OPINION | How will new transformation fund overcome shortcomings faced by previous BEE initiatives?

Minister of Trade, Industry and Competition Parks Tau briefing the media to outline on government's action plan to address food borne illness at the Ronnie Mamoepa Press Room in Pretoria.
Minister of Trade, Industry and Competition Parks Tau briefing the media to outline on government's action plan to address food borne illness at the Ronnie Mamoepa Press Room in Pretoria.
Image: Freddy Mavunda

Trade, industry & competition minister Parks Tau’s recent announcement of a R100bn Transformation Fund aimed at fostering Black Economic Empowerment (BEE) has reignited debates on SA’s protracted journey towards economic transformation.

While the proposal appears bold on paper, its underlying assumptions and execution risks mirror the shortcomings of previous government-led initiatives, raising questions about its potential efficacy and sustainability.

SA’s economic transformation journey is littered with well-intentioned but underperforming programmes, such as the National Empowerment Fund (NEF) and the Black Industrialist Programme, which have failed to deliver meaningful and enduring change. The NEF, for instance, was specifically established to “[promote and facilitate] black economic participation by providing financial and non-financial support to black-owned and managed businesses”, yet the persistence of barriers to black economic inclusion highlights a sobering truth: government instruments, regardless of their design, often fail to address the systemic issues underpinning economic inequality.  

The Transformation Fund’s reliance on existing tools, such as equity equivalents and enterprise and supplier development, signals a lack of innovative thinking. Instead of proposing a new fund, an urgent and honest evaluation of the NEF and other instruments should be undertaken to assess their effectiveness. Why, after nearly three decades of economic transformation policies, do black businesses remain on the periphery of SA’s mainstream economy? Without addressing this question, the Transformation Fund risks becoming another bureaucratic mechanism that fails to deliver tangible results.

Additionally, the fund’s implementation raises concerns. Minister Tau proposes enforcing BBBEE codes to compel private sector contributions, including up to 3% of net profits and up to 25% of multinational companies’ South African operations for equity equivalents. While such measures aim to inject urgency into transformation efforts, they risk alienating private sector players by imposing additional financial burdens without clear accountability or return on investment.

There is merit in involving the private sector and civil society in driving transformation, but this must be done in a manner that fosters collaboration rather than coercion. Enterprise and supplier development programs already require businesses to allocate significant resources toward economic transformation. More than R25bn is reportedly spent annually by private companies to promote black economic participation, yet these efforts are hampered by inefficiencies and a lack of measurable outcomes.

Critics argue that channelling these funds into a centralised Transformation Fund managed by the state could exacerbate corruption, mismanagement, and inefficiencies. SA’s history of state-managed funds is riddled with examples of maladministration and cronyism. Without robust oversight mechanisms, the Transformation Fund risks becoming a “bottomless pit,” benefiting only the politically connected while leaving ordinary black entrepreneurs in the cold.

Government should take deliberate steps to reduce the barriers faced by budding entrepreneurs and start-ups in acquiring, developing, and protecting their intellectual property rights. The high costs associated with registering patents and trademarks, never mind litigating, are often prohibitively expensive and disproportionately affect entrepreneurs from previously disadvantaged backgrounds who lack the necessary funding.

Subsidising registration fees or offering grants for intellectual property development could significantly stimulate economic growth. Furthermore, such measures would promote innovation, encourage the establishment of start-ups and create much-needed employment opportunities.

A glaring omission in government transformation initiatives is the failure to prioritise innovation-driven entrepreneurship. Funding intellectual property (IP) development and commercialisation could be a game-changer for black entrepreneurs. By investing in start-ups that create new technologies, products and services, the government could stimulate job creation and economic growth. However, SA’s numerous technology incubators and innovation programmes, launched in the early 2000s, have largely failed to produce significant black-owned enterprises or industrialists. This failure underscores the need for a fresh approach that prioritises innovation, skills development, and market access over mere compliance with BBBEE codes, especially equity acquisition in large companies multinationals which only benefits a few.

For the Transformation Fund to succeed, the government must address systemic issues that undermine existing economic transformation efforts. This includes a lack of focus, poor implementation, and weak accountability mechanisms. The current BBBEE framework has been criticised for benefiting a select few while leaving the majority of black South Africans marginalised. Any new initiative must be transparent, with clear criteria for fund allocation and measurable outcomes to track progress.

Economic transformation – encompassing diversity, equity, and inclusion – is currently under threat. In the US, Republican-led efforts have focused on rolling back progress in this area and dismantling commitments to advancing transformation. This regressive momentum has emboldened multinationals, including some local major law firms, to resist South African government initiatives aimed at tightening transformation in sectors such as the legal profession, which remains woefully behind in embracing meaningful change.

SA’s economic transformation agenda requires a shift in focus from compliance-driven policies to outcome-orientated strategies that prioritise innovation, accountability, and collaboration between the public and private sectors.

  • Khaas is global chief entrepreneur at the Institute of Chartered Entrepreneurs and former coordinator of the erstwhile Information Communication Technology (ICT) Sector BEE Charter Working Group

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