Government wants to give black businesses R55 million every day for five years

The new R100 billion Transformation Fund aims to help black people to meaningfully participate in the economy. However, many fear it will become a feeding trough for corrupt politicians.

On 19 March 2025, Minister of Trade, Industry and Competition Parks Tau published the Draft Transformation Fund concept document for public comment.

The fund aims to aggregate enterprise and supplier development (ESD) funds to support the participation of black-owned enterprises in the economy.

It will provide access to financial and non-financial support for black-owned and managed enterprises, including small, medium, and micro enterprises.

Tau expects R100 billion to be aggregated over the term through a joint effort by the government in partnership with the private sector.

“We are in pursuit of transforming the economy as guided by the Vision 2030 of the National Development Plan, which is to eliminate poverty and reduce inequality,” he said.

Minister Tau argued that the constitution places a collective burden on all South Africans to advocate for equality and redress.

The objectives of the new R100 billion Transformation Fund include:

• Promote economic transformation to enable meaningful participation of black people in the economy.

• Improve access to funding for black-owned and controlled enterprises.

• Empower and support black-owned and controlled enterprises’ participation in value chains across key sectors of the economy.

• Mobilise financial resources from the private and public sectors using B-BBEE legislation.

Tau said there will be no additional requirements for entities over and above what currently exists in South Africa’s B-BBEE policy.

The B-BBEE policy, through the Codes of Good Practice, requires South African businesses to contribute through Enterprise and Supplier Development (ESD).

This contribution includes giving 3% of net profit after tax (NPAT) to the development of black suppliers, black industrialists and SMMEs.

Tau said the fund will focus on businesses owned by women, youth, and people living with disabilities, especially those based in rural and township areas.

Tau said they will establish governance structures to ensure accountability to both the government and the private sector, transparency, and efficiency in managing the fund.

“We will establish a special purpose vehicle accountable to an oversight committee and a board with the required skills and capacity,” he said.

R55 million every day for 5 years

President Cyril Ramaphosa promoted the controversial R100 billion Transformation Fund during his State of the Nation Address.

“We will set up a transformation fund worth R20 billion a year over the next five years to fund black-owned and small enterprises,” he said.

This means the government wants to give qualifying black businesses R55 million every day for five years.

If the amount is calculated over working days, the government must provide these businesses with R80 million per day.

It is tremendously complicated to administer such a large amount of money, even for highly skilled business incubators.

Many people sounded the alarm, considering the government’s track record of capital allocation, mismanagement, and corruption.

Toby Chance, DA spokesperson on trade, industry, and competition, said it could become a slush fund and is open to abuse by connected politicians.

He likened it to South Africa’s R500 billion coronavirus funding, rife with corruption, fraud, and looting.

Tau’s promises of good governance structures, accountability, transparency, and efficiency did little to calm concerns.

Despite lofty promises regarding good governance and accountability, the government has a track record of widespread corruption and looting.

For example, in April 2020, Ramaphosa promised South Africans that the R500 billion in Covid funds were safe from corruption and mismanagement.

However, a significant proportion was lost to corruption. The looting was so severe that Ramaphosa had to threaten perpetrators with “very, very severe consequences.”

However, the country’s weak law enforcement means that the president’s promises of severe consequences never materialised for most perpetrators.

The lure of a R100 billion fund, which needs to process R80 million per day, will be seen as easy pickings for connected individuals.

Chance said the fund will not address the root causes of South Africa’s economic problems and will perpetuate the same cycle of mismanagement that has led to poor economic growth.

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