The Minister of Trade, Industry and Competition, Parks Tau (pictured), clarified key features of the government’s proposed R100-billion Transformation Fund at a media briefing in Johannesburg on 30 April. Against a backdrop of both cautious endorsement and pointed criticism from business stakeholders, Tau discussed the Fund’s scope, governance, and impact on existing broad-based black economic empowerment (B-BBEE) requirements.
The Department of Trade, Industry and Competition (DTIC) first published a draft concept document in March and initially allowed a 30-day comment period. In response to stakeholder requests for more time, Tau has extended the deadline to 28 May.
Once finalised, the legislation underpinning the Transformation Fund will be tabled in Parliament for debate.
Tau said the Transformation Fund would be voluntary and was intended to amplify – rather than supplant – enterprise and supplier development (ESD) vehicles already operating under the B-BBEE Codes of Good Practice.
“Let me stress that the Transformation Fund does not replace any well-functioning vehicles already in place. Instead, it seeks to amplify what is already required under existing B-BBEE legislation,” he said.
In practical terms, companies subject to B-BBEE reporting will be able to channel their existing ESD contributions – currently set at a minimum of 3% of net profit after tax – into the Fund, alongside any equity-equivalent payments multinationals make to secure compliance. No new codes will be amended, and no extra percentage levies imposed. Rather, Tau said, the Fund offers an alternate “public-private partnership” mechanism for pooling resources more effectively.
To ensure oversight and guardrails against misuse, the Fund will be administered by a special purpose vehicle (SPV) with its own executive team and board of directors drawn from both government and business. This SPV will:
- report regularly to the B-BBEE Commission and to Parliament;
- maintain transparent, merit-based investment criteria;
- draw on technical systems and processes from leading financial institutions; and
- be anchored, initially, by the National Empowerment Fund.
Simphiwe Hamilton, the director-general of the DTIC, acknowledged concerns about potential malfeasance, but said that stringent due-diligence procedures and “objective decision-making frameworks” would be built in from day one.
“It is a genuine concern, but we believe that the structuring that will be done in this regard will mitigate against any possibility of malfeasance, and it’s good that we start with that lens right from the beginning,” Hamilton said.
Measures include due diligence on beneficiaries and leveraging private sector systems to minimise subjectivity and risk.
Based on historical ESD spending by JSE-listed groups, state-owned enterprises and major private firms, the DTIC estimates that R20 billion a year can be mobilised over the next five years. These amounts would come from:
- re-direction of existing ESD and equity-equivalent contributions;
- seed funding from government; and
- donor grants and impact-investment partnerships.
No company will be compelled to sell equity in its core business; instead, debt financing, grants and minority‐equity instruments will be deployed to support qualifying black-owned enterprises. Over the first five years, the Fund is expected to disburse up to R100bn across sectors deemed critical for inclusive growth.
The Fund’s investments will align with South Africa’s industrial priorities. The target areas include renewable energy, mining services, agri-processing, information and communication technology, infrastructure development, and manufacturing and business services.
In addition, deputy director-general Susan Mangole said a focus will be placed on township and rural enterprises, as well as on firms owned by women and youth. Technical assistance, market-access programmes, and capacity-building support will accompany the financial instruments to enhance the long-term sustainability of beneficiary businesses.
Tau said no amendments to the existing B-BBEE Codes of Good Practice are contemplated, and that proceeds from Competition Commission settlements will continue to flow to the National Revenue Fund, not into the Transformation Fund, preserving the “sacrosanct” independence of competition processes.
Tau struck a collaborative tone, invoking section 9(2) of the Constitution to justify the state’s mandate to advance those previously disadvantaged by unfair discrimination. He referenced the 2023 BBBEE Commission report, which found that much current ESD spending lacked sufficient “impact” and was often directed towards non-core, peripheral activities.
“We’re not going to come wielding a big stick,” Tau said. “Rather, we are saying: ‘Let’s have a process of collaboration that says we have all not done well so far, let us work together to improve.’”
