ESD Strategy

Three strategic approaches to ESD

Pick your strategy: ESD is brand-new for most companies operating in South Africa. Until recently, most companies simply offered early settlement discounts to their suppliers that meet the minimum requirement of a BEE level 4 company.

This was done irrespective of size of that supplier. Today, this no longer passes muster. The codes have changed and for the first time, clearer legislation aligned to the spirit of ESD has been promulgated. So where does this leave you?

There are three strategic approaches to developing your ESD strategy as a business. Akin to advances in technology, each strategy is being adopted differently depending on the level of commitment, organisation and pressure on the company. The three strategies include:

Compliance – typically the result of time running out or frustration in having to deal with the BEE codes, this approach looks to secure points by throwing money at the problem. Often this happens within one to three months before the period of measurement is up and verification is about to take place. Whilst it worked with the old codes by simply settling invoices early, the new codes rob this approach of any strategic or business-oriented benefits.

Strategic – the pain of wasted opportunities previously derived from a compliance view of ESD motivates most companies to be more strategic. This is an approach designed and built within 12 to nine months before the next verification audit. It allows for thinking and planning on how to use ED to feed future SD and using SD to secure PP.

Innovation – this approach looks to achieve the strategic outcomes above, but with a view to reducing the cost-per-point in order to maximise cashflow and business returns simultaneously. It goes further to understand how to source and engage SME suppliers whilst providing them with meaningful market and supply chain access, further supporting scale through funding. This approach maximizes PP points.

In today's environment, every budget should be strategically oriented and winning approaches see how to turn compliance into a strategic advantage. This, as stated above, requires forethought and foresight. Put differently, time is crucial to plan, execute, manage and drive the results that support the overall business strategy. Take your pick!

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