R100 Billion Enterprise and Supplier Development Fund – Can It Work? Yes, It Can

One of the lies that is perpetually being echoed is that “Broad-Based Black Economic Empowerment (B-BBEE) does not work”. I disagree, B-BBEE does work. My argument is that people who benefit from the injustice of exclusion, and feel they lose power, are the ones who will continue to spread the lies and myths so they can continue to benefit exclusively.

Steve Biko argued that true freedom could only be achieved once Black People realised that “the most potent weapon in the hands of the oppressor is the mind of the oppressed”. By challenging the premises and forces that created identities of inferiority and helplessness, Black People, and previously marginalised people, can free themselves from the shackles of poverty and lack of access to the mainstream economy. For me, this suggests there is no saviour for the poor, but they themselves, through how they perceive themselves as equal participants of the economy and not merely consumers.

Much as the argument of social engineering of apartheid carries some weight, there is enough evidence that, with some support and proper policy framework, more Black People can and have managed to become active players in the mainstream economy. We need a significant number to be actively involved, but the lens-mind of the oppressed needs to be decisively dealt with in order to move the needle.

Biko’s quote reminds us that the most effective way to fight injustice is to help people see through the myths and lies that are used to keep them in their place, they can understand the real causes of their oppression and the power they possess to overcome it.

The recent announcement by Parks Tau, Minister of Trade, Industry and Competition (dtic) on the formation of a R100bn Transformation Fund aimed at providing support towards black-owned Small, Medium and Micro Enterprises (SMMEs) raised many objections from numerous quarters; some call it ill-advised, vague, poorly conceived, unrealistic, a risk that may encourage corruption and mismanagement, while the Institute for Race Relations referred to it as unconstitutional and may cause enormous harm to the economy. Are these the myths and lies that seek to keep Black People in their place?

Minister Tau, in announcing this policy direction, indicated that the Fund also reflected the statement of intent of the Government of National Unity (GNU), which emphasised fostering a redress and inclusive economic growth. True as it may be, the devil is always in the detail, and we eagerly wait for that detail. The GNU’s transformative agenda seeks to dismantle systemic barriers to economic participation, ensuring that historically disadvantaged communities are afforded equal opportunities to thrive in all sectors of society. Rapid, inclusive, and sustainable growth remains at the apex of the priorities of the GNU.

“Through collaboration with the private sector, civil society, and other stakeholders, we will create an economy that is inclusive, sustainable, and reflective of South Africa’s diversity,” Tau asserted.

In his State of the Nation address, the President echoed the aims of the Transformation Fund and its role in seeking to achieve inclusive and sustainable growth. So, let us rest assured that the Transformation Fund will be in place by 2026 as targeted.

The media release from the Ministerial Spokesperson, Yamkela Fanisi, on the 24 January 2025 highlights the Objectives of the Transformation Fund, as follows:

1. Promotes Economic Inclusion: Provides financial and non-financial support to Black-Owned enterprises, ensuring meaningful participation in the economy.
2. Addresses Fragmentation: Aggregates resources from existing Enterprise and Supplier Development (ESD) obligations and other sources to enhance the Fund’s impact and efficiency.
3. Fosters Sectoral Growth: Focuses on high-impact sectors, including agriculture, tourism, ICT, manufacturing and businesses in township and rural areas.
4. Enhances Market Access: Offers technical assistance, pre-and post-investment support, and market access opportunities to beneficiaries.
5. Supports Industrialisation: Aligns with South Africa’s industrial policy to stimulate growth in productive sectors and underdeveloped areas.

These objectives, noble as they are, are almost similar to the Automotive Industry Transformation Fund (AITF), which is a success despite all the challenges, myths and lies. The AITF is a good case study that demonstrates that with the right will and best approach, that of market access, Transformation Funds can work.
If one were to wonder, where does this Transformation Fund idea come from, I will refer you to the final report of August 2022, “DETERMINING THE EFFECTIVE IMPLEMENTATION OF ENTERPRISE AND SUPPLIER DEVELOPMENT FUNDS” published by the B-BBEE Commission. The Accounting Officer of B-BBEE Commission, in his foreword states: “In this regard, the study recommends among others that ESD funds be pooled into a central fund, with a governance framework similar to the Solidarity Fund that was created to assist with responding to the Covid-19 pandemic. As part of this, a register or database of vetted Black-Owned enterprises that qualify under the ESD element could be created, to enable the funding to be better targeted and more impactful than has been the case overall.”

