Transformation Fund offers second chance for inclusive reform

Trade, Industry and Competition Minister Parks Tau recently made one of the clearest and most urgent calls yet for decisive action to address South Africa’s deepening economic disparities.

To ignore this call is to risk a future too grim to contemplate. His proposed Transformation Fund could not be more timely.

The National African Federated Chamber of Commerce and Industry (Nafcoc) welcomes this renewed clarity and determination from the government.

It represents an honest reckoning with the past 31 years of transformation initiatives – initiatives whose impact has too often been overwhelmed by the enduring legacy of apartheid.

Listening to Tau, one appreciates that the Transformation Fund is not simply another financial instrument.

It is designed to serve as a catalyst for black enterprise and to address the structural exclusion that continues to define much of South Africa’s economy.

Critics have questioned the necessity, governance and effectiveness of such funds. Some argue that broad-based black economic empowerment (B-BBEE) has been inconsistently implemented.

Others highlight corruption or the perceived lack of measurable outcomes from previous efforts. While these critiques cannot be ignored, dismissing transformation as a policy imperative is short-sighted and perilous.

Transformation is not a political preference – it is a constitutional and moral obligation. B-BBEE remains one of the primary vehicles for this redress, and the Transformation Fund is a critical instrument.

We simply cannot sustain an economy in which a minority continues to control the vast majority of productive assets, while millions remain trapped in poverty. The belief that “the market will fix it” is not only ahistorical – it is a blueprint for enduring inequality and growing instability.

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The assessment of the deployment of resources through B-BBEE and other interventions, such as supplier development programmes, shows that the money spent does not match the outcomes.

For example, supplier development and equity equivalent funds have spent R100 billion over the past four years, yet there has been a decline in the industries they aimed to support.

Supplier development and equity equivalent funds are often directed toward downstream activities, rather than upstream ones.

The deployment of resources does not mitigate the challenges. The Transformation Fund aims to act as a force multiplier. By deploying resources in an aggregated fashion, it can achieve a greater impact.

This should not be seen as evidence that transformation has failed, but rather that fragmented, uncoordinated spending cannot yield systemic change.

The question we must ask is whether resources are being deployed strategically and whether they reach upstream activities where lasting value is generated.

Tau’s commitment to using the Transformation Fund as a force multiplier – aggregating efforts across public and private sectors – is essential. Leveraging private sector systems, expertise and infrastructure can correct past inefficiencies.

Crucially, all stakeholders must be held accountable – not just the government. Governance remains a legitimate concern. Past empowerment mechanisms have suffered from weak oversight, ethical lapses, and even outright corruption.

The proposed oversight model for the Transformation Fund – combining public and private sector leadership with board members selected based on skill and experience – is a step in the right direction.

Regular reporting to the B-BBEE commission must become the norm, not an afterthought. We commend Tau for articulating the role and capacity of state-owned entities in the context of the Transformation Fund.

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He rightly noted institutions such as the National Empowerment Fund (NEF) require recapitalisation to fulfil their mandates.

However, enterprise and supplier development funds should not be used to capitalise these entities. For transformation to be meaningful, the fund must be inclusive – not just of large blackowned enterprises, but also of township and rural businesses that remain excluded from formal financial systems.

Accessible funding, joint ventures, equity partnerships with multinationals and supplier development must work in concert to create an ecosystem where inclusive growth can take root. This is not a uniquely South African challenge.

Around the world, countries are embracing localisation and indigenisation strategies to tackle inequality and economic exclusion.

To those who claim the Transformation Fund is flawed or unnecessary, I say this: inaction is a luxury we simply cannot afford. Refusing to act is to abandon our economic and social stability to entropy.

We must refine what has worked, correct what has failed, and press forward with courage and resolve. Tau was candid in his assessment.

He acknowledged, for instance, that the latest B-BBEE report paints a troubling picture: many entities have failed to meet their targets and some have neglected to report altogether.

Yet rather than default to punitive regulation, government has opted for a more cooperative, developmental approach. Transformation cannot be imposed – it must be embraced by all sectors of society.

We are encouraged by this spirit of partnership. Let us not allow cynicism to sabotage the very tools needed to build a just, inclusive, and prosperous South Africa.

If implemented with integrity and focus, the Transformation Fund represents a second chance to get this right. And second chances must not be squandered.

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