The government aims to have its R100bn transformation fund operational by the end of the year, including the establishment of an independent board to oversee it, according to trade, industry and competition minister Parks Tau.
The fund is intended to drive broad-based economic transformation and support inclusive growth, Tau said, adding that the creation of a transparent governance structure is a critical step towards achieving the initiative’s objectives.
In addition to funding empowerment initiatives, the fund will allow companies to meet BEE requirements by contributing to the equity-equivalent investment programme, rather than surrendering a 25% ownership stake in their local operations.
“The creation of the board, its oversight mechanism, will be established, as soon as we have consolidated the public comments we will be able to take it to cabinet for approval,” Tau said on the sidelines of an engagement with organised business regarding the fund on Monday.
Though the establishment of the fund has received cynical reviews from organised business, considering that firms already have their own company enterprise & supplier development (ESD) schemes that comply with BEE requirements, Tau said a number of entities, including international companies, had indicated interest in participation in the fund.
The fund, which will be governed by a public-private partnership, aims to support black-owned enterprises through debt financing, grants and equity instruments. Sectors targeted include renewable energy, mining services, agro-processing, information & communication technology, infrastructure, manufacturing and services.
The fund aims to invest R20bn a year over five years through a mix of grants, loans and equity backed by technical support and programmes to help businesses grow and access markets
The department of trade, industry and competition has defended the need for the fund considering the slow pace of transformation within these key sectors.
Organised business, including Business Leadership SA (BLSA), has criticised the fund, saying it would replicate the functions of existing entities such as Khula Enterprise Finance, the Industrial Development Corporation and the National Empowerment Fund.
Speaking at the same event on Monday, BLSA CEO Busi Mavuso said the proposed fund was not a “silver bullet” to rectify “organisational cultures that are resistant to transformation”.
There still remains uncertainty surrounding the viability of the fund, considering that other public sector efforts regarding transformation have faced constraints.
Mavuso said that “R100bn looks like a very attractive number but what are we hoping to achieve and what are we solving for ... if we are not careful this might be another classical example of institutional inflation where institutions are created [instead of] reforming or improving the ones that are currently existing”.
Deputy president Paul Mashatile said the fund would also be at the centre of the work at the presidency.
“We will work with the minister of trade and industry as well as the key economic cluster minister to ensure that we meet the set targets, especially in the procurement of goods and services,” Mashatile said.
“The focus is to ensure speed of execution and equally implement the Preferential Procurement Policy Framework Act.”
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