Details about new R100 billion BEE fund in South Africa

Minister of Trade, Industry and Competition, Parks Tau, said the new Transformation Fund will be an independent entity with real-time investment monitoring.

Tau provided this information in response to a question from National Assembly member Toby Chance.

Chance has been a vocal critic of the new R100 billion Transformation Fund, better known as a new BEE fund.

He warned that the fund could easily become a bottomless pit for taxpayers’ money, with little to no oversight and few meaningful outcomes.

He added that broad-based black economic empowerment has proven counterproductive in closing South Africa’s inequality gap.

“The majority of funding is missing the mark in terms of stimulating high-growth enterprises in South Africa,” he said.

“Our country has an abundance of entrepreneurs drawn from diverse communities who just need the opportunity to succeed.”

Chance said the fund will not address the root causes of South Africa’s significant economic problems.

“The Transformation Fund will perpetuate the same cycle of mismanagement that has led to poor economic growth,” he said.

“A R100 billion fund, built on this flawed framework, will likely lead to further financial waste and political cronyism rather than true economic empowerment.”

The Freedom Front Plus, which is also a member of the government of national unity, agreed with Chance’s view.

The original aim of black economic empowerment, to economically empower black South Africans, has not been achieved.

Instead, the system was exploited to enrich a small group of billionaires while the broader public has grown even poorer.

Details about the new R100 billion Transformation Fund in South Africa

MP Toby Chance asked Minister Tau what progress has been made with implementing the four pillars that will be relied upon to operationalise the fund.

These four pillars of the Transformation Fund include access to markets, finance, resources, and the telemetry platform.

He also asked what measures managers will take to ensure their performance exceeds the National Employment Fund’s 32% impairment rate and 72% collections rate.

Tau said the Transformation Fund will be an independent entity, and strategic partnerships are being established with public and private sector stakeholders.

This will enable access to finance and access to market pillars of the integrated operating model.

Furthermore, the Fund is working in partnership with financial institutions to develop a digital portal that enables real-time monitoring of investments.

The system will also monitor job creation and impact metrics, supporting data-driven decision-making and transparency.

“The Transformation Fund is structured to reduce over-reliance on credit for black MSMEs by adopting a blended finance approach,” Tau said.

The Minister said they are implementing five core measures to reduce impairments and improve repayment performance.

• Blended finance structures, using first loss and guarantee mechanisms to enhance portfolio resilience and recoverability.

• Embedded technical and operational support, ensuring investees are commercially viable and scalable.

• Real-time monitoring via a telemetry platform, enabling early risk detection and proactive intervention.

• Performance-based governance, linking fund manager incentives to portfolio quality, collections, and impact and not just disbursements.

• Targeted sector focus and strengthened underwriting, leveraging cashflow-based lending and proven sector performance.

“Collectively, these measures aim to lower impairments and improve repayment performance,” Tau said.

“For small businesses, grants will be standardised alongside credit to limit excessive gearing and enhance resilience to interest rate and inflation shocks,” he said.

“For larger, strategic industrial projects, early-stage equity will be used to de-risk investments, with sustainable gearing applied thereafter.”