ENTERPRISE DEVELOPMENT THROUGH EMPLOYEE OWNERSHIP:

EMPLOYEE OWNERSHIP CONFERENCE

24 – 25 JULY 2012

Tendani Nelwamondo

Senior Socio-Economic Development Specialist

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INTRODUCTION

• What is BBBEE?

• What is Enterprise Development?

• Why Enterprise Development?

• What is Preferential Procurement?

• What can be traded with the Trust?

• Why trade with the Trust?

• What are the benefits of trading with the Trust?

• Who manage the Trust business ventures?

• How is the initiative financed?

• Conclusion

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What is B-BBEE

• Broad Based Black Economic Empowerment (B-BBEE) is the

process by which government is trying to ensure economic equity

amongst race groups. It is governed by Broad Based Black

Economic Empowerment Act (Act No. ).

• The act intends to encourage transformation by including black

people in the economy.

• It covers aspects such as equity ownership (shares in the business),

management of the business, skills development, employment

equity (staffing), Preferential Procurement (where you purchase your

supplies), Enterprise Development and socio-economic

development.

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What is Enterprise Development?

• Enterprise Development is a process whereby the main company

assist the target beneficiary to start an enterprise either monetarily

or non-monetarily with an objective of assisting or accelerating

development, sustainability and ultimately bring financial returns

and operational independency to targeted beneficiaries.

• Enterprise Development can happen internally or externally (inside

the company or outside the company).

• Enterprise Development (ED) is one of the 7 elements contained

within the BEE scorecard. It counts 15 points towards the scorecard

and has a strong link to procurement.

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Enterprise Development

• The main objective of the strategy is to utilise ED as an

innovation intervention strategy to manage expectations and

ensure that beneficiaries realise early benefits than expected.

• Innovatively explore the possibilities of gaining access to

procurement opportunities (Workers / Employee Trusts)

(Outsource certain services to the Trust).

• Explore how best ED budget can be utilised to fund the initiative.

• Explore how best Preferential Procurement opportunities can be

unlocked for in-house Workers Trusts.

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Why Enterprise Development

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What is Preferential Procurement ?

• Preferential procurement endeavours to ensure that procurement

opportunities are made available to all South Africans especially

SMMEs. job creation and commercial activity.

Elements Key Principles Implication

Preferential Procurement

Promotes BEE Compliance by all entities

Specific Targets for Procurement from Micro’s and QSE’s

Specific Targets for Procurement from Black Owned and Black Women Owned Enterprises

Enhanced recognition for procurement from value adding suppliers

Enhanced recognition for procurement from ED beneficiaries

• Encourages transformation throughout the entire economy

• Specific incentive to procure from small and micro business creates new and sustainable entities

•Encourage the creation of sustainable black women owned, black owned and controlled enterprises

•Encourages procurement of locally produced goods and services

•Encouragers the sustainable income streams to new entities ensuring their sustainability

CODE 500 - KEY PRINCIPLES

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CODE 500 : THE GENERIC PREFERENTIAL PROCUREMENT SCORECARD

Element Weighting Compliance Targets

Ownership 20 points 25% +1

Management control 10 points (40% to 50%)

Employment Equity 15 points (43% to 80%)

Skills Development 15 points 3% of payroll

Preferential Procurement 20 points 70%

Enterprise Development 15 points 3% (NPAT)

Socio-Economic Development 5 points 1% (NPAT)

TOTAL 100 points

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What can be traded with the Trust?

• POSSSIBLE BUSINESS VENTURES

Catering (Canteen)

Transportation

Laundry

Gardening or Landscaping

Security (very sensitive)

Pruning

Pesticides and Insecticides

Outdoor advertising

Recycling of any products e.g. papers, scrap metals etc

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Why trade with the Trust?

• Build new enterprises using in-house existing resources or

opportunities.

• Create new employment opportunities

• Mitigate the waiting period for realization of tangible benefits

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What are the benefits of trading with the Trust?

• Investor

Creation of new employment opportunities (indirectly)

Motivated staff and Less labour turn-over

Better rating and claim maximum target points in terms of BBBEE scorecard.

Take a lead in promoting ED in South Africa and add more value in creating

sustainable employment opportunities

• Entrepreneur (Trust)

Increased financial rewards, linked to individual and organisational performance

Early benefits to target beneficiaries

Creation of new employment opportunities

An increased sense of ‘ownership’ of the enterprise

A long-term savings plan with minimal investment

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Who will manage the business?

• A joint team of Trustees and management will appoint a

management team or Manager to run the business

• Support required by Trustees and Management

Capacity Building / Mentorship

Training and Education e.g. Basic Business Principles

Involvement of Trustees in planning

Marketing plan for the service rendered

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Structure for Enterprise Development

Operating Company

Workers Trust

Workers Trust

New Business

Enterprise DevelopmentEnterprise Development

Management Team

Management Team

New business is 100% owned by the Trust

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How is the initiative financed?

• Loans

• Investments in beneficiaries entities

• Seed Capital

• Guaranties /Securities

• Enterprise development budget.

• Corporate Social Investments (CSI) or Socio-Economic Development

Budget (SED)

• Vendor financing

• Grants

• Donations

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Tranter Rock Drills Canteen

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Tranter Rock Drills Canteen

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Conclusion

• Companies are encouraged to be innovative by using enterprise

development as model to create investment opportunities for

Workers Trusts.

• Employee Ownership through enterprise development and

preferential procurement can only be a success if Trustees,

beneficiaries, Management and Shareholders working together.

• The initiative has potential to contribute significantly in improving

the socio-economic livelihoods of beneficiaries.

Industrial Development CorporationIndustrial Development Corporation19 Fredman Drive, Sandown19 Fredman Drive, SandownPO Box 784055, Sandton, 2146PO Box 784055, Sandton, 2146South AfricaSouth AfricaTelephone 011 269 3000Telephone 011 269 3000Facsimile 011 269 2116Facsimile 011 269 2116E-mail callcentre@idc.co.zaE-mail callcentre@idc.co.za

Thank you / Ndo Livhuwa Thank you / Ndo Livhuwa