ESD Programmes Risk Becoming Compliance Exercises Rather Than Sustainable SMME Support

Despite their importance, the reality remains harsh. According to the Banking Association South Africa, small and medium enterprises make up approximately 91% of formalised businesses in the country however, they only contribute around 34% of GDP. At the same time, research frequently points to extremely high business failure rates among startups.

Funding constraints, limited commercial capabilities, leadership challenges, legislative compliance requirements and barriers to market access continue to place enormous pressure on SMMEs. Added to this are global economic uncertainty, rapid technological change and intense local competition.

While many interventions have been introduced to support SMMEs, one of the biggest challenges lies in the way enterprise and supplier development (ESD) has evolved within the corporate sector.

The introduction of BBBEE legislation compelled corporates to support and develop small businesses through ESD programmes. The intention was commendable, aimed at driving inclusive economic growth, supplier transformation, job creation and community development. However, in many instances, ESD has gradually become more about compliance than meaningful and sustainable enterprise development.

Too often, corporates provide funding without genuinely integrating SMMEs into their supply chains. Programmes are outsourced, mentorship is limited and procurement opportunities remain concentrated among long-standing “trusted” suppliers. The result is a significant misalignment between what corporates seek from ESD programmes and what SMMEs actually need

For many corporates, the objective is annual BBBEE compliance and the attainment of ESD points. For SMMEs, the objective is long-term sustainability through access to revenue streams, markets, operational skills and procurement opportunities. Where these goals are not aligned, support becomes short-term and ineffective.

Many SMMEs do not simply need funding. They need opportunity

Over the past few years, I have worked with numerous small businesses and one message consistently emerges: entrepreneurs want a fair opportunity to demonstrate what they can deliver. They want access to procurement systems, supplier databases and trading opportunities that allow them to compete meaningfully within the economy.

The reality is that many SMMEs enter the market already disadvantaged. They are expected to compete against established multi-billion-rand suppliers with stronger infrastructure, deeper resources and greater pricing flexibility. In many cases, they lose before they are even given a chance to participate.

One of the major barriers remains the perceived risk associated with procuring from SMMEs. There is often reluctance to integrate smaller businesses into supply chains long before proper due diligence is even conducted. Yet procuring from any supplier in today’s volatile economy carries risk. The difference is that when dealing with established suppliers, corporates focus on risk mitigation. When dealing with SMMEs, the tendency is often towards risk avoidance.

This mindset must change

Studies have consistently shown that well-designed ESD programmes with aligned intentions can significantly improve the capabilities of SMMEs to meet corporate requirements around quality, governance, efficiency, safety and sustainability. Corporates should not view SMMEs as charity cases or merely vehicles for compliance points, but as strategic contributors to economic growth and supply chain diversification.

Meaningful ESD requires far more than financial donations. It requires intentional integration, mentorship and practical support. Corporates need to work closely with the businesses they support, understand their operational realities and actively help them navigate challenges. Leadership buy-in is essential. Without it, even well-funded programmes struggle to create sustainable outcomes.

Effective programmes should focus not only on funding, but also on entrepreneurial leadership development, operational and industry skills, practical application of learning, mentoring, coaching and technology adoption. Directed investment is equally important. Instead of simply transferring cash, corporates should work alongside SMMEs to identify specific resource gaps and invest strategically in tools, systems and operational capabilities that strengthen the business long term.

This type of support creates more than individual business success stories. It creates entrepreneurial ecosystems.

When implemented correctly, ESD programmes can enhance collaboration between small businesses, encourage knowledge sharing and create networks that strengthen entire sectors. I have personally witnessed SMMEs collaborate successfully to deliver superior services to corporates through shared expertise and capabilities

Importantly, these programmes also build confidence. Entrepreneurs perform differently when they know someone genuinely believes in their growth and success.

At the same time, we must remain realistic. While SMMEs are critical to economic participation and job creation, they alone will not solve South Africa’s unemployment crisis or economic stagnation. These challenges are symptoms of far broader systemic issues including failing infrastructure, bureaucratic obstacles, organised crime, corruption, poor education outcomes and border control failures.

However, this does not diminish the importance of improving how we approach SMME development.

If South Africa is serious about driving inclusive economic growth, then ESD programmes must evolve beyond tick-box exercises. Success should not only be measured through BBBEE compliance levels, but through tangible indicators such as sustainable business growth, permanent employment creation, expanded customer bases, improved operational standards and increased participation of SMMEs within national supply chains.

Strategic collaboration between corporates, academia and industry stakeholders will be essential if the intended benefits of BBBEE and ESD are to be realised fully.

South Africa already possesses entrepreneurial talent, resilience and ambition in abundance. What many small businesses still lack is meaningful access to opportunity. Until ESD programmes intentionally create that opportunity beyond financial support, we will continue to undermine one of the country’s most important drivers of economic inclusion, job creation and long-term growth.