Enterprise and supplier development (ESD) is important to South Africa’s economic future. South Africa requires an economy that create jobs, reduce inequality and alleviate poverty and Small, Medium and Micro Enterprises (SMME) can play a key role in achieving this goal.
They are more conducive to innovation given their organisational dexterity, capable of serving consumer needs at a local level and grant increased economic mobility to previously excluded economic actors. This is why ESD programmes are an economic focal point within South Africa’s economic policy framework.
However, executing an effective and impactful ESD programme is a complex task requiring considered forward planning, resource allocation and most critically, a willingness from all involved stakeholders
There are a number of reasons why ESD programmes fail, with our focus being on four areas causes that, if left unattended, will severely affect the odds of a programme achieving its objectives.
1. Selected entrepreneurs do not show the necessary commitment
A key part of an ESD programme is the process used to select participants in the programme. As discussed elsewhere on this forum, the early phase of the programme requires much thought, introspection, time and planning. If the foundations unpinning a programme are flawed, in this case the beneficiaries themselves, those flaws will only manifest in different and greater ways the longer it goes on.
Attitude will form part of the assessment and/or report compiled when selecting programme participants, and it is here that often expectation does not meet reality. ESD solutions require participants to meet a set of defined criteria and objectives, usually over a long period of time. This requires significant energy, time and commitment from participants.
Unfortunately, even the best screening processes do not have the ability to detect either unknown or unforeseeable factors. This can also apply to the participants themselves. These unknown factors can stop participants from showing the necessary commitment. This is why it is essential to be as transparent as possible with potential participants and beneficiaries so they understand what will be required over the long-haul.
2. Misuse of financial resources
Financial resourcing forms part of any ESD programme. Capital plays an important role in bridging the divide faced by entrepreneurs who do not have market access or the ability to access the established financial system to aid their business.
This capital is a limited resource, and within an ESD programme, always comes from an external party. If participants or those charged with overseeing the programme misuse these limited financial resource, there are two meta consequences, plus other connected effects.
The first and most direct consequence is that there will no longer be funds to pay for line-items such as salaries, equipment, maintenance and legal support. Second is the long-term negative impact on stakeholder relationships. The chances of success as a result would be vastly reduced.
3. Lack of follow-through leading to market access and business growth
An ESD programme should be a holistic process that covers the beginning, middle and end of a business cycle and specifically curated to the needs of programme participants and policy objectives.
However, if programme stakeholders only focus on the first phase of the project, and do not enable entrepreneurs to access the market or give them the necessary tools to grow, the entire programme immediately becomes a process in failed development.
From a participant’s perspective, if the opportunity for market access is created, and thereby business growth, it is vital such an opportunity is taken. Not doing so is similar to using time, knowledge and money preparing the ingredients for a meal, cooking the meal but then never serving it.
4. Misalignment with overall business strategy
While the intentions of an ESD programme may be good, if the overall business strategy is not aligned with the objectives of the programme, the opportunity to make a real impact is lost. This may occur because programme stakeholders are more interested in compliance rather than laying the necessary foundation for a business to succeed. Alternatively, the strategy decided upon does not align with an entrepreneur’s target market, ability to deliver, the type or product or service being sold, or a combination of all three.
A trait that cuts across these four different failure areas is that they can and must be identified, and factored in, as the structure and strategy of an ESD programme is developed. Once these challenges are ingrained into a programme, retrospectively extracting them becomes increasingly complex and costly.
The more time spent on planning and strategy at a programme’s outset will greatly serve the programme’s prospects for success over the long term.