Enhanced livelihoods

Enterprise and supplier development (ESD)

Our ESD programme aims to foster black economic empowerment by transforming our supply and value chains in alignment with the objectives of the B-BBEE Act. A preferential procurement policy spearheads our approach, prioritising contracts with black-owned, especially black women-owned enterprises. Through our ESD programme, we support these businesses to meet the necessary standards of scale, integrity, and quality required for inclusion in our value chain. In collaboration with industry, government, and non-profit partners, we provide these suppliers and enterprises with capital, education, mentorship, and market access. Our ESD strategy has five key focus areas, and aligns with our 2030 targets to support black-owned enterprises, create jobs, and build a significant ESD fund. The strategy was updated for 2023 and will steer our initiatives until 2028.

Management

Our primary method for offering liquidity and business development investment is through the Dipuno ESD Fund, launched in 2019. Our core focus is on supporting black and black women-owned agricultural enterprises. We engage these enterprises through our farmer development initiatives, which help small farmers achieve scale through incubation, financing, business development, and technical support. In 2022, we extended our support to black and black women-owned distributors, a previously untargeted enterprise category that aligns well with Tiger Brands' commercial plan.

Over the last two years, the ESD programme has faced local challenges, including global supply chain disruptions, extreme weather, environmental change, infrastructure failures, and a generally challenging economic landscape affecting small farmers particularly severely ( see – ethical supply chain). In 2023, participating farmers confronted increased operating costs, frequent power outages, climatic fluctuations, pests, unseasonal rains, and drought, all affecting their ability to farm successfully and produce quality crops. Delayed government grants for certain agricultural aggregators compounded these issues, limiting their capacity to respond to unexpected events.

These challenges have, in turn, affected the ESD programme and our business. Farmers' difficulties have resulted in the delayed delivery of quality produce, and many have defaulted on loans received through the Dipuno Fund. In certain instances, we have had to replace locally sourced agricultural commodities with imported commodities or source replacements from commercial suppliers to meet our production requirements. In our Grains division, we have modified our contracts with farmers from fixed purchase agreements to letters of intent to purchase, allowing for weather-affected harvest flexibility and removing the legal obligations for small-scale farmers to deliver per signed binding contracts.

In our continued efforts to support supplier development, we have actively engaged with farmers to understand their challenges and identify potential solutions. This includes exploring alternative energy sources, investigating additional funding avenues to reduce reliance on loan funding, and facilitating partnerships with other companies. Our experiences have underscored the importance of increased government collaboration, particularly concerning the timing of grant disbursements aligned with planting seasons. We also recognise the need to enhance the technical assistance we offer to agricultural aggregators, who often lack the expertise needed to guide their member farmers effectively. Looking forward, we aim to diversify our financing schemes and broaden our partnership network to streamline and enhance the multi-faceted support available to farmers, involving better co-ordination across multiple investors and co-investors to provide the beneficiaries with blended funding options.

Performance

As a result of the challenges faced, and to protect the long-term sustainability and viability of the Dipuno ESD Fund, the board of Dipuno decided to pause the fund in 2023 and restrict the intake of new farmers. This period was utilised to better understand how to overcome these challenges and to determine the best way to support the farmers for long-term success. A significant concern is that farmers cannot repay their loans if they are not farming, making it imperative to explore blended financing solutions to reduce the farmers' sole dependence on loan funding. This requires engagement and partnerships with government and other development agencies capable of providing timely grant funding, patient capital from other corporates to spread the risk, and partnerships with technical experts to offer the necessary support to these emerging small-scale farmers.