According to the survey, Covid-19 impacted on budget size for ESD as the reduction in economic activity reduced profits. Picture: Czarek Sokolowski, AP.
According to the survey, Covid-19 impacted on budget size for ESD as the reduction in economic activity reduced profits. Picture: Czarek Sokolowski, AP.

ESD and SME initiatives face budget cuts

By Given Majola Time of article published Sep 6, 2021

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Enterprise and Supplier Development (ESD) and small -medium enterprise (SME) development initiatives are facing reduced budgets amid Covid-19 disruption just as South Africa’s deteriorating socio-economic situation needed more support, which was a challenge, the Edge Growth STRIVE-ESD Survey Results 2021 found.

Small business development specialists, Edge Growth hosted the hybrid event on Friday to share the findings that provided vital information from corporate South Africa as to the current challenges faced in the ESD, particularly in the wake of the Covid-19 pandemic and its devastating impact on small business development.

According to the survey, Covid-19 impacted on budget size for ESD as the reduction in economic activity reduced profits. ESD budgets below R2 million increased from 35 percent in 2019 to 41.4 percent this year, however, those above R25m fell to just 19 percent this year, from 33 percent in 2019.

This annual research into the state of ESD and SME Development now in the third year suggested that there was a real battle between the reduced budgets and the heightened need for impact in a post Covid-19 world with a forward looking ESD lens.

The general ESD environment is said to have changed due to the pandemic as 62.8 percent of the budgets were affected by the pandemic. Just 46.2 percent of those affected had adapted their ESD approach.

Senior leadership involvement in driving transformational goals and ESD had improved to 78.3 percent this year from 55.4 percent in 2019 indicating a positive response.

Confidence in and use of ESD Service Providers (SPs) had grown over the three years that the survey has been done. Some 83.7 percent believed that ESD SPs achieved better impact and 69.8 percent ESD SPs were value for money.

ESD SPs were seen to be helping to understand and track impact better as 61.1 percent of companies who made use of ESD SPs could articulate the impact they created accurately compared to just half of those who did not use ESD SPs that knew their actual impact.

Longer term support to SMEs was proving more beneficial to both ESD contributors and beneficiaries as 18.2 percent more companies using support programmes of over 18 months from 2019 was reported.

Longer-term support created better impact in SMEs as 38.4 percent of companies using ESD programmes for over 18 months, were able to create more than 25 jobs. Only 14.3 percent of respondents who used less than 18-month initiatives were able to create more than 25 jobs.

Some 76.5 percent indicated that they would still contribute to ESD initiatives, even if it was voluntary, showing a true belief in the ability of ESD to drive economic growth and achieve real transformation.

The level of awareness and maturity of ESD as a practice had increased sufficiently over the three years.

Most respondents could clearly articulate the challenges and complexities inhibiting successful ESD implementation, which included the time required to make real impact, a lack of ESD strategy alignment to business strategy and procurement, a lack of senior-level drive and support, lack of monitoring and evaluation and companies using ESD as a tick-box exercise for BEE points.

This was showing a true belief in the ability of ESD to drive economic growth and achieve real transformation.

Nabeela Vally a business development and solutions specialist at Edge Growth said that impact tracking in the ESD space was crucial because it gave one the ability to see whether ESD worked or not.

“Essentially, if you impact track well you get to a point where you know whether SMEs are sustainable or not post any type of support and how effective the support is in creating long-term sustainable SMEs that can contribute toward the economic growth of the country,” said Vally.

To help achieve the needed impact from these initiatives, the authors of the survey suggested that organisations needed to consider a comprehensive preferential procurement strategy framing the ESD approach, collaboration with other institutions and niched, bespoke initiatives with smaller cohorts which showed better results.

They further suggested that partnering with an ESD provider who used digital delivery tools, tracked impact and had relevant Covid-19 context interventions for SMEs to ensure ongoing improvement and efficiency of delivery would help. An organisational stance on broad reach versus a narrow one to enable commitment to it as well as updated procurement and tender policies to support the integration of SMEs were also suggested.

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BUSINESS REPORT ONLINE

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