South Africa’s transformation journey stands at another crossroads. The government is reported to consider a new policy allowing nonlisted companies to achieve level 3 BEE compliance by paying 3% of their revenue into the R100bn Transformation Fund launched earlier this year.
At first glance, the idea sounds progressive; a structured, revenue-based route that promises to unlock around R40bn a year for transformation. However, beneath the simplicity lies a crucial question of whether the model will enable real change or simply absolve companies from the harder (but more meaningful) work of inclusion, mentorship and shared ownership.
Working in SME empowerment, I’ve always believed in two things: transformation is not a box-ticking exercise, and empowerment should never come with a price tag. A levy-based compliance route risks turning empowerment into a transaction rather than real transformation and if empowerment becomes something companies can buy, we risk hollowing out the very intent of BEE, which was to create shared prosperity, not paid compliance.
Revenue levy risks harming businesses
On paper, a 3% price tag sounds minuscule, and manageable, but only until you do the math. Unlike the current BEE requirement, which allocates 3% of net profit after tax to enterprise and supplier development, this proposal pegs the figure to revenue, not profit.
That means a company with a 5% profit margin would effectively sacrifice over half of its profits for compliance. For many businesses, especially those operating on thin margins, a 3% levy on gross revenue could mean the difference between breaking even and going under.
A levy-based compliance route risks turning empowerment into a transaction rather than real transformation.
So, while the simplicity of a revenue-based levy makes it easier to enforce, it’s also blunt and unsustainable, punishing productive companies rather than rewarding transformative ones.
If we’re looking for a blueprint, the Automotive Industry Transformation Fund has invested more than R600m since its 2020 launch. It supported more than 70 black-owned enterprises and 2,700 jobs, proving that an industry-led, outcomes-driven fund can work when governance, accountability and industry are aligned.
However, even with its success, the AITF still faces uphill battles. The industry is at an all-time low, with black industrialist participation at only 7%, far from the 2035 target of 25%. This shows money alone doesn’t guarantee transformation. It takes mentorship, market access, skills development and an ecosystem nurturing small suppliers. If the new Transformation Fund doesn’t embed those same principles, it risks becoming a glorified collection basket and not a growth catalyst.
Centralised funds could undermine BEE
Without robust oversight, a centralised transformation fund could benefit intermediaries more than communities, undermining existing BEE efforts and creating a two-speed system, where small players do the real work while larger ones just pay to pass.
I am all for simplifying compliance, but not at the expense of accountability. South Africa doesn’t need easier transformation. We need smarter transformation.
Companies that invest directly in people, suppliers and ownership models should be rewarded, as opposed to those that find the most convenient, often financial, shortcut. Transformation funds, if used, should be co-investment vehicles, not substitutes for real inclusion.
At Unconventional CA, we’ve seen firsthand that transformation succeeds only when people and businesses grow together, and we advocate a model where capital, capability and collaboration intersect.
Global examples
There’s no shortage of working models. In Africa and beyond, several economies are driving SME growth without race-based ownership quotas. In Kenya, the industry and entrepreneurship project Kiep 250+ has supported more than 250 high-potential SMEs through performance-based grants, and the Kenya industrial estates scheme trained over 45,000 entrepreneurs and created 23,000 new jobs.
In Latin America, initiatives such as New Ventures have taken a similar approach, supporting over 1,000 social and environmental enterprises across Mexico, Brazil and Colombia through acceleration programmes and access to capital with no ownership mandates required.
These examples show that true empowerment isn’t about transferring shares but about transferring skills, opportunities and access. When transformation is rooted in capability rather than compliance, the impact is deeper, more sustainable and better for the economy.
If government and business can align around this principle, this policy could evolve from a controversial idea into a catalyst for inclusive growth.
• Keshave is the CEO of Unconventional CA, an SME empowerment organisation
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