Transformation Fund draft document lacks clear, outcome-driven goals, BLSA says

Mail & Guardian

17-06-2025

Business Leadership South Africa has criticised the recently launched Transformation Fund as being flawed because it was structured around input-based targets instead of clear, outcome-driven goals..(John McCann/M&G)
Business Leadership South Africa (BLSA) has criticised the recently launched Transformation Fund as being flawed because it was structured around input-based targets instead of clear, outcome-driven goals. It said effective efforts should be anchored in measurable objectives that justified the financial commitment required.
According to a
In
'The fund should use an outcome-based approach by specifying the expected transformation impact in tangible terms, such as the number of businesses it aims to grow, employment targets, or improvements in SME (small and medium enterprises) survival rates,' it said.
'For example, a goal of supporting 5 000 black-owned businesses with a 30% annual growth rate over five years would provide a more practical framework for assessing effectiveness.'
Trade and Industry Minister Parks Tau published the fund's concept document — which envisages raising R20 billion annually for black enterprise development — in March, with a 28 May deadline for comments.
Scrutiny of the draft comes amid tension over the government's
Communications and Digital Technologies Minister Solly Malatsi, a DA cabinet member, recently
President Cyril Ramaphosa has
BLSA acknowledged the importance of redressing the structural economic imbalances created by apartheid, and commended the government for establishing the Transformation Fund, but bemoaned the lack of analysis about why previous state-led initiatives such as the National Empowerment Fund and the Small Business Fund had underperformed.
'The paper does not provide a comprehensive overview of these existing funding mechanisms, nor does it justify why a new R100 billion structure is necessary instead of enhancing existing models,' it said in its submission.
It also expressed concern about institutional inflation, where new entities are created for the same purpose instead of supporting ongoing programmes, adding that access to funding alone would not resolve the systemic challenges and insufficient mentorship capacity had hampered black empowerment initiatives.
'Without targeted investment in mentorship infrastructure even significant financial allocations may fail to yield desired development outcomes,' it said.
Labour union Solidarity and the Free Market Foundation estimate that black empowerment laws have incurred R145 billion to R290 billion in compliance costs since their inception, equivalent to between 2% and 4% of GDP.
A report by the two organisations on the cost of broad-based black economic empowerment says the programme has imposed a substantial economic burden on high-intensity sectors such as mining and finance, attributing low employment numbers to racially motivated policies.
'While B-BBEE may have contributed to an increase in black ownership and supported some skills and SME development, those gains are overshadowed by elite capture, limited grassroots impact and persistent inequality,' the report said.
BLSA said transformation efforts would improve with more private sector participation in the fund's financial disbursement and oversight.
It argued that transformation is already happening in companies' enterprise and supplier development programmes, which have proved to be commercially viable in integrating small businesses.
A joint fund management team between government and the private sector would allow businesses to share and 'codify lessons and best practices for the fund's design', the organisation added.
'We recommend that the Transformation Fund be designed with sufficient flexibility to align with existing industry master plans and accommodate the requirements of the fast-growing priority sectors,' it submitted.