Article
Rethinking the Transformation Fund
Published: 18/06/2025
The
Department of Trade, Industry and Competition (DTIC) has proposed the creation
of a Transformation Fund, envisioned as a R100 billion initiative to drive
inclusive economic growth and address persistent inequality. The Fund aims to
pool public and private resources including contributions of up to 3% of net
profit after tax (NPAT) from companies to support black-owned businesses,
township- and rural enterprises, and youth employment.
The
Department of Trade, Industry and Competition (DTIC) has proposed the creation
of a Transformation Fund, envisioned as a R100 billion initiative to drive
inclusive economic growth and address persistent inequality. The Fund aims to
pool public and private resources including contributions of up to 3% of net
profit after tax (NPAT) from companies to support black-owned businesses,
township- and rural enterprises, and youth employment.
A
bold vision but unanswered questions
The
Agricultural Business Chamber (Agbiz) and Business Unity South Africa (BUSA),
among other voices in the private sector, have welcomed the Fund’s intention
but raised serious concerns about its structure, feasibility, and overlap with
existing efforts.
Agbiz
notes that while transformation in agriculture has been slow. Many
agribusinesses are already investing significantly in black empowerment through
Enterprise and Supplier Development (ESD), blended finance, and internship
programmes. The proposed Fund could amplify these efforts but should avoid
duplicating what already works.
BUSA
echoes this concern, calling for clarity on how the Fund will differ from
current initiatives like the National Empowerment Fund (NEF), Small Enterprise Finance Agency (SEFA), and the Township and Rural Entrepreneurship Programme
(TREP). Without defined outcomes, strict governance, and private sector trust,
they warn, the Fund risks becoming another top-heavy structure with little
grassroots impact.
To
deliver meaningful impact, the Transformation Fund must shift from input-based
compliance to clearly measurable outcomes, such as the number of sustainable
enterprises created, jobs generated, revenue growth, and increased black
ownership. This requires a tailored results framework with regular progress
tracking, sector-specific goals, and phased implementation that allows for
learning and adaptation. Crucially, job creation must be underpinned by skills
development, the Fund should support bursaries, internships, and employer
incentives for graduate retention to build a pipeline of capable, work-ready
youth. Without strong linkages between contributors and beneficiaries, however,
there is concern that the Fund may become too broad and disconnected from the
needs of specific industries, weakening its effectiveness and undermining
private sector participation
A
risk of overreach and the importance of good governance
Both
Agbiz and BUSA caution that if the Fund becomes compulsory in practice, it
could erode trust and push companies to opt out entirely. Legal ambiguities
especially around the “voluntary” 3% NPAT contribution must be resolved through
clear, consultative revisions to the B-BBEE Codes.
Furthermore,
the risks of political interference, poor fund management, and loss of direct
impact to contributors are real. As history shows, well-intentioned state funds
can be derailed by weak governance. The Fund should be governed by an
independent board, with transparency. The DTIC can include sector-based
investment committees for targeted, measurable outcomes and finally the Fund
can be implemented in phases, starting with pilot programmes in high-impact
sectors like agriculture, ICT, and energy.
Alignment
with existing programmes
Several
industry stakeholders have raised concerns that the proposed Transformation
Fund risks duplicating or undermining existing, effective transformation
initiatives funded through statutory levies and voluntary contributions. These
efforts, already aligned with sector-specific needs and approved under the
Marketing of Agricultural Products Act, could be compromised by centralising
funds into a broad, generic structure. Risks include legal non-compliance,
weakened accountability, reduced sectoral relevance, and the loss of control and
visibility over how transformation funds are used. Industry warns that this
could discourage private-sector participation, disrupt targeted programmes, and
create regulatory uncertainty highlighting the need for the Fund to complement
rather than displace existing initiatives
If
implemented effectively, the Transformation Fund could complement existing
empowerment efforts by providing broader, more coordinated support to
underfunded sectors such as township manufacturers and agribusinesses. The
Fund’s scale and centralised structure could serve as an optional platform to
amplify impact particularly in areas that may fall outside the current reach of
agricultural companies. Rather than replacing internal ESD efforts, it could
offer a mechanism for collaboration and targeted interventions aligned with
national transformation priorities. Under the oversight of professional fund
managers and investment committees including private sector representatives
corporate funding could drive tangible development outcomes.
Any
new initiatives must be designed to complement and enhance existing programmes,
rather than replace them. A constant cycle of resetting and restructuring
undermines continuity and progress. If we continue to discard established
efforts with each new intervention, we risk stagnation rather than advancement.
For true transformation, we must build on what works and invest in long-term,
integrated solutions that deliver real and measurable impact.
By Thapelo Machaba, Agbiz