The “GNU” Approach to ESD

We often hear business leaders saying that business as usual is no longer an option. That’s never been more true. The election results showed that the people of South Africa wanted leaders to come up with new ways to shift the dial on the challenges the country faces. The Government of National Unity (GNU) (long may it last) is the political response, but business too has to rethink how it does things in this new era, and more specifically, how it approaches enterprise and supplier development (ESD) and creates real impact on our stagnant employment figures.  

For some businesses the ‘ESD rethink’ has meant opting to undertake this function internally. While this approach has definite business benefits for the corporate, one has to ask whether it is really benefitting the SME?

Before we answer that question, we should remind ourselves why ESD forms part of the B-BBEE codes, and why it’s more important than just ticking the compliance box. The key point here is that no business—or its supply chain—operates alone. It exists within the broader ecosystem of the economy as a whole. And the health of our economy, like that of every other, is significantly tied to the health of its SMME sector. In Organization for Economic Cooperation and Development (OECD) countries, SMMEs are responsible for 60-70% of jobs; they also account for up to 60% of gross domestic product.

In South Africa, though, small enterprises only provide 28% of jobs, and although they make up the majority of South Africa’s formal businesses, a huge percentage of them are survivalist micro enterprises.

According to the World Bank, “relative to larger firms, SMEs enhance competition, entrepreneurship, job growth and spur economy-wide efficiency, innovation and economic growth”. That’s why the National Development Plan identified support of the small business sector as a key driver of change. For one thing, if SMMEs could increase the numbers of sustainable jobs they create to something like the global average, the impact on our socio-economic environment would be profound.

In short, nurturing our SMME sector is good for the business environment generally, and is vital for the country’s long-term sustainability.

Doing ESD Successfully

One way to approach ESD is to run the programme in-house. There is a business case for this approach:

• The corporate has complete control over every aspect of the programme and can seamlessly integrate the ESD beneficiary with its with existing business processes— without exposing sensitive or proprietary information.
• Perceived cost savings as resources are already funded and cash doesn’t need to be outlaid.

However, this approach has drawbacks for both the business and the beneficiary:

• Lack of focus on the core business. Managing ESD programmes requires dedicated time, expertise, and ongoing commitment. One could argue that this time and energy could better be spent on the core business.
• Limited entrepreneurial/ business coaching. Internal people typically lack first-hand experience of what it’s like to be an entrepreneur, and the kind of business decisions and trade-offs that are often necessary. An internally run ESD programme will effectively teach the ESD beneficiary how to be a supplier for that particular company but not a better businessperson. In the end, the ESD beneficiary becomes reliant on the company because it is not being helped to become competitive in the marketplace, and it’s not being exposed to other market segments.
• Over exposure to the corporate. There is a risk of internal bias to favour certain suppliers or overlook opportunities for innovation due to entrenched practices or internal politics.

While the internal approach can seem like the ‘easy’ option for the corporate, it could distract it from its core business. From the ESD beneficiary’s perspective, such an approach could be a limiting, equipping them to become a supplier to one company, but not a better business able to grow and create jobs across the broader marketplace.

Reap the Benefits of a Partnership Approach

Alternatively, a corporate could elect to partner with a specialist ESD company to craft a programme that not only benefits the corporate but also equips the beneficiary SME to grow and create jobs independently:

1. Access to expertise and experience. Partners that specialise in ESD bring a wealth of experience from working with diverse companies and industries, offering insights that internal teams may not possess.
2. Access to broader networks. Entrepreneur development specialists have extensive networks of entrepreneurs, suppliers and industry experts. This network can be leveraged to provide more opportunities for the beneficiaries and to foster innovation. Specialist partners already have databases of entrepreneurs to ensure that the most suitable SMEs are chosen for a specific project.
3. Focus on core competencies. By outsourcing ESD programmes, companies can focus on their core business activities, improving the effectiveness of the ESD programmes and enhancing overall business performance. The ESD partner would also handle the onerous compliance paperwork, thus removing a further burden on internal staff. That said, if desired, some of the corporate’s employees can be integrated into the partner’s programme.
4. Measurable impact and accountability. ESD partners have the methodologies and capacity to track and measure the programme, providing detailed reports and insights that help companies understand the impact of their investment and make data-driven decisions for future initiatives.

The GNU promises a fresh approach to solving our most pressing problems. ESD should be approached in the same spirit.