The R20bn gamble to rewrite SA's rules of empowerment

After much speculation about a loss of nerve in the Union Buildings, Trade and Industry Minister Parks Tau has detonated the Transformation Fund bomb - and debris is set to scatter far and wide

- By Lindsey Schutters

It has been a summer of stuttering starts at the Department of Trade, Industry and Competition (DTIC). Twice in late January, the Presidency scheduled and then abruptly cancelled the official launch of the much-trumpeted Transformation Fund.

But on 29 January, with little fanfare, Minister Parks Tau quietly pushed the button, providing the first insight into what may be the most aggressive pivot in broad-based black economic empowerment (B-BBEE) policy since the 2013 amendments. The draft amendments to the Codes of Good Practice, which are now open for public commentary for 60 days, place a singular, controversial mechanism at the heart of South Africa's economic future: a state-backed Transformation Fund.

Under the existing framework for enterprise and supplier development (ESD), companies wanting to score B-BBEE points manage their own ESD initiatives or partner with third-party intermediaries to support black-owned small businesses. It is dispersed capital allocation: imperfect and often criticised as a box-ticking exercise, but it gives the private sector autonomy over where its compliance spend goes.

The proposed amendments, specifically to statement 400, upend this. The new codes' intention is to incentivise businesses to contribute their ESD capital directly to the Transformation Fund, which aims to raise an initial R20-billion, partially by borrowing R10.8-billion from the African Export-Import Bank.

This is supposedly designed as a “catalytic vehicle” to finance black-owned and black-managed enterprises in the industrialisation and manufacturing space. Tau is basically saying that the private sector's fragmented approach to development hasn't worked fast enough, and the state now wants to take the wheel.

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