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Importance of enterprise development

Understanding Enterprise Development

Enterprise Development is a new concept to most South African businesses. Your company is rewarded for supporting another business. In terms of BEE the beneficiary has to qualify by being more than 50% black owned or more than 25% black owned provided that the enterprise achieves a BEE Level of six or better.

Support may be given in any way so long as it is quantifiable. This can include, but is not limited to, financial support, time in the form of mentoring and discounts on products or services. Even settling an invoice early can be seen as support as cash-flow is critical to business growth.

Listed support activities that qualify include; grants, investments, loans, guarantees, credit facilities, direct costs incurred supporting beneficiaries, overhead costs incurred supporting beneficiaries, favourable credit terms, mentoring and training.

The purpose of this section of the BEE Scorecard is to encourage the establishment and growth of BEE businesses. The high business failure rates around the world indicate that running a business is one of life’s greatest challenges. Few people are born with the knowledge and people management skills to run a successful business. Most of us have learned from training and observation as to what works and what does not and yet some of the most intelligent people still fail in business.

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Enterprise development: A tool for poverty alleviation

 "Economic growth is key to addressing unemployment, gender equality, health and other povertyrelated issues worldwide. Enterprise development (ED) is an important tool and essential element to economic growth.

Raizcorp in an article entitled Enterprise Development Made Easy, defines enterprise development as investing time, knowledge and capital to help Small and Medium Enterprises establish, expand or improve businesses including empowering modest incomegenerating informal activities to grow and contribute to the local economy.

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Enterprise development

In 2016, 27% of the adult population in South Africa was unemployed. According to The National Development Plan, 90% of the approximately 11 million jobs that need to be created by 2020 will be through small businesses. However, according to The Gordon Institute of Business Science, 80-90% of new businesses fail in the first two years, with some of the reasons for failure being lack of access to markets, capital and business skills. A panel discussion held at Trialogue’s 2017 Business in Society Conference unpacked some of the key elements needed to support enterprise development in South Africa.

Allon Raiz, founder of Raizcorp – a successful business start-up incubator – contextualised the discussion by highlighting that successful enterprise development means sustainable enterprise development. This means looking beyond individuals with the right qualifications, to those who will survive in the real world – people with resilience, flexibility, and grit, among other traits.

In South Africa, he explained, in addition to the traditional reasons for failure of start-ups, we have a culture of viewing failure as shameful, which explains why our entrepreneurial economy shows very low rates of re-entry after failure. We need to distinguish fear from shame. “We need to change the way that society views failure – it is a teacher, it is the thing that provides you with the knowledge to move forward.” 

The expert panel went on to discuss what makes businesses work, and how entrepreneurs can avoid failure.

 

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