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ENTERPRISE DEVELOPMENT THROUGH EMPLOYEE OWNERSHIP: EMPLOYEE OWNERSHIP CONFERENCE 24 – 25 JULY 2012 Tendani Nelwamondo Senior Socio-Economic Development.

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Presentation on theme: "ENTERPRISE DEVELOPMENT THROUGH EMPLOYEE OWNERSHIP: EMPLOYEE OWNERSHIP CONFERENCE 24 – 25 JULY 2012 Tendani Nelwamondo Senior Socio-Economic Development."— Presentation transcript:

1 ENTERPRISE DEVELOPMENT THROUGH EMPLOYEE OWNERSHIP: EMPLOYEE OWNERSHIP CONFERENCE 24 – 25 JULY 2012 Tendani Nelwamondo Senior Socio-Economic Development Specialist

2 2 INTRODUCTION What is BBBEE? What is Enterprise Development? Why Enterprise Development? What is Preferential Procurement? What can be traded with the Trust? Why trade with the Trust? What are the benefits of trading with the Trust? Who manage the Trust business ventures? How is the initiative financed? Conclusion

3 3 What is B-BBEE Broad Based Black Economic Empowerment (B-BBEE) is the process by which government is trying to ensure economic equity amongst race groups. It is governed by Broad Based Black Economic Empowerment Act (Act No. ). The act intends to encourage transformation by including black people in the economy. It covers aspects such as equity ownership (shares in the business), management of the business, skills development, employment equity (staffing), Preferential Procurement (where you purchase your supplies), Enterprise Development and socio-economic development.

4 4 What is Enterprise Development? Enterprise Development is a process whereby the main company assist the target beneficiary to start an enterprise either monetarily or non-monetarily with an objective of assisting or accelerating development, sustainability and ultimately bring financial returns and operational independency to targeted beneficiaries. Enterprise Development can happen internally or externally (inside the company or outside the company). Enterprise Development (ED) is one of the 7 elements contained within the BEE scorecard. It counts 15 points towards the scorecard and has a strong link to procurement.

5 5 Enterprise Development The main objective of the strategy is to utilise ED as an innovation intervention strategy to manage expectations and ensure that beneficiaries realise early benefits than expected. Innovatively explore the possibilities of gaining access to procurement opportunities (Workers / Employee Trusts) (Outsource certain services to the Trust). Explore how best ED budget can be utilised to fund the initiative. Explore how best Preferential Procurement opportunities can be unlocked for in-house Workers Trusts.

6 6 Why Enterprise Development Increasing investment rates Political and Economic Stability More money in circulation Job Creation ED has potential to create more employment opportunities in SA Enterprise Development

7 7 What is Preferential Procurement ? Preferential procurement endeavours to ensure that procurement opportunities are made available to all South Africans especially SMMEs. job creation and commercial activity.

8 ElementsKey PrinciplesImplication Preferential Procurement Promotes BEE Compliance by all entities Specific Targets for Procurement from Micro’s and QSE’s Specific Targets for Procurement from Black Owned and Black Women Owned Enterprises Enhanced recognition for procurement from value adding suppliers Enhanced recognition for procurement from ED beneficiaries Encourages transformation throughout the entire economy Specific incentive to procure from small and micro business creates new and sustainable entities Encourage the creation of sustainable black women owned, black owned and controlled enterprises Encourages procurement of locally produced goods and services Encouragers the sustainable income streams to new entities ensuring their sustainability CODE 500 - KEY PRINCIPLES

9 9 CODE 500 : THE GENERIC PREFERENTIAL PROCUREMENT SCORECARD ElementWeightingCompliance Targets Ownership20 points25% +1 Management control10 points(40% to 50%) Employment Equity15 points(43% to 80%) Skills Development15 points3% of payroll Preferential Procurement20 points70% Enterprise Development15 points3% (NPAT) Socio-Economic Development5 points1% (NPAT) TOTAL100 points

10 10 What can be traded with the Trust? POSSSIBLE BUSINESS VENTURES Catering (Canteen) Transportation Laundry Gardening or Landscaping Security (very sensitive) Pruning Pesticides and Insecticides Outdoor advertising Recycling of any products e.g. papers, scrap metals etc

11 11 Why trade with the Trust? Build new enterprises using in-house existing resources or opportunities. Create new employment opportunities Mitigate the waiting period for realization of tangible benefits

12 12 What are the benefits of trading with the Trust? Investor Creation of new employment opportunities (indirectly) Motivated staff and Less labour turn-over Better rating and claim maximum target points in terms of BBBEE scorecard. Take a lead in promoting ED in South Africa and add more value in creating sustainable employment opportunities Entrepreneur (Trust) Increased financial rewards, linked to individual and organisational performance Early benefits to target beneficiaries Creation of new employment opportunities An increased sense of ‘ownership’ of the enterprise A long-term savings plan with minimal investment

13 13 Who will manage the business? A joint team of Trustees and management will appoint a management team or Manager to run the business Support required by Trustees and Management Capacity Building / Mentorship Training and Education e.g. Basic Business Principles Involvement of Trustees in planning Marketing plan for the service rendered

14 14 Structure for Enterprise Development Operating Company Workers Trust New Business Enterprise Development Management Team New business is 100% owned by the Trust

15 15 How is the initiative financed? Loans Investments in beneficiaries entities Seed Capital Guaranties /Securities Enterprise development budget. Corporate Social Investments (CSI) or Socio-Economic Development Budget (SED) Vendor financing Grants Donations

16 16 Tranter Rock Drills Canteen

17 17 Tranter Rock Drills Canteen

18 18 Conclusion Companies are encouraged to be innovative by using enterprise development as model to create investment opportunities for Workers Trusts. Employee Ownership through enterprise development and preferential procurement can only be a success if Trustees, beneficiaries, Management and Shareholders working together. The initiative has potential to contribute significantly in improving the socio-economic livelihoods of beneficiaries.

19 Industrial Development Corporation 19 Fredman Drive, Sandown PO Box 784055, Sandton, 2146 South Africa Telephone 011 269 3000 Facsimile 011 269 2116 E-mail callcentre@idc.co.za Thank you / Ndo Livhuwa


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