Current and coming law on ED, and you - Serious Enterprise Development 2011

Dr Robin Woolley082-332-9201

Introducing Enterprise development

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).”

GINI CO- EFFICIENT: Measuring inequality

B-BBEE will not succeed without growth

Source: The Brenthurst initiative 1999

The dimensions of B-BBEE – a Maslow’s view

Enterprise development

Preferential procurement

Employment equity

Company ownership

The environment

Your supply chain

Your company

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Targets Weight

Management & control

Skills development

Socio-economic1% NPAT

3% NPAT

See overleaf

3% payroll

68%-3%

40% - 50%

25% shareholding

20%

10%

15%

20%

15%

5%

15%

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

ED Definition

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.

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; or25% black owned with a BEE Status of between Level One and Level Six

i.e. > 25% black owned is a qualifying requirement

grant and related contributions

contribution amount benefit factor

grant contribution full grant amount 100%

direct cost incurred in supporting ED

verifiable cost (including both monetary and non-monetary)

100%

discounts in addition to normal business practices supporting ED

discount amount (in addition to normal business discount)

100%

overhead costs incurred in supporting ED(including people appointed in ED)

verifiable costs (including both monetary and non-monetary)

80%

Enterprise development – 3. What qualifies

loans and related contributions

contribution amount benefit factor

interest-free loan with no security requirements supporting ED

outstanding loan amount 100%

standard loan to black owned entities with turnover of less than R 35 million supporting ED

outstanding loan amount 70%

standard loan provided to other beneficiary enterprises supporting ED

outstanding loan amount 60%

guarantees provided on behalf of a beneficiary entity supporting ED

guarantee amount 3%

lower interest rate supporting ED

outstanding loan amount prime rate – actual rate

Enterprise development – 3. What qualifies continued

other contributions contribution amount benefit factor

shorter payment periods supporting ED

percentage of invoiced amount

percentage being 15 days less the number of days from invoice to payment

Enterprise development – 3. What qualifies continued

Enterprise development – 4. Different from cost of sales

Enterprise Development best practice

• Supplier support - development

• Strategic investment – related value offerings / M & A activity

• Core vs non-core activities

• Courtship? – joint venturing

• Collaboration

• Capex

PURPOSE

POSITIONINGPRODUCTS

PROCESSES

PEOPLE PARTNERS

Excess

• 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

ED: Verification Process

Conceptualization Process/ Concept/ opportunity development

Idea Generation

Idea Graduation

IdeaImplementation

Incubation Nexttime

1. Understanding COGP technical compliance aspects of ED

2. Understanding a value based strategic approach to ED

3. Brainstorming for “best fit ideas”

4. Idea filtering and selection

5. Mapping certainties and uncertainties (Scoping)

1. Business Model Development

2. Market Analysis: Customers and Competitors

3. Risk Assessment : structuring tax, IFRS2, legal, empowerment,

4. Financial Budgets

5. Business Plan

1. Deal Structuring

2. Financing

3. Entrepreneur / Partner selection

4. Start -up

1. Virtual Incubation: Mentorship, Coaching, BDS

2. Total Incubation

3. Networking Forums

1. Accelerated Growth Development

Phase One

Phase Two

Phase ThreePhase Four

Phase Five

Our ED map is …

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