Trade, industry and competition minister Parks Tau. (Photo: X)
Minister of Trade, Industry and Competition (the Dtic) Parks Tau said on Friday that the R100 billion transformation fund will set aside resources for black-owned businesses operating within the transport sector.
“Too many businesses remain on the margins. We must double down on efforts where transformation has stalled. Enforcing existing codes will lead to deeper integration of the sector,” Tau said.
Small, medium and micro enterprises (SMMEs) account for about 90% of businesses in South Africa, yet many are unable to access opportunities due to high asset requirements and limited credit histories, he said.
The sector-specific fund will allocate resources for inclusion and capacity building in aviation, rail and ports.
Tau said the fund will facilitate market access and provide export-readiness programmes with the goal of ensuring that the benefits of modernisation reach all stakeholders.
In March, Tau proposed the creation of a R20-billion-a-year transformation fund in a concept document currently open for public comment.
The goal of the fund is to promote the participation of black-owned enterprises and marginalised groups such as women, youth and persons with disabilities.
The transformation fund has received criticism for repeating race-based legislation after 30 years of democracy, which has had disputed outcomes.
A distinguishing feature of this new initiative is its explicit focus on high-risk rural and township enterprises, which have previously been neglected.
Minister of Transport Barbara Creecy said the draft transformation fund and integrated sector codes will consolidate support for better outcomes in broad-based black economic empowerment (B-BBEE).
Creecy stated that the logistics and freight subsectors remain largely untransformed, and that increasing the participation of black-owned businesses will have a positive effect on economic inclusion.
The sector-specific fund will also focus on financing for taxi recapitalisation and aligning provincial regulatory frameworks.
The government has therefore honed in on inclusion as the solution to unemployment and stagnant economic growth, while critics have said corruption-inducing BEE is the cause of joblessness.
The new sector codes propose an equity-equivalent programme for multinationals and the removal of BEE recognition for companies that lose black ownership.
Board voting rights held by black individuals will increase from 50% to 65%, and specialised technical positions will be reserved for junior black managers.
The transport fund will deploy debt, grant and equity instruments to diversify economic activity beyond urban centres.
The fund will therefore target support for rural and township enterprises operating outside of traditional value chains.
The government’s contribution will serve as seed capital to leverage further private sector investment.
The fund also seeks to address the practice of superficial compliance aimed solely at avoiding penalties, which the government says undermines genuine transformation and meaningful market participation of black people.
In response to the fund, the South African Institute of Race Relations (IRR) said that BEE legislation amounts to race quotas that have led to the decline of state-owned entities.
The IRR argues that using race as a proxy for disadvantage is unfair and illegal, and that the government should follow the non-racial ethos of the Constitution.
The IRR has also praised the Democratic Alliance for challenging employment equity laws in court.
The institute believes that less race-based legislation and more investor-friendly policies will drive economic growth and reduce unemployment.
However, the Black Management Forum (BMF) has said that in a country where 81% of people are black, with most living in poverty, neoliberal, trickle-down economics would not resolve this crisis and therefore the government should build the kasi economy.
The BMF has criticised the World Bank for suggesting that South Africa should roll back its BEE policies to attract foreign investment.
The bank argued that the country’s excessive affirmative action regulations need to be overhauled for the country to grow, while the BMF said the private sector should carry a significant burden of the country’s economic woes.
The forum also criticised Old Mutual for appointing Jurie Strydom in May as chief executive, calling it a setback for transformation in a statement.
“As an institution with deep African roots and a significant continental footprint, Old Mutual is expected to reflect South Africa’s diversity at all levels of leadership, particularly the executive level,” said the statement.
Business Leadership South Africa (BLSA) welcomed the fund’s intent but raised concerns over past empowerment failures, including weak risk management and poor recovery of allocated funds.
The organisation said too much time had been spent on funding mechanisms and too little on mentorship and capacity building.
The BLSA urged the government to clearly articulate how the final fund design will move beyond financing to achieve long-term transformation outcomes.