While political parties and civil society continue to lambast the Minister when he announced the policy intent to form the Transformation Fund, it seems at least to me, that this topic was on the agenda in 2022, long before Parks Tau was the Minister, moreover, it is congruent with the priorities of the GNU and based on a study of the ESD landscape.

The Competition Commission in awarding or endorsing mergers and acquisitions and to protect the public from monopolistic behaviour, it will normally instruct companies, as a condition, to set up funds that are aimed at creating an inclusive and diversified supply chains. These funds have not been effective, in fact, most have missed their deadlines while companies continue to benefit. Some even complain about the lack of capacity to deliver on the mandate which they have agreed to be conditional to the transaction.

The same challenge is met through the Equity Equivalent Investment Programmes where most companies, who were awarded B-BBEE Ownership points through this mechanism, struggle to meet their own set of performance targets of creating inclusive growth. We also note the existence of several ESD funds providing little value to the beneficiary while most of the value vests with the respective fund managers and intermediaries, and as a concern, the beneficiaries do not experience financial and operational independence.

With a reported R26bn available per annum to support Black-Owned SMMEs, it is amiss that the dtic reports that as a country 70% of SMMEs fail within the first 24 months. It therefore makes sense to pool these funds together to create impact. However, we must remain vigilant in ensuring that this will not be another failure story.

As an Environmental and Social Governance (ESG) and B-BBEE specialist, I fully support the ESD Transformation Fund approach to stop the leakage and avoid excuses of a lack of capacity for it to be implemented. We know that the problem lives with the will to create inclusive economic growth and address the mental slavery of the oppressed. I would further urge other stakeholders to continue to hold the powers that be accountable.

We as the BEE Chamber, will continue to provide guidance, support and the required criticism and solutions where necessary to ensure we create an environment of inclusive growth where the marginalised become active participants in the creation of value and benefit equitable in the rewards from that value creation.

In this way, we will dispel the myths and lies that seek to perpetuate exclusion of the majority from participating in the mainstream economy of the country. After all, when the Fund works well, our South African economy will grow in an inclusive manner and the demand for products and services will also increase and ultimately benefit all equitably, including those who continue to complain. This will go far in realising the true freedom that Biko was referring to. We look forward to participating in the formation of the ESD Transformation Fund. By Kebalepile Matlhako, Service Desk Transformation Specialist, The BEE Chamber

Kebalepile Matlhako
Kebalepile Matlhako is a Service Desk Transformation Specialist at the BEE Chamber. He holds an MBA and a Master of Business Administration (MBA-Majoring in Entrepreneurship) through Hult International Business School Dubai. He is an accomplished, analytical and strategic transformation specialist with over 20 years’ professional in-the-field experience. His areas of expertise lie in problem-solving, strategy and programme development, stakeholder management, diversity and inclusion, change management, BBBEE compliance management, community development, and environmental and social governance.

Transformation Fund
The R100 billion Transformation Fund in South Africa is an initiative aimed at promoting transformation, inclusivity, and growth in key industries, particularly in the automotive, manufacturing, and related sectors. The fund, driven by collaboration between government, industry stakeholders, and financial institutions, seeks to support Black-owned businesses, SMMEs (Small, Medium, and Micro Enterprises), and emerging entrepreneurs by providing access to financing, skills development, and market opportunities. It aligns with South Africa’s broader economic transformation goals, including localisation, job creation, and supply chain diversification, ensuring greater participation of historically disadvantaged groups in the economy. The fund is a long-term investment designed to drive sustainable development and industrial competitiveness.

About The BEE Chamber:
The BEE Chamber was established in 2016 by BEESA (est. 2007) as the next evolution of a B-BBEE consulting partner – not a traditional consultancy. It aims to enable businesses to promote South Africa’s diversity and equity policies, rather than leaving them reliant on isolated sets of complex information. As a group of specialised B-BBEE consultants, The BEE Chamber supports internal capacity and builds its clients’ B-BBEE practices to a level of excellence by using the tools of continuous support and engagement. It provides information, services and software to those practitioners who are responsible for managing a company’s B-BBEE Scorecard. For more information, visit www.bee.co.za

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Author: BEE Chamber from BEE Chamber on behalf of BEE Chamber.