IT HAS been said that broad-based black economic empowerment (BEE) is an economic plan that will see South Africa achieving its growth target of six percent in 2010.

The most significant measure of this growth will be the number of new and sustainable businesses that are contributing to the economy by 2010.

The enterprise development element within the BEE scorecard has been designed with this purpose in mind.

Enterprise development is simply defined as contributing to the development, sustainability and financial and operational independence of beneficiaries, with beneficiaries being black majority-owned businesses.

The theory is that companies will provide the necessary professional, financial and logistical support to these businesses to ensure that they are able to survive in the long term.

This contribution is measured as a percentage of net profit after tax. A two percent contribution is expected from Qualifying Small Enterprises whose annual turnover is between R5 million and R35 million. And for those businesses with a turnover above R35 million the target is 3%.

One of the most popular misconceptions of enterprise development is that this contribution should be viewed as a donation, and currently some companies are making these types of contributions simply for the BEE points.

While these contributions are most likely appreciated, this method is flawed for the following reasons:

• Donations tend not to be sustainable, especially donations of this magnitude. The chances are they will be made while there is an abundance of money, but when the money is not as abundant, they will dry up.

• A donation without any conditions attached (like repayment) might not be taken as seriously as one where the beneficiary has some form of responsibility to perform.

• We could end with a culture of people expecting money to come their way in the form of donations. And once a donation is consumed they could return to a donor requesting more and so the pattern would continue.

It is important that we nip this perception in the bud and return to the most basic economic principle of risk versus reward.

Enterprise development contributions must be viewed as an investment coupled with a return and a reciprocal responsibility for the beneficiary to ensure that this investment is realised.

The new business-owner or enterprise development beneficiary must embrace this challenge and accept the contribution in this light.

If you are a potential enterprise development beneficiary then a recommended approach would be to do the following:

• Identify complimentary businesses to yours. In other words, see where your business could assist the larger company. An example is a small black courier company becoming the supplier to the larger EWC Express.

• Agree on certain levels of service and always surpass them. If your company does meet these levels it is likely that your business will be referred to other companies.

• Ensure that both parties understand every possible aspect of the relationship. This includes understanding the support that you will receive and what is expected in return.

• Many companies are very happy to get involved in enterprise development projects but do not have the time or resources to manage the process. Remove this burden from companies by arranging regular update meetings explaining how the project is progressing and requesting help where it is needed.

Paul Janisch is a director of Caird BEE Consultancy. Contact Janisch on 011 666 0928 or email paul@caird.co.za.