Trade, industry & competition minister Parks Tau pitched his planned R100bn Transformation Fund this week to a group of journalists, whose pointed questions made it clear they were sceptical at best. He seemed keen to soothe the concerns of the private sector, with which he hopes to partner on the fund.
His answers sought to reassure that it isn’t some sort of land grab, designed to pull black empowerment money the private sector is already spending into the hands of the public sector. But they left more questions than before about what problem the fund is meant to solve, and how this much money will be raised — and safeguarded.
First the money. The plan is to capitalise the fund with R20bn a year over five years. That’s not unrealistic, say department officials, given that annual returns by listed companies and state-owned entities to the Broad-based BEE Commission show they spent R116bn on enterprise & supplier development (ESD) over the past four years to comply with their obligations under the BBBEE codes, plus R186bn on skills development.
However, Tau emphasised he would not impose any additional BBBEE obligations on companies, and that he won’t intervene or interfere in “well functioning” company ESD schemes that comply with the codes (though it is unclear who decides this). He also insisted that the competition authorities are “sacrosanct” — there are no plans for competition fines to be rerouted to the fund. Nor does Tau plan to force companies seeking merger approvals to address public interest requirements by contributing to the fund (though it is suggested they might want to).
He thus doesn’t necessarily plan to raid the funds companies are spending in their own right to comply with their BBBEE or competition obligations. That should help to allay concern that the investments companies make in their own supply chains to support disadvantaged entrepreneurs and communities will vanish into one giant state-run centralised fund that does nothing for their businesses or their sustainability. But it doesn’t help solve the mystery of Tau’s R20bn a year.
Then there is the problem statement. The government already has many funds and programmes that aim to support black entrepreneurs, black industrialists, small and women-owned businesses, emerging farmers and spaza shops, to which billions are allocated annually. That is not counting private equity and venture capital investors — though the department’s Susan Mangole seemed to dismiss SA’s entire R12bn venture capital industry this week, saying there was no facility in SA to support start-ups.
Tau’s argument is that BBBEE has not delivered the transformation outcomes the legislation and the constitution hoped for in terms of black ownership, economic growth, job creation and poverty reduction. His solution is to aggregate all that BBBEE investment into a single public-private fund, which he and his team believe would do a better, more targeted job of investing in and supporting historically disadvantaged entrepreneurs. Many would argue with that, especially given the government’s patchy record in this area, not to mention the risk of corruption and waste — a risk Tau insists he is well aware of and will mitigate with a sound governance structure.
In theory, if the government used this to rationalise its own funds and programmes and make them more effective, there could be some sense to it. But that doesn’t seem to be part of the plan. Instead, the National Empowerment Fund will be put in charge, boosting its budget from R1.5bn to R35bn thanks to “strategic partners such as venture capitalists”, budget documents suggest.
It's not that there isn’t a problem; just that grandiose plans for a new fund are unlikely to be the solution. The tragedy is that SA’s economy has been growing so horrendously slowly over the past 15 years that many can no longer picture an environment in which entrepreneurship can thrive and deliver jobs, incomes and social mobility for a meaningful number of people. Tau might have a better chance of success if he focuses his energies on doing what’s needed to create that environment.
• Joffe is editor-at-large.
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