Enterprise development - where big companies offer operational assistance to small, black-owned enterprises - is not seen by many companies as a way to participate in black economic empowerment (BEE).
The problem is not that companies are not interested in enterprise development, but rather that few have a firm understanding of it, says Empowerdex researcher Mrinal Patel.
Many companies are not sure how to integrate enterprise development into their transformation strategy. This is a pity, says Patel, because developing black-owned and black-run businesses can be an inexpensive way for a company to implement an aspect of its transformation agenda.
And some companies that are already implementing it, do not see it as a contribution to empowerment. "In general, enterprise development is a missed opportunity [for companies]."
The lack of understanding on what enterprise development is can be seen in the way financial institutions have not picked up on it. Under the financial sector charter, R122,5bn has been set aside by banks, life assurers and pension funds to fund BEE by 2009.
The only financial institution to be placed in the top 10 of the enterprise development rankings is Brimstone Investment Corp. This means that the enterprise development support given by financial institutions to black-owned businesses is not being recognised.
To change this, says Patel, companies must be educated on what counts as enterprise development. For example, support such as preferential credit terms and business skills training given by large companies to emerging black-owned businesses can be seen as enterprise development.
Compared with other forms of empowerment, such as bringing in a black shareholder, enterprise development is relatively inexpensive. It also has the advantage of building the capacity of smaller suppliers, giving them the ability to do larger deals and improving their profitability.
Enterprise development should not be confused with procurement. Buying goods from empowered companies is a continuous activity, while enterprise development can be a one-off event.
There are cases where enterprise development and procurement can work hand in hand. For example, if a company offers its truck drivers the opportunity to become subcontractors instead of remaining employees, it is empowering them. By giving them business skills training and providing terms for them to pay for the trucks, the company earns points for enterprise development.
If the company goes on to lock these drivers into a long-term contract, it then also gets points for procurement.
Some companies, such as technology group Paracon Holdings, are providing more hands-on assistance. In 2002 it took a 49% holding in recruitment company Zenzele. Paracon is providing Zenzele with financial support, operational guidance and infrastructure.
And construction and engineering company Group Five has committed itself to mentoring, coaching and training its empowerment partner iLima's staff.
