outcomes and overcame implementation challenges.
Companies keeping ESD separate from operations saw limited impact and less effective, short-term initiatives. A collaborative and integrated ESD approach, tied to business needs, enhanced overall programme effectiveness.
Corruption and competition within the ESD sector
The research also revealed corruption and competition within the ESD sector, hindering collective progress. Corporates, BDSPs, and SMMEs often prioritised self-interest over a shared vision of transformation.
Improving ESD requires a well-regulated, collaborative ecosystem with shared best practices, data, and a strong code of ethics. SMMEs displayed disinterest and skepticism about ESD, with many unaware of its benefits or mechanisms. Engaging directly with SMMEs to understand their needs will improve programme design and execution. These insights outline steps needed to enhance ESD programme effectiveness and promote long-term sustainability.
Edge Growth believes SMMEs are crucial to Africa’s future and funded this research to foster collaboration.
This research begins vital conversations for action within the SME development sector.
– Nabeela Vally, Head of Business Development at Edge Growth
Significant progress has been made, but ongoing efforts are required to ensure sustainable impacts for future generations.
We are proud to spark this research to assess whether ESD programmes meet policy, sponsor, and recipient expectations.
– Stuart Townsend, Director at Edge Growth
We aim to catalyse change within ESD by bridging the gap between businesses and entrepreneurs.
Related FAQs: ESD programmes
Q: What are some key indicators of successful enterprise and supplier development?
A: Key indicators of successful enterprise and supplier development include increased productivity of SMMEs, improved competency in supply chain management and the ability of enterprises to secure contracts through preferential procurement processes.
Q: Why is it imperative for the private sector to ensure effective ESD implementation?
A: It is imperative for the private sector to ensure effective ESD implementation to foster entrepreneurship, stimulate job creation and support broad-based black economic empowerment efforts, which are critical for the sustainable development of South Africa’s economy.
Q: What role do SMEs play in South Africa’s economy?
A: ASMEs play a vital role in South Africa’s economy as they contribute significantly to job creation, innovation and the overall dynamism of the market, making their development an essential focus for economic growth and stability.
Q: How can the impact of ESD strategies be assessed?
A: This can e done by assessing the impact of ESD strategies through the establishment of KPIs (Key Performance Indicators) that measure the outcomes of various supplier development programmes, their influence on SMMEs and their contributions to broader economic goals.
Q: What are the potential benefits for South African enterprises participating in ESD programmes?
A: Potential benefits for South African enterprises participating in ESD programmes include increased access to procurement opportunities, enhanced competitiveness in the market, improved business capabilities and stronger relationships within the supply chain.
Q: What are some challenges regarding ESD implementation?
A: Challenges regarding ESD implementation include the need for better alignment between large enterprises and SMMEs, the complexity of supply chain management and the necessity for ongoing support and resources to ensure the long-term success of these programmes.
