R100 billion black business fund under siege

Krutham executive chairman Stuart Theobald says South Africa’s planned R100 billion Transformation Fund is misguided and will not reach its goal.

President Cyril Ramaphosa promoted the controversial R100 billion Transformation Fund during his State of the Nation Address.

“We will set up a transformation fund worth R20 billion a year over the next five years to fund black-owned and small enterprises,” he said.

On 19 March 2025, Minister of Trade, Industry and Competition Parks Tau published the Draft Transformation Fund concept document for public comment.

The fund wants to aggregate enterprise and supplier development (ESD) funds to support the participation of black-owned enterprises in the economy.

It will provide access to financial and non-financial support for black-owned and managed enterprises, including small, medium, and micro enterprises.

The Draft Transformation Fund document outlines its objectives:

• Promote economic transformation to enable meaningful participation of black people in the economy.
• Improve access to funding for black-owned and controlled enterprises.
• Empower and support black-owned and controlled enterprises’ participation in value chains across key sectors of the economy.
• Mobilise financial resources from the private and public sectors using B-BBEE legislation.

Tau said there will be no additional requirements for entities beyond those currently in South Africa’s B-BBEE policy.

The B-BBEE policy, through the Codes of Good Practice, requires South African businesses to contribute through Enterprise and Supplier Development (ESD).

This contribution includes giving 3% of net profit after tax (NPAT) to the development of black suppliers, black industrialists and SMMEs.

Tau said the fund will focus on businesses owned by women, youth, and people living with disabilities, especially those based in rural and township areas.

He said they will establish governance structures to ensure accountability to the government and the private sector, transparency, and efficiency in managing the fund.

It is unclear whether the 3% of net profit after tax (NPAT) ESD commitment would still be voluntary or may become compulsory.

There is also uncertainty about the new fund’s impact on current enterprise beneficiaries and supplier development from companies.

R100 billion black business fund under siege

Toby Chance, the DA’s spokesperson on Trade, Industry, and Competition, said the party rejects the notion that the fund will empower previously disadvantaged South Africans.

Chance said real transformation can only be achieved by focusing on economic growth by reducing the regulatory burden on companies.

He added that the Broad-Based Black Economic Empowerment (B-BBEE) Act and associated regulations have failed to deliver sustainable economic transformation.

“Instead, they have entrenched corruption, patronage, inefficiency and waste and have left millions without work or opportunities to start and grow a business,” he said.

He said their primary concern with the fund is that it will not address the root causes of South Africa’s economic malaise.

Instead, it will perpetuate the same cycle of mismanagement that has led to flatlining economic growth.

South Africa has lost an estimated R1.5 trillion in the past five years due to corruption and inefficient regulations.

“A R100 billion fund will likely lead to further financial waste and political cronyism rather than actual economic empowerment,” he said.

Sakeliga CEO Piet Le Roux also opposed the Transformation Fund, calling it another extortion racket to put money in a government fund.

“The fund will be a way to siphon money to preferred government associates and preferred political people around the government,” he said.

“It’s a direct attack on businesses, and it’s going to be very harmful for everyone in this country through a multiplier effect.”

Le Roux said similar legislation has already caused tremendous damage in the public sector, and people must prevent this from happening in the private sector.

Krutham executive chairman Stuart Theobald slates the fund

Krutham executive chairman Stuart Theobald told The Money Show that the fund suffers from focusing on the inputs instead of the output.

He said black economic empowerment is a good example of a policy with good intentions that fails to produce the desired outputs.

“If you look at how BEE is done in practice, it is how much money companies will spend,” Theobald said.

Companies carefully manage how much money they should spend to get the required points on BEE scorecards.

“Companies are measured by how much money they put in and not by the impact or the desired outcomes,” he said.

He said the R100 billion Transformation Fund, as it has been articulated, is an extreme version of the current black empowerment legislation.

“The government is talking about spending a lot of money and not about the outcomes or the effect it wants to achieve,” he said.

He added that giving out R20 billion annually to help small and medium-sized businesses scale is a tremendously complicated task.

To put it in perspective, the government wants to give qualifying black businesses R55 million every day for five years.

If the amount is calculated over working days, the government must provide these businesses with R80 million daily.

“Nobody who has been involved in enterprise supply and development will see it as remotely possible to deploy this amount of money in the local economy,” he said.

The constraints are not only finding suitable enterprises to give money to. They also include the non-financial support that should accompany it.

“For small companies to grow and become sustainable, they need mentorship, support, and help to access markets,” he said.