Revaro - Enterprise Development

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ENTERPRISE DEVELOPMENT

Enterprise Development is one of the seven legs of BBBEE (Broad based black economic empowerment)

Government has singled out small, medium and micro enterprises (SMEs) as vital in the fight against poverty and unemployment. But because of the high risk associated with smaller suppliers, large corporations are in the habit of by-passing the 'small guy'. This leaves many SMEs struggling to make ends meet, trapped in the vicious cycle of limited growth.

The codes intend to change this by getting big business to play a 'big brother' role in the nurturing and developing of these enterprises by providing incentives for the implementation of specific initiatives intended to "assist and accelerate the development, sustainability and ultimate financial and operational independence" of other enterprises, particularly small, very small and micro enterprises.

The Enterprise Development scorecard measures:

The extent to which companies carry out initiatives contributing to enterprise development by awarding companies for contributing to enterprise development contributions and sector specific programmes.

Enterprise Development

Maximum points: 15

Compliance target: 3% of Net Profit After Tax

Enterprise development contributions consist of monetary or non-monetary, recoverable or non-recoverable contributions actually initiated and implemented in favour of beneficiary entities with the specific objective of assisting or accelerating the development, sustainability and ultimate financial and operational independence of that beneficiary. This is commonly accomplished through the expansion of those beneficiaries' financial and/or operational capacity.

Beneficiary entities include:

Exempted Micro Enterprises, which have a turnover of less than R5-million per annum, and Qualifying Small Enterprises, which have annual turnovers of between R5-million and R35-million.

Qualifying enterprise development contributions: Contributions made to Exempted Micro-Enterprises or Qualifying Small Enterprises which are 50% black owned or 30% black women owned, are multiplied by 1.25 and the full value of contributions to any enterprises that are:

50% black owned or 30% black women owned with a BEE status of between Level One and Level Eight
25% black owned or 20% black women owned with a BEE status of between Level One and Level Six.

Cumulative contributions:

Enterprise development contributions are recognised on a cumulative basis:

from the commencement date of the codes
or from an earlier date chosen by the company (inception date) until the date of measurement, but the inception date chosen must not be earlier than five years before the commencement of the codes.

Note: Historical contributions to non-qualifying beneficiaries are considered qualifying enterprise development contributions if those contributions were initiated by the measured entity in favour of the beneficiary on the understanding that the beneficiary; as a result of those contributions, would over time meet the requirements of a beneficiary entity.

Qualifying enterprise development contributions include:

grant contributions to beneficiary entities
investments in beneficiary entities
loans made to beneficiary entities
guarantees given or security provided on behalf of beneficiaries
credit facilities made available to beneficiary entities
preferential credit terms granted by a company to beneficiary entities
preferential terms granted by a company in respect of its supply of goods or services to beneficiary entities
direct costs incurred by a company in assisting and hastening development of beneficiary entities.