Presented during Tshikululu Social Investments' 2011 Serious Enterprise Development workshop. How do the objectives of enterprise development under B-BBEE codes compare to those in other countries? Dr Woolley will review the basis of ED qualification under the codes; ask how a company might engage in value-adding ED in a way that aligns with business strategy; and consider what to do, and what not to do, during the implementation of ED.

1. Introducing Enterprise development
Dr Robin Woolley
082-332-9201

2. Ticking Time-Bomb 1 – High GINI
Coefficient “Gini Coefficient is a measure of statistical dispersion
developed by the Italian statistician Corrado Gini,
commonly used as a measure of inequality of income or
wealth. A low Gini coefficient indicates a more equal
distribution, with 0 corresponding to perfect equality,
while higher Gini coefficients indicate more unequal
distribution, with 1 corresponding to perfect inequality.
When used as a measure of income inequality, the most
unequal society will be one in which a single person
receives 100% of the total income and the remaining
people receive none (G=1); and the most equal society
will be one in which every person receives the same
percentage of the total income (G=0).”

3. GINI CO- EFFICIENT: Measuring inequality

5. B-BBEE will not succeed without growth
Source: The Brenthurst initiative 1999

6. The dimensions of B-BBEE – a Maslow’s view
Targets Weight
25% shareholding Company ownership 20%
40% - 50% Management & control 10%
Once off
Your company
68%-3% Employment equity 15%
3% payroll Skills development 15%
On-going
See overleaf Preferential procurement 20% Your supply
3% NPAT Enterprise development 15% chain
1% NPAT Socio-economic 5% The
environment

8. ED Definition
Enterprise Development Contributions means:
• monetary or non-monetary contributions
• recoverable or non-recoverable contributions
• actually initiated and implemented in favour of qualifying
beneficiary entities
• with the objective of contributing to the development,
sustainability and financial and operational independence of
those beneficiaries
Enterprise development – 1. Beneficiary exists
for profit
Note: size and maturity is not a specific disqualification,
But look at the definition of ED in the Codes.

9. Enterprise development – 2. Who qualifies
Category A EME Contributions or 50% black owned or 30% black women
owned; adjusted using the Benefit Factor, multiplied by 1.25
Category B Enterprise Development Contributions adjusted using the Benefit
Factor:
50% black owned or 30% black women owned; or
25% black owned with a BEE Status of between Level One and Level Six
i.e. > 25% black owned is a qualifying requirement

10. Enterprise development – 3. What qualifies
grant and related contribution amount benefit factor
contributions
grant contribution full grant amount 100%
direct cost incurred in verifiable cost 100%
supporting ED (including both
monetary and non-
monetary)
discounts in addition discount amount (in 100%
to normal business addition to normal
practices supporting business discount)
ED
overhead costs verifiable costs 80%
incurred in supporting (including both
ED monetary and non-
(including people monetary)
appointed in ED)

11. Enterprise development – 3. What qualifies
continued
loans and related contribution amount benefit factor
contributions
interest-free loan with no outstanding loan amount 100%
security requirements
supporting ED
standard loan to black outstanding loan amount 70%
owned entities with turnover
of less than R 35 million
supporting ED
standard loan provided to outstanding loan amount 60%
other beneficiary
enterprises supporting ED
guarantees provided on guarantee amount 3%
behalf of a beneficiary entity
supporting ED
lower interest rate outstanding loan amount prime rate –
supporting ED actual rate

12. Enterprise development – 3. What qualifies
continued
other contributions contribution amount benefit factor
shorter payment periods percentage of invoiced percentage being 15
supporting ED amount days less the number of
days from invoice to
payment
Enterprise development – 4. Different from cost
of sales

13. Enterprise Development best practice
• Supplier support - development Excess
• Strategic investment – related value PRODUCTS POSITIONING
offerings / M & A activity
• Core vs non-core activities PURPOSE
• Courtship? – joint venturing
PEOPLE PARTNERS
• Collaboration
PROCESSES
• Capex

14. ED: Verification Process
• Use audited financial statements
• For Enterprise Development
– Obtain evidence to determine the B-BBEE Status of
the beneficiary entity and qualifying category
– Obtain an independent competent person's report
confirming that the beneficiaries meet the definition of
"black" as defined.
– Inspect Enterprise Development Agreements to
ensure that it complies with the criteria.
– Confirm that VAT is not included

15. Conceptualization Process/ Concept/
opportunity development
Idea Idea Idea time
Generation Graduation Implementation
Incubation Next
1. Understanding
COGP 1. Business Model 1. Deal 1. Virtual 1. Accelerated
technical Development Structuring Incubation: Growth
compliance Mentorship, Co Development
aspects of ED 2. Market Analysis: 2. Financing aching, BDS
Customers and
2. Understanding Competitors 3. Entrepreneur / 2. Total
a value based Partner Incubation
strategic 3. Risk Assessment selection Phase Five
approach to ED : structuring 3. Networking
tax, IFRS2, legal, 4. Start -up Forums
3. Brainstorming empowerment,
for “best fit
ideas” 4. Financial Budgets Phase Four
4. Idea filtering 5. Business Plan Phase Three
and selection
5. Mapping
certainties and
uncertainties
Phase Two
(Scoping)
Phase One

16. Actions Responsibility By When
Long Term
Med Term
Short Term
Our ED map is …