New BEE tax for business in South Africa draws fire

The Democratic Alliance (DA), a key member of the Government of National Unity (GNU), has outright rejected the Department of Trade, Industry and Comeptition’s plan to tax private sector profits to exclusively fund black-owned businesses in the country.
The department has outlined its plans to establish a R100 billion Transformation Fund to support black-owned businesses and Small, Medium, and Micro Enterprises (SMMEs).
The plans are still in the discussion stage and will require further engagement and processing, but have already drawn heavy criticism.
DTIC minister Parks Tau noted in the past week that the fund would be financed through the private sector.
This would be done through existing Broad-Based Black Economic Empowerment (BBBEE) regulations, which would effectively force companies to contribute proportions of their finances to the fund.
According to Tau, the Enterprise and Supplier Development (ESD) element of the B-BBEE Codes of Good Practice already mandates that companies allocate 3% of their annual net profit after tax to developing black-owned suppliers.
Under the plan, these contributions would instead be funnelled into the fund.
In addition, multi-national companies who refuse to hand over equity to black partners will be expected to contribute up to 25% of the value of their South African operations as an “equity equivalent” cash contribution.
Another key funding source will come from public interest commitments linked to mergers and acquisitions.
The public interest clause of the Competition Act could be invoked to force companies entering into mergers and acquisitions to contribute to the fund for these transactions to be approved.
The DA rebuffed the proposal, calling it a “new tax on businesses” that goes against sound governance and undermines the GNU.
Business advocacy group Sakeliga has also spoken out against the plan, saying that such a fund could push investors away, particularly multinationals and those looking at mergers and acquisitions.
There are also concerns about how the fund will be managed, with the government having a poor track record of maintaining funds and keeping them safe from looting.

The DA’s spokesperson on the DTI portfolio, Toby Chance, said that using the BBBEE codes to impose new rules and possible penalties on the private sector is uncompetitive and illegal.
Chance said that the department also couldn’t create the fund without explicit approval from Cabinet, especially if it introduces what is essentially a new tax.
Other questions of legality have been raised in relation to the legal requirements for state revenues to be managed through the National Revenue Fund under the National Treasury’s oversight.
While the fund has drawn focus this week, Chance flagged the fund in November 2024 when it was first proposed during the department’s revised Annual Performance Plan presentation to the Portfolio Committee.
At the time, the DA MP warned that the party was against the intended use of the fund: race-based financing through a combination of grants, equity and loans.
He pointed out that companies already direct approximately R25 billion through the ESD codes and maintained that companies are, and should remain, in control of where this funding goes.
Chance also added that BBBEE has proven to be ineffective dealing with inequality, with the BBBEEE codes and funding not stimulating high-growth enterprises.
He said it’s the DA’s position that resources should be provided based on merit, with business viability and growth potential considered.
“Our country has an abundance of entrepreneurs drawn from diverse communities that just need the opportunity to succeed,” he said.
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