New BEE tax to pay black-owned businesses R55 million every day for 5 years 

The new Transformation Fund is effectively another tax the private sector will have to pay for the privilege of operating their businesses in South Africa. 

Under the new fund, money that would have been allocated by companies to supplier and enterprise development will instead flow to the state. 

The government will then manage the fund and allocate capital towards businesses that meet its criteria and drive the transformation of the economy. 

The Institute of Race Relations’ head of policy research, Anthea Jeffery, explained that this is another example of the state trying to centralise power in South Africa. 

Jeffery told the Free Market Foundation that instead of the state leaving private companies to allocate capital as they wish, it wants to exercise authority over what is done with the money. 

The Transformation Fund was first announced by Minister of Trade, Industry, and Competition Parks Tau in January 2025. 

It is designed to pool and redirect funding from big corporates and businesses to small, black-owned enterprises and entrepreneurs. 

This aims to level the playing field in the economy by giving black-owned businesses a leg up through funding from the government. 

President Ramaphosa said the government will use the fund and all policy levers to deconcentrate ownership in the economy. 

“There is both a constitutional and economic imperative to correct the skewed patterns of ownership, control, and participation in the economy,” Ramaphosa said. 

“The fund aims to improve access to funding for majority black-owned and controlled enterprises, and support them to participate in value chains across key sectors of the economy.” 

Tau has explained how the fund will work and how his department plans to fund it amid widespread criticism from both defenders and critics of Black Economic Empowerment (BEE). 

The fund will be an independent entity under the Department of Trade, Industry, and Competition. It will be run through partnerships with public- and private-sector stakeholders. 

Partnering with financial institutions, the fund will have a digital portal for real-time investment monitoring to ensure the funds are not misused. 

Tau also claimed the system will monitor job creation and impact metrics to ensure it drives the outcomes the government desires. 

R100 billion power grab

A major question surrounding the fund is how it will be capitalised, with Tau saying it will allocate R100 billion to black businesses over the first five years of operation. 

This amounts to R20 billion a year, or R55 million per day. This is an extraordinary amount of money to be allocated. 

For comparison, the established Industrial and Development Corporation disbursed R16.3 billion in its previous financial year. Only R2.6 billion of this went to small businesses in that period. 

Jeffery explained that the draft regulations for the fund indicate that it will be capitalised through existing supplier and enterprise development funds. 

Instead of private companies allocating this money themselves to earn BEE points, they will be able to pay into the fund for an equivalent amount of points or even more. 

“This now has a particular bearing on the private sector and how it copes with BEE. Under the existing codes, companies put money into supplier and enterprise development,” Jeffery said. 

“They are, in effect, helping to grow small businesses and incubate them. Some of them are in the supply chains of big corporates and others are in the broader economy.” 

“What the government wants to do is impose a state-controlled fund into which money, which business currently has the choice of what to do with, will go to the government.” 

The draft regulations show that businesses will be encouraged to contribute to the fund rather than to their own supplier and enterprise development. 

Webber Wentzel’s experts explained that businesses could even score more points by contributing to the fund than by making individual contributions to black-controlled companies. 

The proposal is to increase the total points businesses can score in the Enterprise and Supplier Development element from 46 to 53, including bonus points, if they contribute to the fund.

“The money, according to the state, should rather go into the Transformation Fund and the government will decide on its deployment,” Jeffery said. 

“At the same time, businesses are coming under pressure to buy from 51% black-owned firms. There are not that many businesses that fit this requirement.” 

Now, corporates will be encouraged to do business with 100% black-owned firms, of which there are even fewer.

The government will also be hard-pressed to find enough of these companies to allocate the R100 billion Transformation Fund to.