CDE Submission | Transformation Fund: Right Goal, Wrong Approach
- The government’s proposed R100 billion Transformation Fund is “a lose-lose proposition” that will fail to achieve its stated objectives.
- CDE supports the goal of creating a more inclusive and bigger economy in which historically disadvantaged South Africans own and manage a much larger share of businesses.
- The Fund relies on unsupported assumptions that access to finance is the key barrier for black-owned businesses, and that a centralised, state-managed mega-fund can somehow distribute vast sums effectively and offer mentorship, skills and other support to small enterprises.
- CDE’s analysis suggests that the bulk of the R100 billion is expected to come from Enterprise and Supplier Development (ESD) spending under the Broad-Based Black Economic Empowerment (B-BBEE) codes. Redirecting ESD spending to the Transformation Fund would be ineffective, expensive and harm existing black-owned businesses that are currently supported through integrated supply chain relationships.
- When the Fund fails to attract sufficient voluntary contributions, government may resort to making these contributions compulsory as suggested in the document. This would be equivalent to imposing a new tax on corporate profits.
- If government is serious about achieving genuine economic inclusion, it should initiate a comprehensive, evidence-based review of South Africa’s transformation policies.
