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What Is Enterprise Development?

Enterprise development is an activity that assists or accelerates the development, sustainability and ultimately financial independence of an Enterprise Development Beneficiary and is evidenced in the form of an Enterprise Development Contribution.

This is commonly accomplished through the expansion of the beneficiary’s financial and/or operational capacity.

What is an enterprise development contribution and how is this measured?

Enterprise development contributions are contributions actually initiated for enterprise development purposes and may be monetary or non-monetary and recoverable or non-recoverable.

Examples of common enterprise development contributions and the recognition thereof include:

Contribution Type Recognition
Loans60% to 100%
Early payments% of invoiced amount
Equity80% to 100%
Overhead costs80%
Professional services and time of employees80%

From the above table it can be seen that businesses started by black people, as defined in the B-BBEE Codes of Good Conduct, are least likely to mature into new and established firms.

Businesses in the SMME sector tend to have primarily a local effect. As long as African and coloured entrepreneurial activity remains concentrated in the start-up phase, they are unlikely to have much effect in revitalising local communities and proving employment. Given the unemployment statistics below, this is a matter for concern.”

Unemployment rate by population group, 1st quarter 2011
Black AfricanColouredIndian/ AsianWhiteSouth Africa

How do corporates get involved?

Black-owned SMMEs (Small, Medium or Micro Enterprises) based in any of the cities where Shanduka Black Umbrellas has a presence-provided they meet the selection criteria which largely focuses on the ability of the owner, the feasibility of the venture and the intention to grow a sustainable business and create jobs.

Corporates can get involved by funding Shanduka Black Umbrellas through their enterprise development spend or in kind; utilising the services of the SMMEs as suppliers to their businesses; mentoring SMMEs and referring potential SMMEs to Shanduka Black Umbrellas.

Aside from helping to set up businesses and alleviate unemployment, there are significant tax benefits and B-BBEE scorecard points that may be earned by companies investing in the programme.

Per the Broad Based Black Economic Empowerment Act, companies are required to contribute three percent of Net Profit after Tax (NPAT) towards enterprise development in order to qualify for the 15 points available in terms of the scorecard.

According to clause of Statement 600 of the B-BBEE Codes of Good Practice, payments made by the Measured Entity to a third party (Shanduka Black Umbrellas) to perform enterprise development on the Measured Entity’s behalf qualifies as an Enterprise Development Contribution.

Opportunities also exist for contributions other than cash e.g. mentoring which will count towards the B-BBEE scorecard. There are also opportunities to procure from 100 percent black owned SMMEs and obtain points in terms of the procurement requirements on the B-BBEE scorecard.

Empowerdex certifies that Shanduka Black Umbrellas is fully compliant with requirements of the Broad-Based Black Economic Empowerment (B-BBEE) Act and its accompanying Codes of Good Practice Codes and all relevant criteria therein for the recognition of Enterprise Development Contributions at a factor of 1.25.

What is an Enterprise Development Beneficiary?

Enterprise Beneficiaries may be classified into two categories: Category A beneficiaries which are Exempt Micro Enterprises (annual turnover less than R5 million) and Qualifying Small Enterprises (annual turnover between R5 million and R35 million) which are 50% or more black owned.

Category B beneficiaries which are any Generic Enterprise (annual turnover more than R35 million) which is 50% or more black owned or any company which is 25% to 49% black owned and has a B-BBEE rating of level one to six

How much does one need to contribute?

For Qualifying Small Enterprises which choose Enterprise Development as one of the four elements on which they wish to be measured and Generic Enterprises which are evaluated on all seven elements of the B-BBEE scorecard, the contribution requirements and measurement are as follows:

EnterpriseTargetScorecard point available
QSE2% pf Net profit after tax (NPAT)25 points
Generic3% of Net profit after tax (NPAT)15 points

The actual points achieved are calculated according to actual annual contributions made as a percentage of the target.

Can Enterprise Development Contributions be enhanced in any way?

Enterprise Development Contributions to Category A Beneficiaries are recognised at a factor of 125% of actual contributions made which in effect reduces the target to 1.6% of NPAT for QSEs and 2.4% of NPAT for Generic Enterprises.

May contributions to Shanduka Black Umbrellas be recognised as Enterprise Development Contributions in terms of the B-BBEE Scorecard?

SBU has been certified by Empowerdex as fully compliant with the requirements of the B-BBEE Codes of Good Practice and all relevant criteria therein for the recognition of Enterprise Development Contributions.

Empowerdex has verified that all beneficiaries of the SBU initiative are Category A beneficiaries. Therefore the full value of the contributions made to SBU by donor entities may be recognised at a factor of 1.25 when calculating the donor entities’ Enterprise Development Contributions.

Thus a company donating money to SBU would be able to claim 125% of its contributions as an Enterprise Development Contribution. For example, a company donating R100 000 to SBU would be able to claim R125 000 (R100 000 x 125%) as an Enterprise Development Contribution.

Donations of goods or services, which will assist in the operation of the offices, development of the clients and expansion of existing operations are also recognised. Overhead costs allocated to supporting the activities of SBU and not directly incurred may be recognised at a benefit factor of 80%. However, with the enhancement factor of 1.25, 100% of the allocated overhead cost may be claimed for scorecard purposes.

Are contributions to Shanduka Black Umbrellas tax deductible?

SBU has been granted Section 18A Tax Exemption by SARS, thus donations of cash or quantifiable assets are deductible for tax purposes within the limits prescribed in terms of Section 18A of the Income Tax Act.