Philippa Larkin | March 19, 2025
The much-anticipated and controversial draft transformation fund concept document to boost black-owned businesses was published on Wednesday by Minister of Trade, Industry and Competition Parkstau.
It has been published for public comments from March 20th to May 7th. The proposed fund was first announced in January by the Ministry of Trade, Industry, Competition and Tau, but President Cyril Ramaphosa officially made the presentation in his national speech on February 6th.
The proposal comes at a time when South Africa's policy of catalyzing bees-mediated economic transformation is under the global spotlight after the US Trump administration is in trouble.
Tau aims to catalyze economic change by consolidating resources to support black-owned businesses, focusing on small, medium and micro-companies and cooperatives.
The initiative, rooted in the broad Black Economic Empowerment (BBBEE) Act, aims to mobilize funds primarily through corporate and supplier development (ESD) contributions. However, the TAU has made it clear that the requirements for the fund are no more additional requirements than the entities than those currently present in the BBBEE policy.
“The B-BBEE policy through Good Practice's code requires that we have to contribute through businesses and supplier development (ESD) in the development of 3% of post-tax net profits, black suppliers, black industrialists and SMMEs,” he said. The fund is a joint effort between the government and the private sector.
The fund's rationale is explained in the draft document, pointing to the need for a “more influential approach” to economic inclusion. A 2022 survey by the B-BBEE Committee revealed only 61% of cases in compliance with the 2021 ESD targets. This is a continuing trend over the past five years (2017: 44%; 2018: 60%; 2019: 51%; 2020: 61%).
“The issue at hand with regard to ESD and its use transcends the legislative compliance mandate by all economic actors: unlocking its effectiveness in promoting economic inclusion and participation. As the issue arises, it is essential to acknowledge that the funds raised through ESD's contributions are assumed to be the presence of the group that exists as long as it is assumed to be within the scope of the BBEE existence. Funds shortages,” he said.
Tau said, “We are keen to transform the economy led by the vision 2030 of the National Development Plan (NDP) to eliminate poverty and reduce inequality. Our constitutional orders place a collective burden on us all to defend equality and relief.”
“This provides an opportunity to work with the private sector to increase effective economic participation of black-owned and managed businesses,” he said.
With annual capitalization of R20 billion over five years expected, the Change Fund aims to close the funding gap that has long hindered Black entrepreneurs. A key driver of job creation, the SMME sector in South Africa remains immature and underfunded, an issue that the fund needs to tackle head on.
Beyond financial support, it provides technical assistance and access to markets targeting key sectors such as manufacturing, agriculture and tourism. Tau said special attention will be paid to businesses owned by women, young people and people with disabilities, especially in rural and town areas where economic exclusion is most severe.
Part of the fund's distribution is only for entities operating within the definition of “black industrialists” in accordance with the definition of black industrialist policies such as agriculture and agricultural processing. Mining and mineral benefits; manufacturing and services opportunities, and infrastructure opportunities.
The fund's objectives include promoting meaningful participation by black people in the economy, improving access to funds, and enabling black-owned companies to integrate into the value chain. Based on existing B-BBEE policies, there is no additional burden on businesses that exceed current ESD requirements, but we aim for a significant impact through adjustments.
The governance structure is designed to ensure transparency and accountability. Special Purpose Vehicles (SPVs) administer funds that are overseen by the board and oversight committee, including representatives from the government and private sector.
“We will implement a governance structure that ensures accountability, transparency, and efficient management of the fund,” Tau said. The framework aims to promote trust among stakeholders as SPVs operate as tax-free entities to maximize resource deployment.
The fund's R100 billion target will be achieved through a mix of government seed capital and private sector contributions, including ESD funds and equity equivalent investment programs for multinational corporations. We deploy a variety of equipment, including subsidies, debt, and capital, to support companies of various stages, from start-ups to suffering entities. The town and rural economies are allocated in part, and they have undeveloped potential for job creation and local growth, taking advantage of opportunities such as spaza shops, informal services and urban agriculture.
Kganki Matabane, CEO of the Black Business Council, defended the proposed fund, saying that economic change will only end if the ownership and control of the economy reflects the country's demographics.
Others compete for draft documents. Earlier this week, Democratic Alliance (DA) president Matt Cuthbert labeled the proposed fund as “outrageous.”
“It is important to note that this is on top of tens of millions of rands already allocated only to black-owned companies through development finance institutions such as the National Empowerment Fund and the Industrial Development Corporation, through development finance institutions that have failed to make black South Africans meaningful.”
“What's worse, he (TAU) wants to pay 3% of his post-tax annual net profit under the auspices of B-BBEE Good Practice, and is taking advantage of the competition committee's public interest participation further to leverage the fund.
Cuthbert also pointed to the failure of the “trickle-down relief” model. The recently released World Bank report entitled “Promoting Inclusive Growth in South Africa” ​​highlighted how honeybee policies and laws can hinder South Africa's investment and economic growth.
“Disclaimer – the views and opinions expressed in this article are the views of the author and are not necessarily those of the Bee Room.”
