The enterprise and supplier development (ESD) contributions by the private sector to the Transformation Fund will be ring-fenced, aggregated and managed centrally, says trade, industry & competition minister Parks Tau.
Kaamil Alli, the minister’s spokesperson, made it clear that this related to the governance of the fund itself and ESD contributions by the private sector under the broad-based BEE (BBBEE) codes of good practice would continue to be voluntary.
In his budget vote speech during a mini plenary of the National Assembly on Friday, Tau said the Transformation Fund would be “ring-fencing, aggregating and centrally managing these [ESD] contributions” to ensure “they are deployed with scale, discipline and impact”.
“For far too long ESD efforts have fallen short of their potential. Despite regulations requiring companies to allocate 3% of their net profit after tax towards ESD, only 61% of these funds reach their intended beneficiaries. This leaves an estimated R26bn untapped each year. The Transformation Fund changes this,” Tau said.
The fund is strongly opposed by organised business, which argues that companies contribute to enterprise and supplier development through their BBBEE obligations. They had knowledge of their own specific supply chains and were more competent to make these investments, it said.
Tau said his department and its entities were mobilising commitments through existing structures to achieve aggregation.
“These funds include the equity equivalent investment programme pipeline projects of R1bn and other sectoral funds (R3bn) such as mining, ICT, automotive and the financial sector. The response to this initiative has been overwhelmingly positive and the message is clear: SA is ready for a smarter, more accountable model of transformation.”
He agreed with the chair of the trade, industry & competition committee, Mzwandile Masina, that the management control requirements of the BBBEE scorecard needed to be tightened and said this would be addressed.
Tau gave notice of a number of initiatives under way to reduce the regulatory burden on business.
“Our landmark omnibus bill is designed to ease the cost and complexity of doing business. It introduces a high-speed approval lane for projects demonstrating significant impact. Investors who submit robust impact plans meeting stringent criteria will see their applications fast-tracked with decisions capped at 90 days.
“Our regulators are going to assist our economy in deconcentrating. Market inquiries into steel, poultry, polymers and franchising will dismantle entry barriers and restrictive practices in these sectors, promoting a more conducive environment for all players.
“The work done through these inquiries will enable historically disadvantaged people to compete in our market. This is demonstrated through the recently concluded Online Platform Intermediation Market Inquiry, which has extracted a R330m support fund for the digital innovation sector.”
The threshold for merger notifications, particularly large mergers, was being reviewed, the minister noted.
He said the Clean Trade and Investment Partnership (CTIP) with the EU, backed by an initial R90bn commitment, would open duty-free access for exports in key sectors such as dairy, aviation fuel, new energy vehicles, green hydrogen and battery components that would accelerate SA’s industrial decarbonisation.
This would assist in SA addressing the requirements of the EU’s carbon border adjustment mechanism.
The initial amount was a facilitation that Tau expected to unlock more investment value. Details of the partnership were being worked on as well as on decarbonising SA’s industrial value chains so that they became globally competitive. Bilateral engagements were under way with Japan on this as well.
The minister said a fully operational Export-Import Bank of SA by 2028 with the potential upgrading to a sovereign shareholding in the African Export-Import Bank (Afreximbank), would expand affordable financing options for exporters.
Tau acknowledged the work of his former deputy minister Andrew Whitfield, dismissed by President Cyril Ramaphosa for failing to secure his permission for overseas travel.
In his speech, DA MP Toby Chance quoted Whitfield on his achievements as deputy minister, including him saying: “I have worked hard to bridge the divide between government and business and to find a way to make it easier for businesses to do business, grow and create jobs.”
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