If you want to fix a broken machine, the first step is to understand how it’s supposed to work in the first place. South Africa’s economy is one such machine—designed to run inclusively but often stumbling along the way. Since 1994, Enterprise and Supplier Development (ESD) programs have been one of the tools used to grease the gears, helping Black-owned businesses gain a foothold in an economy that historically shut them out. But has it worked? Well, kind of.
The Idea Behind ESD: A Simple but Powerful Concept
The premise of ESD is straightforward: big businesses should actively support and integrate smaller Black-owned enterprises into their supply chains. This is done through funding, mentorship, preferential procurement, and skills development. In theory, this should create a vibrant ecosystem where small businesses thrive, leading to job creation and economic empowerment.
Imagine a massive, well-oiled factory machine (the economy) and a tiny gear (a small business) that isn’t quite spinning at full speed. ESD is supposed to help that gear turn more efficiently, contributing to the larger system. The logic checks out—if small businesses succeed, they hire more people, create wealth, and reduce inequality. Sounds great, right?
Reality Check: The Good, The Bad, and The Inefficient
Let’s start with the wins. ESD has undeniably led to the growth of Black-owned enterprises. Billions of rands have flowed into these businesses over the years, and many have secured contracts with major corporations that would have been impossible without these programs. Preferential procurement rules have ensured that more Black suppliers are integrated into supply chains, slowly reshaping the country’s economic landscape.
But—because there’s always a ‘but’—the impact hasn’t been as widespread as one would hope. The problem? The machine isn’t running smoothly.
- The ‘Tick-Box’ Problem Many corporations treat ESD as an obligation rather than an opportunity. They throw money at a few Black-owned businesses to tick the compliance box, but there’s little effort to develop these suppliers into competitive, independent players. Some businesses are set up just to fulfill ESD criteria, leading to a phenomenon known as “fronting,” where a company is Black-owned on paper but controlled by its non-Black partners behind the scenes.
- Small Businesses Still Struggle Despite funding and opportunities, many small businesses fail. Why? Because getting a contract is one thing; fulfilling it successfully is another. Many of these enterprises don’t have the operational capacity, experience, or market resilience to scale up. A business that relies solely on preferential procurement often collapses once the funding or contracts dry up.
- The Wealth Gap Hasn’t Shrunk Enough While a small group of Black entrepreneurs have benefited significantly, the broader population still faces enormous economic challenges. The dream of wide-scale economic transformation remains just that—a dream. The wealth gap persists, and unemployment among Black South Africans remains stubbornly high.
So, What’s the Fix?
If a machine isn’t working as expected, you don’t throw it away—you adjust the design and improve efficiency. ESD needs a tune-up. Here’s how:
- Move Beyond Compliance – Corporates should view ESD as a strategic advantage rather than a checkbox exercise. Developing strong, competitive suppliers benefits everyone in the long run.
- Better Training and Mentorship – Funding alone isn’t enough. Small businesses need hands-on mentorship, guidance, and access to real-world business networks to build resilience.
- Crack Down on Fronting – More stringent monitoring and real consequences for businesses that exploit loopholes will help ensure that ESD serves its intended purpose.
- Shift from Dependency to Sustainability – Instead of making small businesses dependent on procurement rules, ESD should focus on building enterprises that can stand on their own feet.
The Bottom Line
The idea behind ESD is brilliant, but execution has been uneven. The gears are turning, but they’re grinding rather than humming along smoothly. Fixing it isn’t impossible, but it requires a shift in mindset—from seeing ESD as an obligation to recognising it as an opportunity. When that happens, the economic machine won’t just work; it’ll thrive. And that’s good for everyone.
