According to the Stellenbosch Business School, Enterprise Development is defined as
the act of investing time and capital in helping people establish, expand or improve businesses. Enterprise development helps people to earn a living; it helps them out of poverty; and it leads to long-term economic growth for themselves, their families and their communities.
But why is Enterprise Development important to your B-BBEE score?
- Enterprise Development is a Priority Element.
- If the business does not achieve a subminimum of 40% for Enterprise Development then your business’ B-BBEE Score will drop a level – in other words if your business achieved a Level 4 but you do not achieve 40% in Enterprise Development your business is going to be discounted one Level to a Level 5.
Business has to spend (1% of Net Profit After Tax or NPAT for short), to achieve the points for Enterprise Development. Large Businesses (Generic) as well as Qualifying Small Enterprises (QSE’s) must comply with this element.
There are many ways to comply with Enterprise development let’s have a look at a few:
- Provision of training or mentoring by suitably qualified entities or individuals to SMME’s
- Investments in beneficiary businesses (SMME’s)
- Loans made to beneficiary businesses
- Guarantees given or security provided on behalf of beneficiaries
- Assistance with contributions towards operational or financial capacity or efficiency levels of beneficiary entities
- Settlement of accounts with beneficiary entities over a shorter period of time in relation to the measured entity’s normal payment period, provided the shorter period is no longer than 15 days
- Providing training or mentoring to beneficiary communities by a measured entity
- Payments made by the measured entity to suitably qualified and experienced third parties to perform Enterprise Development on the measured entity’s behalf.