TALKING

By targeting black-owned businesses , the initiative seeks to address the legacy of economic exclusion and promote more broad-based participation in the country ’ s economy . A well-managed fund could drive economic growth and transformation , but critics highlight risks of inefficiency , corruption , and unintended economic consequences .

According to Minister of Department of Trade , Industry , and Competition , Parks Tau , the fund will be a publicprivate partnership managed through a National Empowerment Fund . Funding will be raised through the Competition Commission ’ s public interest participation investment commitments and in line with the B-BBEE Codes of Good Practice , specifically the Enterprise and Supplier Development , ESD and Ownership pillars . of scale , enhancing competitiveness .

A diversified portfolio of investments spreads risk , increasing the likelihood of overall success . And by focusing on specific sectors or regions , the fund can address disparities in economic development and stimulate industrialisation .

B-BBEE has been a cornerstone of South Africa ’ s economic policy for decades , however the Minister believes that B-BBEE legislation has not achieved its intended outcomes of fostering an inclusive economy .

Shaun Smit , Director , Transcend Capital

The fund will offer equity funding , debt and grants to accommodate different needs of the intended target beneficiaries .

The ESD provisions of the B-BBEE Codes set out a contribution target of 3 % of annual Net Profit After Tax for the development of black suppliers . Under the Ownership pillar , multinational corporations that cannot address B-BBEE ownership through shareholding or sale of assets may instead contribute up to 25 % of the value of the entity for enterprise development in terms of the Equity Equivalent Investment Programme , EEIP .

The minister stated that funding for the Transformation Fund will come from these contributions . However , in his address to the National Assembly he stated that entities are obliged to make these contributions , whereas in terms of the B-BBEE Codes , entities may partially contribute for lower recognition , or may choose to not contribute at all , at risk of being B-BBEE non-compliant .

One of the most compelling arguments in favour of the Transformation Fund is its ability to aggregate and deploy resources efficiently . By pooling substantial capital , the fund could provide significant support to black-owned businesses and SMMEs , which often face barriers to accessing traditional financing .

Aggregated funds allow for scalability , risk mitigation , and targeted interventions . Essentially , the argument is that a fund approach can achieve better outcomes than a mass of individual company initiatives , some of which may be half-hearted tick-box exercises . Largescale funding can help businesses achieve economies

South Africa ’ s economy remains heavily skewed , with wealth and opportunity concentrated among a relative minority – black and white . The fund could serve as a powerful tool to redress this imbalance by prioritising SMMEs and community-level enterprises . This would create opportunities for a wider segment of the population , stimulate job creation and domestic production and ultimately foster social cohesion and political stability .

The DA does not support the fund in its current form , and sees a better shot at economic growth through providing resources purely based on merit and the prospective beneficiary business ’ s viability and growth potential . While this technically does not align with a pure B-BBEE contribution concept , it is hard to argue that this approach would not be best to grow the economy .

Perhaps there is an opportunity for fund rules to ensure that deployment of grants enables partial support of beneficiaries that are not black for B-BBEE purposes , while still strongly supporting black-owned businesses .

Even if the Transformation Fund contributions are housed mostly under B-BBEE legislation and will be for the exclusive benefit of black-owned businesses , allocation of funds must be merit-based without any form of favouritism .

South Africa does not have a great track record when it comes to government-managed funds , and although there have been some successes , many initiatives have been marred by inefficiency , corruption , and failure to deliver on promises .

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