The launch of the proposed Transformation Fund by Parks Tau, the trade, industry & competition minister, was always going to spark controversy. But now a deadly cocktail of factors is threatening to turn the fund into a stillborn.
The timing of the announcement, through an answer to a question by the DA, was inopportune and badly handled.
Soon after the reply was published, the backlash began. Sensing trouble, Tau, not the originator of the idea, called for a public discussion and even extended the comment period.
In the past month, he has been addressing various stakeholders, with the help of deputy president Paul Mashatile, to secure broad support for an idea that appears, at best, half-baked.
Making Tau’s job even harder were events outside his control. On January 20, Donald Trump returned to the White House as America’s 47th president and, in tow, was SA-born billionaire Elon Musk who had a personal agenda to his government agenda.
Musk’s Starlink, an internet satellite business, tried and failed to secure a licence to operate in SA. The main reason was its failure to comply with the BEE laws of the country. Until a week ago, a close ally of Trump, Musk mounted a spirited attack of the country’s BEE policies calling them racist.
Advocacy groups such as Solidarity and AfriForum have been in and out of the White House lobbying Trump to pressure SA to walk back on the BEE laws. Unusually for Trump, he chose to concern himself with the domestic policies of another country.
On Thursday, the groups released “evidence” of the negative effect of BEE on SA’s economy.
The DA has criticised the fund’s concept paper as has the free-market leaning Centre for Development and Enterprise (CDE).
Tau’s department has received hundreds of submissions, which are being studied.
Though he has yet to draw up a road map for the fund’s establishment, in interviews he has signalled his aspiration to have it up and running by December. Fat chance!
Of the many troubling questions about the fund, which is to be managed by the undercapitalised National Empowerment Fund, a trade, industry & competition department agency, is the capitalisation of the stand-alone fund. According to the concept paper, the fund will be capitalised through the government’s own finances, proceeds from the private sector’s enterprise and supplier development funds, corporate social investment (CSI) and donations.
This suggests two worrying thoughts: there doesn’t seem to have been enough thought applied in arriving at how it ought to be funded; and asking for donations to seed the fund suggests that government regards transformation as a CSI or charity instead of an economic imperative.
The fund straddles mandates of at least two state departments: Tau’s department, the custodian of BEE, and Stella Ndabeni-Abrahams’ small business development. This implies, rather erroneously, that black equates small, and that the government works in a joined-up fashion. This is scarcely the case; in fact, even ministers from the same party are not immune from turf wars and rivalries.
The idea of a stand-alone fund is the scariest. The government has a poor track record of setting up new institutions on time within budget.
Also, the concept paper makes no reference to other sectoral initiatives — such as the motor and savings industries funds — and a relationship envisaged with these initiatives.
Despite the opposition, Tau still has air cover from his boss, Cyril Ramaphosa.
The opposition, and reservations raised by this newspaper, doesn’t mean that the fund should be thrown out completely.
A more sensible idea would be for Tau to show that he has listened. Unfortunately, his ANC colleagues are not known for this skill. Cases in point include the National Health Insurance.
The fund should just be a corporate governance accountability mechanism not a disburser to businesses. That would be a progressive and pragmatic step towards ultimate transformation.
Tau should do all he can to avoid litigation killing this concept.
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