ENTERPRISE DEVELOPMENT THROUGH EMPLOYEE OWNERSHIP EMPLOYEE OWNERSHIP CONFERENCE

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

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 2

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. 3

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. 4

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. 5

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

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. 7

CODE 500 - KEY PRINCIPLES Elements Key Principles Implication Preferential Procurement Promotes BEE Compliance by all entities • Encourages transformation through the entire economy Specific Targets for Procurement from Micro’s and QSE’s • Specific incentive to procure from small and micro business creates and sustainable entities Specific Targets for Procurement from Black Owned and Black Women Owned Enterprises • Encourage the creation sustainable black women owned, black owned and controlled enterprises Enhanced recognition for procurement from value adding • Encourages procuremen locally produced goods a

CODE 500 : THE GENERIC PREFERENTIAL PROCUREMENT SCORECARD Element Weighting Compliance Targets Ownership 20 points 25% +1 Management control 10 points (40% to 50%) Employment Equity 15 points (43% to 80%) Skills Development 15 points 3% of payroll Preferential Procurement 20 points 70% Enterprise Development 15 points 3% (NPAT) Socio-Economic Development 5 points 1% (NPAT) TOTAL 100 points 9

What can be traded with the Trust? • POSSSIBLE BUSINESS VENTURES üCatering (Canteen) üTransportation üLaundry üGardening or Landscaping üSecurity (very sensitive) üPruning üPesticides and Insecticides üOutdoor advertising üRecycling of any products e. g. papers, scrap metals etc 10

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 11

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

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 ü Capacity Building / Mentorship ü Training and Education e. g. Basic Business Principles ü Involvement of Trustees in planning ü Marketing plan for the service rendered 13

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

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 15

Tranter Rock Drills Canteen 16

Tranter Rock Drills Canteen 17

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. 18

Thank you / Ndo Livhuwa 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