Supplier Development in the Construction Industry

Understanding Supplier Development in the B-BBEE Framework

In the current B-BBEE landscape, Supplier Development stands as a priority element across all industries. However, its application in the Construction Industry is unique. It’s crucial for the appointed ESD (Enterprise and Supplier Development) Champion of your business to fully grasp the specific aspects of Supplier Development within this sector.

What Makes the Construction Industry Different?

The B-BBEE Construction Sector Charter places significant emphasis on Supplier Development, particularly in implementing programs that not only support beneficiaries but also foster long-term relationships through ongoing progress monitoring and development.

One of the key differences in the Construction sector is the qualification criteria for beneficiaries. Specifically, a beneficiary's revenue for its most recent financial period must not exceed 30% of the measured entity’s total annual revenue for that period.

Supplier Development in the Construction Codes is a priority element, meaning that 40% of the points must be achieved to avoid a one-level downgrade.

Pre-Requisites for Choosing a Beneficiary

When selecting a beneficiary, a Construction Company must adhere to several pre-requisites:

• The measured entity may not hold more than 20% equity in the beneficiary company.
• The qualifying beneficiary must employ a minimum of three permanent employees.
• The qualifying beneficiary must possess a valid tax clearance certificate.
• The qualifying beneficiary must have a sworn affidavit or B-BBEE certificate that was valid at the time of entering into the agreement.

Evidence for a Qualifying Supplier Development Program

To qualify as a Supplier Development Program, the following evidence must be provided:

• A written agreement signed by both parties (Supplier Development Agreement).
• A needs analysis signed by both parties.
• A documented Supplier Development Plan, signed by both parties, which must include:some text
  • Clear Objectives: Development of at least three needs identified in the needs analysis, from at least two targeted areas for development. These could include skills transfer, establishment of administrative systems, tendering assistance, legal compliance, loan assistance, and more.
  • Priority Interventions: Address the objectives identified above.
  • Qualifying Supplier Development Contributions: Specify the value of contributions allocated.

Role of the ESD Champion

It’s important to appoint an ESD Champion at the Senior Management level or higher within the measured entity. The ESD Champion must be suitably qualified and experienced to monitor progress and compile a portfolio of evidence for verification.

Qualifying Initiatives for Supplier Development Points

Various interventions can help your company earn supplier development points, including:

• Grant contributions, direct costs incurred, discounts, overheads, standard or interest-free loans, professional time spent, or services rendered at a discount or no cost.
• Shorter payment methods, such as paying invoices within 15 days of issue, can also contribute, although they will only account for 75% of the total Supplier Development points.

At Elevate Advisory Partners, we specialize in ensuring B-BBEE compliance, particularly in navigating the complex Construction Sector Codes. If you need assistance aligning your compliance needs, feel free to contact us

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