How to Invest

When will your investment Rands turn into BEE points?

Investing in an ESD SME portfolio offers extensive benefits. Getting it done right requires a number of hurdles to be overcome. One of the hurdles, in fact a critical hurdle, is the certainty that ESD monies invested will secure your organisation the ESD points you need to support your overall BEE scorecard.

Reporting to your board that money spent on the ESD pillar of the codes, from the transformation budget of the company, did not meet the requirements of the verification audit can be an awkward moment in anyone's career. It's not simple. Mostly, verification audits require a 'line-of-sight' between the investment spend to be allocated to the SME supplier and the SME supplier itself.

It's not simple because to invest in an ESD SME portfolio responsibly and enjoy the benefits that such a solution offers, responsible investing practices ought to apply. This requires a number of SMEs in a potential portfolio to meet certain criteria upfront.

  • Are they compliant?
  • Will they be used in the supply chain?
  • Are they investable?

These are some of the many considerations. Once you have been through a selection process to 'pick the winners' attracting investment – your investment – into their growth, do you simply make the investment, in exchange for equity and then hope for the best? Hopefully not. Rather, you would want to be sure that these SMEs are the right ones to invest in, that the supply chain opens up for them, which they deliver on their offerings.

All of these factors matter in terms of having your points counted in your verification. The right supplier means that they offer value in product or service to your company and that they are compliant beneficiaries in terms of the BEE codes. That they are investable means that they have a reasonable set of books to conduct a valuation and make a responsible investment. It also means that you trust them with the investment that you make and that it does not turn into a beautiful latest-model German-engineered sedan.

Lastly, it means that you can assess the risk in the SME to make a reliable investment.

The reason that these factors all matter is because the allocated ESD budget needs to be invested in the SME supplier before the period of measurement is complete.

It's not simple and we at Aurik have worked hard to build an approach that ticks all the boxes and measures up to a verification audit in creating a funded SME portfolio. We got it right through consulting with the top verification consultancies in SA, advice from PWC and Webber Wentzel, and through the careful implementation of a fund-driven ESD solution for over nine corporate clients.

Let's do it with you, for you, too. The benefits are remarkable and a growing SME ESD portfolio is the beginning of turning ESD spend into PP points.

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