Enterprise development is closely related to other empowerment factors. By building associated black empowered enterprises, a company can develop suppliers or future equity partners. Second-placed Illovo has created its strong procurement scores by investing in emerging suppliers.
The enterprise development component of broad-based black economic empowerment (BEE) is intended to drive the transfer of skills from large companies to small black-run companies. The department of trade & industry's (DTI) codes of good practice propose rating a company on a mix of monetary investment and support of small to medium-sized businesses as a percentage of net asset value, Ebitda (earnings before interest, tax, depreciation & amortisation) or procurement. Up to 10% of a company's BEE score can be made up of enterprise development. Because of the difficulties in measuring the softer support of small businesses, as proposed by the DTI, the accompanying table is based on the percentage of assets invested in BEE companies.
"There is still a lot of confusion around enterprise development," says Empowerdex deputy CEO Chia-Chao Wu.
"People are unsure what to measure and how to measure it. And what base to use - whether it should be a percentage of assets, profits or Ebitda."
Enterprise development is the area the early empowerment deals dealt with. The 1990s were characterised by companies who created empowered subsidiaries as their contribution to empowerment.
But the focus of empowerment has shifted towards equity deals at the holding-company level. Those early deals now contribute to companies' scores for enterprise development.
The scores are easier to achieve for companies that are investment holding companies such as the Cape Empowerment Trust (CET), which tops the list. Its largest holding is 60% of Dynamic Cables - a suspended JSE Securities Exchange-listed company. It also has interests in clothing and security businesses. CET remains only marginally profitable and is looking for other opportunities for investment.
Illovo has achieved second place thanks to a concerted strategy of investing in and developing black farmers who in turn act as suppliers to the sugar giant. It has also sold off milling operations but retained some influence and an equity stake.
The same technique has been used by other companies. Noncore business processes are sold to an empowered company, which then becomes part of the supply chain. It has been used effectively in agriculture and in logistics companies. Some transport providers such as fourth- and fifth-placed Cargo Carriers and Super Group have helped truckers finance their own rigs and then outsourced their fleet requirements to them.
That creates sustainability in the company that can then solicit other business from the market.
"There are many companies that are intent on helping their suppliers in a way that links quite closely to preferential procurement," says Wu.
