The Covid-19 pandemic has driven a reduction in Enterprise Supplier Development (ESD) spending among big companies.

This is one of the findings from Edge Growth’s annual survey into the state of ESD and SME development.

A massive 62,8% of respondents who participated in the survey reported having their budgets affected by the pandemic.

Companies with ESD budgets of less than R2-million experienced a slight increase in ESD spend from 35% in 2019 to 41,4% in 2021. However, those with an ESD budget of over R25-million showed a noticeable decrease from 33% in 2019 to 19% this year.

“The challenge that exists here is striking a balance between reduced budgets and a heightened need for impact in a Covid-19 world, with a forward looking ESD lens,” says Stuart Townshend, director at Edge Growth.

Meanwhile, 42,2% of those affected by Covid-19 reported having adapted their ESD approach, including the investment in and adoption of digitisation and tech applications for more efficient delivery.

More partnership and collaborations and an increased focus on beneficiary economic survival and supporting their short-term cash flow needs were also identified as innovative and essential ways to adapt.

On a positive note, 2021 saw a noticeable increase in senior leadership involvement in driving transformational goals and overall ESD improvements.

According to Nabeela Vally, business development manager at Edge Growth, over 75% of respondents indicated that they would still contribute to ESD initiatives, even if it was voluntary.

“This shows a true belief in the ability of ESD to drive economic growth and achieve real transformation, with the level of awareness and maturity of ESD as a practice increasing positively over the last three years,” she says.

With 77,5% of respondents reporting that they are actively measuring impact on their programmes, impact measurement remains an important development area. In fact, nearly half of all respondents were unable to give an exact indication of the number of jobs created or revenue growth for their SMEs through their ESD initiatives.

When it comes to the use of ESD service providers over the last three years, 83,7% believe that these service providers achieve better impact.

In tracking trends and themes over this past three-year period, access to market remains an ongoing challenge, with more collaboration needed amongst end users and procurement.

Surviving the pandemic economically and a focus on cash flow support were two other key changes to focus areas and ESD approach noted during this research.

In summarising these research results, Townshend concludes that there is a need for more impact from ESD and SME development initiatives, specifically within the current socio-economic context.

“ESD as an industry is maturing and innovating in many ways, but in some foundational areas it is still infantile. Some of the core focus areas going forward need to include linking ESD strategy to business strategy and commercial return on investment, and measuring and communicating results,” Townshend says.

Other essential pillars for improving ESD included SME selection on the back of identified areas of opportunity, including ESD objectives in scorecards and the consideration of longer-term programmes with smaller numbers of SMEs.