Business

Government wants to take money from successful businesses and give it to BEE firms

Department of Trade, Industry and Competition (DTIC) Minister Parks Tau doubled down on the controversial BEE Transformation Fund despite widespread criticism.

Tau said the fund is anchored in South Africa’s Broad-Based Black Economic Empowerment (B-BBEE) Act.

Tau said the R100 billion Transformation Fund, managed by the National Empowerment Fund, will have three funding sources.

  • The first is companies contributing 3% of annual net profit after tax for the development of black suppliers as part of enterprise and supplier development.
  • The second is multinational entities complying with the ownership element by setting aside 25% of the value of their South African operations for transformation purposes.
  • The third is intervening in mergers that raise public interest concerns to get companies to commit to transformation funds.

The beneficiaries will be majority-black-owned enterprises according to the definition in the B-BBEE Act.

The Transformation Fund aims to increase the economic participation and income-earning potential of black-owned enterprises and SMMEs by addressing access to funding.

“Established businesses must support black-owned enterprises and SMMEs for them to participate in their value chains and other markets as suppliers,” Tau said.

Business organisations and political parties criticised the Minister’s plans, saying the fund will likely become another feeding trough for connected individuals.

The DA’s Toby Chance said they reject race-based legislation and that BBBEE has proven counterproductive in closing our inequality gap.

“This fund could very easily become a bottomless pit for taxpayers’ money, with little to no oversight or meaningful outcomes,” Chance said.

“This policy clearly violates the principle of good governance. It is unthinkable that the Minister would announce it without the necessary legal processes being followed.”

Sakeliga has also opposed the plan, saying that such a fund could discourage investors, particularly multinationals and those considering mergers and acquisitions.

There are also concerns about how the fund will be managed, with the government having a poor track record of maintaining funds and keeping them safe from looting.

The Free Market Foundation also slated the fund, saying it drips with an ideological racialism that should long have been abandoned in a democratic society.

“There are concerns that further imposing of BEE policies and taxes to finance it will damage the economy further,’ it said.

DTIC Minister Parks Tau doubles down on the Transformation Fund

Minister of Trade, Industry and Competition Parks Tau

DTIC Minister Parks Tau doubled down on the R100 billion Transformation Fund, calling it a critical initiative that advances South Africa’s constitutional commitment to economic redress.

He said it aims to promote shared equality through legislative and other measures to empower black-owned enterprises and small, medium, and microenterprises (SMMEs).

“The GNU’s transformative agenda seeks to dismantle systemic barriers to economic participation,” he said.

“It ensures that historically disadvantaged communities are afforded equal opportunities to thrive in all sectors of society.”

He added that the fund aligns with the National Development Plan’s (NDP) Vision 2030, which aims to eliminate poverty and reduce inequality.

Tau shared the objectives of the Transformation Fund, which include five points.

  1. Promotes Economic Inclusion: Provides financial and non-financial support to black-owned enterprises, ensuring meaningful participation in the economy.
  • Addresses Fragmentation: Aggregates resources from existing Enterprise and Supplier Development (ESD) obligations and other sources to enhance impact and efficiency.
  • Fosters Sectoral Growth: Focuses on high-impact sectors, including agriculture, tourism, ICT, manufacturing, and businesses in township and rural areas.
  • Enhances Market Access: Offers technical assistance, pre- and post-investment support, and market access opportunities to beneficiaries.
  • Supports Industrialization: Aligns with South Africa’s industrial policy to stimulate growth in productive sectors and underdeveloped areas.

Tau dismissed arguments that the Transformation Fund is about imposing new obligations in companies.

“It is about ensuring that existing commitments under the B-BBEE legislation are strategically utilised to create meaningful economic transformation,” he said.

“It embodies our constitutional mandate to achieve equality and empower historically disadvantaged communities.”

“The Transformation Fund is not merely a funding mechanism. It is a catalyst for change,” Tau said.

“Through collaboration with the private sector, civil society, and other stakeholders, we will create an economy that is inclusive, sustainable, and reflective of South Africa’s diversity.”

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