The trade, industry & competition department will scrape together R100bn from the private sector to finance a fund set up to assist black-owned businesses, triggering a sceptical reaction from the DA.
Funds will be derived from the implementation of the broad-based BEE (BBBEE) codes of good practice and the Competition Commission’s public interest requirements, according to trade, industry & competition minister Parks Tau.
The Transformation Fund will be managed by the private and public sector through a special purpose vehicle of the National Empowerment Fund and will benefit enterprises owned by majority black people, according to the definition in the Broad-based Black Economic Empowerment Act.
These will also include designated groups: women, youth, people living with disabilities and people based in townships and rural areas. It will offer equity funding, debt and grants.
Tau said in reply to a parliamentary question by DA trade spokesperson Toby Chance that the funds would be raised in line with the BBBEE codes of good practice and through the Competition Commission’s public interest participation.
“Entities are obliged under statement 400 of the BBBEE codes of good practice to contribute an equivalent of 3% of annual net profit after tax for the development of black suppliers.
“Entities will be required to contribute to the Transformation Fund for compliance with the enterprise and supplier development element,” Tau said.
“The BBBEE codes of good practice under statement 103 make provision for multinational entities in complying with ownership element to set aside funds (25% of the value of their SA operations), which will be used for transformation purposes. Therefore, funds from the equity equivalent investment programme will form part of the Transformation Fund to ensure that they are used for greater transformation impact, and for a broader reach.”
Public interest
Tau said the Competition Act made provision for the minister to participate in the public interest in merger proceedings before the Competition Commission, Competition Tribunal or the Competition Appeal Court. The public interest could be catered for through investment commitments to the Transformation Fund, ownership by historically disadvantaged persons, employment protection and sectoral inclusiveness.
“The Transformation Fund aims to address access to funding for black-owned enterprises and SMMEs to increase their economic participation and income-earning potential. The fund is established to address unemployment, inequality and poverty in line with the National Development Plan vision 2030.
“Additionally, it will address financial barriers to entry of black people in the mainstream of the economy, providing an enabling environment for access to funding for SMMEs and black owned businesses.”
The fund has ignited debate in the government of national unity. Supporters see it as a beacon of hope to tackle high unemployment and endemic poverty, while critics warn it could be financial black hole and state-sanctioned piggy bank raid on private sector funds meant for support of small businesses.
Chance said at face value the fund “is simply a means for the state to expropriate private sector funds which they are already spending on supporting SMMEs, implying that the National Empowerment Fund is more capable than individual companies to do this job.
With enterprise and supplier development funding alone amounting to up to R25bn per annum, the scale of this expropriation could be enormous and is yet another example of state-driven development which, in the hands of an incapable state, bodes ill for the economy and job creation”.
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