Round Table: From Compliance to Impact rethinking ESD 

 

The Question Every Black Supplier Already Knows the Answer To 

There is a question that has been sitting in the middle of South Africa's enterprise and supplier development sector for twenty years. It does not appear in annual reports. It is rarely the opening line of a transformation strategy. But every Black supplier who has been through an ESD programme has encountered it, usually in silence, usually after the training certificates have been handed out and the contract has not followed.

Where is the real impact?

That question was the reason the ESD Community of Practice convened its June 2026 Virtual Roundtable. Not to showcase progress, but to be honest about the gap between what ESD was designed to achieve and what it is currently delivering.

The Numbers That Started the Conversation

The session opened with figures that are difficult to sit with comfortably. South Africa invests over R20 billion annually in enterprise and supplier development. National unemployment sits above 30%. Nearly 40% of corporate procurement targets remain unmet every year.

These numbers do not describe a broken system. They describe a system that runs efficiently in the wrong direction. Money goes in. Compliance comes out. But the sustainable businesses, thriving local value chains and scaled Black industrialists that the framework was designed to produce remain too rare, too fragile and too dependent on the next programme cycle to stay afloat.

ESDI: The One Letter That Changes Everything

The most useful reframe of the morning came early. Not ESD. ESDI. Enterprise and Supplier Development Investment.

The thinking behind it is straightforward: an investment framework demands a return. It asks whether the rand committed today creates a business that is still standing five years from now. It makes impact not a reporting obligation but the entire point of the exercise. And it changes who is accountable when that return does not materialise. 

Spur Corporation brought this to life practically. They embed transformation into the performance scorecard of every leader in the organisation. Internally, they do not use enterprise development language; they talk about helping small businesses. The logic is entirely commercial: without SMMEs creating employment and discretionary income, the consumer base that sustains a restaurant group shrinks. Their ESD investment is simultaneously a transformation commitment and a long-term market development strategy—not a compliance cost. 

The National Research Foundation has made a similar shift. An internal ESD task team is in place, and a formal strategy is in development with a target of at least 10 active beneficiaries by the end of the current financial year. It is not a complicated model; it is simply an organisation that decided to be accountable for outcomes rather than inputs.

Death by Training

One phrase from the session deserves wider use: "Death by training."

It names a pattern that too many emerging enterprises know from experience. Mentorship. Certificates. Capacity-building workshops. Soft loans structured as development support. And then, at the end of the programme, no contract. No actual revenue. No real market access.

The answer is not less training. It is training tied to tangible procurement pathways. Supplier readiness has to be built alongside real market integration, not offered as a precondition that keeps moving. And readiness has to look forward, to the green economy, to future industries, to the contracts that will define supply chains a decade from now.

A structural point that often gets missed: the sector treats all MSMEs as a homogenous group when they are not. A startup selling chips from home for R3,000 per month does not need a Clicks contract. It needs township market days, product development support and the time to build towards formal compliance when the business is genuinely ready. A phased approach that meets suppliers where they are is more likely to produce durable results than forcing premature market integration.

The Transformation Fund: What the Fine Print Actually Says

The proposed dtic Transformation Fund does not replace the existing B-BBEE ESD NPAT targets. The 2% for supplier development and 1% for enterprise development remain as measurement targets. What the fund introduces is an alternative: measured entities may contribute 3% of their net profit after tax directly into the fund and receive points accordingly.

The critical distinction is in the nature of the contribution. The current framework allows soft loans, early settlement discounts and indirect development costs to count towards ESD measurement points. The transformation fund route requires hard cash to move, which represents a materially different accountability standard.

Two concerns about the fund as currently structured are worth naming:

  1. The proposed regulations do not clearly require contributing entities to commit to market access for beneficiaries within their own supply chains. Without that linkage, the fund risks producing more training and more capital in the marketplace without creating more competitive supplier integration.

  2. An organisation pursuing a compliance objective may simply contribute its 3% NPAT, bank the 20 scorecard points and conclude that no in-house ESD practitioner is needed. If that becomes common behaviour, the fund could inadvertently hollow out the very ESD capacity the sector needs to build.

What the 100% Target Is Really About

The proposed procurement target requiring 15% of total basic procurement spend to go to 100% black-owned QSEs and EMEs was the most contested topic of the session. There were real concerns about forcing procurement targets in environments where procurement follows sales rather than the other way around.

And the harder truth was named directly: some suppliers have been structured to fail, given contracts without the cash flow support to execute them, waiting 90 days for payment while running out of working capital.

But the more important reframe is this: the existing solutions have not produced transformation at the required scale. If the target is difficult, the answer is not to negotiate it down; it is to redesign the solutions. Aggregator models, sector-specific market access pathways, SMME clustering and shared compliance infrastructure are the innovations that close the gap.

What China developed in its early economic growth—a recognised aggregator function that takes the risk and quality management burden off the large buyer while enabling multiple small suppliers to compete—does not yet exist at scale in South Africa. That is an ESD opportunity, not just an ESD problem.

The context behind the government's intent matters here. Non-black ownership has historically extracted disproportionate benefit from B-BBEE. Companies achieved high scorecard levels while profits continued to flow away from black shareholders. The 100% target is a deliberate corrective to a structural imbalance that has persisted within the compliance framework for too long.

Measuring What Actually Matters

Spend is an input measure; it was never designed to be an impact measure. The metrics that matter are economic outcomes. From the session, a picture of meaningful ESD measurement emerged:

  • Revenue growth and graduation from EME to QSE to independent competitive business.

  • Job creation and the quality of those jobs.

  • Market footprint diversification rather than reliance on a single buyer for the majority of revenue.

  • Procurement integration that outlasts the programme.

  • Stock turn, range expansion and product availability in retail contexts.

  • Successful tender applications and contract awards.

  • Whether the enterprise has become an exporter, an importer, an employer or an innovator.

One structural risk sits inside many existing measurement frameworks: exclusivity clauses that prevent supported suppliers from selling to other markets lock them into a single dependency and eliminate the economies of scale that would make them genuinely competitive. Market footprint diversification should be an explicit ESD outcome, not a contractual restriction buried in an agreement.

The Partnership Gap

The session's final discussion asked how corporates, government and industry can actually collaborate rather than operate alongside each other without connecting.

Academia was identified as a missing voice. Research on MSME development exists and is not being accessed by practitioners or policymakers effectively. Furthermore, a sector-specific fellowship model, where major retailers share a representative and a best-practice handbook, would reduce the competitive barrier to collaboration on transformation. Fragmented industry bodies pulling in different directions remain a structural impediment that the sector has not resolved.

The closing observation was the most pointed: the sector does not celebrate success enough. B-BBEE has produced measurable positive outcomes that remain invisible because the conversation defaults to what is not working. Those success stories belong on LinkedIn, on radio and on television, not only in compliance documents that nobody outside the procurement department reads.

ESD works best when it is relational, structured, measured and done in a collaborative environment. The end state is not complicated: stable, bankable, procurement-ready businesses that grow into competitive, innovative, independent enterprises that create jobs and deepen South Africa's competitiveness. The system must shift from compliance to impact. Not just one organisation at a time—the whole system.