The Centre for Development and Enterprise (CDE) has issued a critical assessment of the South African government’s proposed R100 billion Transformation Fund, arguing that it could inadvertently undermine the objectives of Broad-Based Black Economic Empowerment (B-BBEE)
By Linda Ensor – Business Live
Trade, Industry and Competition Minister Parks Tau introduced the fund with the intention of raising R20 billion annually over five years to invest in black-owned enterprises. The strategy involves encouraging private sector companies to voluntarily allocate their Enterprise and Supplier Development (ESD) commitments, as outlined in the B-BBEE codes, into this centralized fund.
However, the CDE contends that the fund’s design is fundamentally flawed. Executive Director Ann Bernstein highlighted that the proposal is based on the assumption that access to finance is the primary barrier for black entrepreneurs. She pointed out that this overlooks more pressing challenges such as limited market access, inadequate infrastructure, low demand for products and services, and insufficient managerial capacity.
Bernstein also expressed concerns about the feasibility of a centralized, state-managed fund effectively delivering a wide array of services—including grants, loans, technical support, training, and market access—across diverse industries and regions. She emphasized that no single organization could efficiently manage such a complex and high-risk operation.
The CDE further warned that redirecting ESD spending to the Transformation Fund could disrupt existing supply chain relationships that currently support black-owned businesses, potentially causing more harm than good. Additionally, the think tank questioned the likelihood of the private sector voluntarily contributing to the fund and expressed skepticism about the government’s ability to raise the targeted R100 billion within the proposed timeframe.
In summary, the CDE argues that while the goal of promoting economic inclusion is commendable, the current structure of the Transformation Fund may not only fail to achieve its objectives but could also negatively impact the very businesses it aims to support.
