Tau says Transformation Fund aims to consolidate black empowerment efforts

Banele Ginidza 

Minister for Trade Industry and Competition (the dtic), Parks Tau, has clarified that the newly proposed R100 billion Transformation Fund will not leverage Competition Commission settlements as a means of financing.

This statement comes in light of growing concerns regarding the Fund's financial structure and its necessity given ongoing black empowerment programmes already in place.

During a media briefing on Wednesday, Tau asserted that the establishment of the fund is not intended to undermine existing empowerment initiatives.

On the contrary, he described it as an aggregator of all current efforts, designed to augment resources from both government and private sector empowerment allocations, including direct equity contributions.

"Competition processes with large transactions, mergers and acquisitions date from a process that fundamentally deals with competition issues and you cannot predetermined the outcome of that," Tau said.

"Competition Commission settlements to a large extent go towards the national revenue fund and that is where the resources are, so there is not a fund that is dedicated to supporting initiatives at the dtic. So we can't necessarily use them should we go through the competition processes as a means to capitalise the transformation fund.

"I think that would undermine competition issues, we want competition authorities to exercise their authority inline wit their mandate."

Tau said the fund will seek to aggregate the funding that JSE-listed groups, State-owned enterprises, and unlisted private companies spend collectively on enterprise and supplier development (ESD), as well as some of the funding multinationals direct towards equity equivalent schemes to secure their B-BBEE compliance, without selling shares in their companies.

Deputy Director-General for Incentives, Susan Mangole, revealed that over the past four years, R100bn had been spent from entities measured and reported to the Competition Commission. 

Mangole said this highlighted the scale at which JSE-listed groups, State-owned enterprises, and private companies are engaging with Enterprise and Supplier Development (ESD) initiatives and equity equivalent schemes to meet Broad-Based Black Economic Empowerment (B-BBEE) requirements without diluting their ownership.

Simphiwe Hamilton, the newly-appointed director-general of the dtic, said the biggest threat to the Fund was public perception, partcicularly negative sentiment on lack of contriols.

"It is a genuine concern, but we believe that the structuring that will be done in this regard will mitigate against any possibility of malfeasance, and it's good that we start with that lens right from the beginning," Hamilton said.

Tau said the Fund would be established in partnership with the private sector and that a special purpose vehicle (SPV), with its own board and executive, be given responsibility for governance and the day-to-day running of the Fund, which would include the National Empowerment Fund as an anchor member. 

"In particular, we are designing the Fund to ensure there is good governance, transparency, and accountability, through the establishment of a SPV, which will report to an oversight committee and a board composed of individuals with the necessary technical and sectoral expertise," he said.

At its core, the Transformation Fund aims to address the long-standing structural exclusion in the economy, according to Tau.

"Allow me  to emphasise that this Fund is not seeking to impose any new demands on business and industry but rather, it will consolidate funding efforts through ESD and other obligations as prescribed by the B-BBEE Codes of Good Practice," Tau said.

"Let me stress that the Transformation Fund does not replace any well-functioning vehicles already in place. Instead, it seeks to amplify what is already required under existing B-BBEE legislation."

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