How ESD Drives Real Transformation in South Africa

Enterprise & Supplier Development (ESD) is one of the most practical and visible elements of Broad-Based Black Economic Empowerment (BBBEE). Unlike ownership targets or boardroom diversity, ESD plays out in everyday business relationships. At its core, the procurement aspect of ESD is the true driver of BEE: to earn points and build a compliant scorecard, businesses need to engage and utilise compliant suppliers, setting the transformation “snowball” in motion. ESD combines procurement with funding, mentoring, and capacity building for black-owned suppliers, making it one of the few levers that can directly expand opportunities and strengthen value chains.

Yet there is a clear difference between ‘tick-box compliance’ and real impact. While corporates often approach ESD as a scorecard requirement, many medium-sized companies are proving that transformation is most effective when it is personal, hands-on, and embedded into supplier relationships.

What ESD Really Means in Practice

The intent behind ESD is to move beyond transactional procurement. Procurement is the starting point: directing spend toward black-owned suppliers not only earns points but also creates the momentum for deeper transformation. Businesses are then expected to invest in supplier growth.

This often includes:

• Funding support: Providing grants, loans, or preferential payment terms.
• Mentorship and skills transfer: Offering hands-on guidance from executives and managers.
• Capacity building: Helping suppliers meet quality standards, adopt technology, and improve compliance.

When delivered effectively, these interventions do more than boost a scorecard; they amplify the initial impact that procurement creates, building suppliers that can compete sustainably and contribute to long-term economic growth.

Why Medium-Sized Companies Often Deliver More Impact

Medium-sized businesses often deliver more meaningful ESD than the largest corporates.

Why?

1. Closer supplier relationships: Mid-sized firms typically know their suppliers by name, making mentorship and capacity building genuine rather than abstract.
2. Agility: Without layers of red tape, they can adapt initiatives to supplier needs.
3. Shared stakes in growth: Many see suppliers not as compliance boxes to tick but as partners whose success is tied to their own.

In contrast, corporates may allocate millions to ESD but struggle to translate spend into deep transformation. The result can be glossy reports with limited on-the-ground change (the classic tick-box approach).

The Government’s Transformation Fund: Big Idea, Lingering Doubts

The government has sought to scale up ESD with tools like the Transformation Fund, aimed at financing and supporting black-owned suppliers. On paper, this looks like a powerful lever to close funding gaps and create systemic change.

However, doubts remain about whether such funds will be managed effectively. Concerns include:

• Delivery bottlenecks: Will funds reach businesses fast enough?
• Transparency: Will beneficiaries be chosen fairly, or will politics interfere?
• Capacity: Does the government have the systems to manage complex supplier development at scale?

These questions highlight the importance of strong collaboration between government, corporates, and medium-sized businesses to ensure funds achieve their intended impact.

ESD as Strategy, Not Compliance

The most important insight about ESD is this: it cannot be reduced to a compliance exercise. Procurement is the trigger, but real transformation happens when businesses move beyond it, building suppliers’ capacity and sustainability.

For companies, robust ESD initiatives strengthen BBBEE scorecards, diversify suppliers, and reduce supply chain risk. For suppliers, ESD is a lifeline to contracts, mentoring, and the resources needed to grow.

At its best, ESD creates shared value. A business gains competitive advantage while a black-owned supplier becomes stronger, more skilled, and more sustainable. This is transformation in its truest sense; not numbers on a scorecard, but new businesses thriving in the economy.

Unlocking Real Impact Through ESD

The real potential of ESD lies in its ability to shift from tick-box compliance to genuine capacity building. Medium-sized businesses, with their agility and close supplier ties, often deliver transformation that corporates and government struggle to achieve.

If the Transformation Fund can overcome skepticism and deliver with transparency, ESD could become one of the most powerful tools for economic change in South Africa. But until then, the most progress is likely to come from those companies (often mid-sized) who view suppliers not as scorecard entries but as partners in growth.

In short: the future of BBBEE will be defined not just by who businesses buy from, but by how they leverage procurement to kickstart and build lasting supplier success.