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IOL News
26-05-2025
- Business
- IOL News
Transforming BBBEE: The potential of the R100bn Fund
Unsplash the Transformation Fund aims to channel R100 billion into firms that are majority black-owned and controlled, as defined by the BBBEE Act. Image: Unsplash South Africa stands at a pivotal moment. Two months ago the Department of Trade, Industry and Competition (Dtic) unveiled a draft Transformation Fund Concept Document, sparking a bold conversation about the future of Broad-Based Black Economic Empowerment (BBBEE). This proposed R100 billion fund, to be raised over five years, isn't just a policy proposal - it's a potential catalyst for reshaping economic inclusion, empowering black-owned businesses, and redefining corporate responsibility. But with great ambition comes great scrutiny. Will this fund deliver transformative impact, or will it stumble under its own complexity? A Vision for Empowerment Announced by the Minister of Trade, Industry and Competition in January 2025, the Transformation Fund aims to channel R100 billion into firms that are majority black-owned and controlled, as defined by the BBBEE Act. Administered through a tax-exempt Special Purpose Vehicle (SPV), the fund will operate as a registered Financial Services Provider, overseen by an eight-member board appointed by the Minister, including two private-sector representatives. Funding will come from a mix of government, public entities, international donors, development banks, and—crucially—the private sector. Video Player is loading. Play Video Play Unmute Current Time 0:00 / Duration -:- Loaded : 0% Stream Type LIVE Seek to live, currently behind live LIVE Remaining Time - 0:00 This is a modal window. Beginning of dialog window. Escape will cancel and close the window. Text Color White Black Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Background Color Black White Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Transparent Window Color Black White Red Green Blue Yellow Magenta Cyan Transparency Transparent Semi-Transparent Opaque Font Size 50% 75% 100% 125% 150% 175% 200% 300% 400% Text Edge Style None Raised Depressed Uniform Dropshadow Font Family Proportional Sans-Serif Monospace Sans-Serif Proportional Serif Monospace Serif Casual Script Small Caps Reset restore all settings to the default values Done Close Modal Dialog End of dialog window. Advertisement Video Player is loading. Play Video Play Unmute Current Time 0:00 / Duration -:- Loaded : 0% Stream Type LIVE Seek to live, currently behind live LIVE Remaining Time - 0:00 This is a modal window. Beginning of dialog window. Escape will cancel and close the window. Text Color White Black Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Background Color Black White Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Transparent Window Color Black White Red Green Blue Yellow Magenta Cyan Transparency Transparent Semi-Transparent Opaque Font Size 50% 75% 100% 125% 150% 175% 200% 300% 400% Text Edge Style None Raised Depressed Uniform Dropshadow Font Family Proportional Sans-Serif Monospace Sans-Serif Proportional Serif Monospace Serif Casual Script Small Caps Reset restore all settings to the default values Done Close Modal Dialog End of dialog window. Next Stay Close ✕ The private sector's role is where the fund's innovation shines. Companies can contribute through two key mechanisms: Equity Equivalent Investment Programme (EEIP): Multinationals without black shareholding can earn BBBEE ownership points by investing in Dtic-approved initiatives. The fund could become a new destination for these contributions, though it's unclear whether existing EEIPs will be required to redirect funds or if this applies only to new programs. Enterprise and Supplier Development (ESD) Points: The Dtic plans to amend the BBBEE Codes of Good Practice, allowing firms to earn ESD points by contributing to the fund. This could streamline compliance for companies while funneling capital to black-owned businesses. These mechanisms promise to align corporate incentives with national transformation goals, but they also raise questions about execution and impact. A Simpler Path to Compliance—or a Missed Opportunity? Under the current BBBEE framework, firms earn ESD points by directly supporting black-owned businesses with annual revenues of R50 million or less. This involves monetary contributions (like loans, grants, or investments) and non-monetary support (such as mentoring or training), fostering direct relationships that integrate beneficiaries into supply chains. The system incentivises swift action, as contributions must be delivered within the firm's financial year to count toward its ESD score. The Transformation Fund, however, introduces a tantalising shortcut: companies could earn ESD points 'immediately' by contributing to the SPV, bypassing the need to design and implement their own ESD programs. This could save time and resources, especially for firms struggling to meet ESD targets (2% of net profit after tax for supplier development and 1% for enterprise development). Tax incentives, including exemptions under section 56(1)(h) and deductions under section 18(A) of the Income Tax Act, sweeten the deal. But here's the catch: simplicity comes at a cost. Direct relationships between firms and ESD beneficiaries drive tangible benefits, like tailored support and supply-chain integration. By interposing the SPV, the fund risks diluting these connections, potentially slowing the delivery of benefits to black-owned businesses. The concept document's vagueness on the 'participation agreement' with the SPV adds another layer of uncertainty—will contributions come with strings attached? Voluntary Contributions, Strategic Choices The Dtic emphasises that contributions to the fund are voluntary, suggesting firms can stick with their existing ESD programs. But the proposed amendments to the BBBEE Codes could shift incentives, nudging companies toward the fund for its efficiency. The flexibility of the current system, where firms can scale ESD spending based on their strategy (while risking a downgrade if they fall below 40% of ESD points), may be constrained if the fund becomes the default path to compliance. Investors and business leaders should watch closely. The fund's success hinges on its governance, efficiency, and ability to complement—rather than compete with - existing BBBEE programs like the National Empowerment Fund, the Industrial Development Corporation, or the DTIC's Black Industrialist Scheme. Why create a new entity when established programs could be scaled up? The SPV must prove its value through transparency and measurable outcomes, or it risks becoming another layer of bureaucracy. An Investment in South Africa's Future The Transformation Fund is more than a policy - it's a bet on South Africa's economic potential. If executed well, it could unlock unprecedented opportunities for black-owned businesses, driving growth and inclusion. For investors, it signals a maturing market where transformation and profitability are increasingly aligned. Companies that embrace the fund strategically could strengthen their BBBEE ratings, reduce compliance costs, and build goodwill in a nation hungry for progress. Yet, the fund's promise depends on its delivery. Will the SPV operate with the agility and accountability needed to distribute R100 billion effectively? Can it amplify existing BBBEE efforts without overshadowing them? And will the private sector see contributions as an investment in shared prosperity rather than a compliance checkbox? South Africa's transformation journey is at a crossroads. The Transformation Fund could be a bold step toward economic justice—or a cautionary tale of ambition outpacing execution. As the Dtic gathers public comments, businesses, investors, and policymakers must engage to ensure this R100 billion vision delivers real, lasting impact. Pieter Steyn is a director at Werksmans Attorneys. BUSINESS REPORT
Daily Maverick
21-05-2025
- Automotive
- Daily Maverick
SA auto component manufacturers roll back production after crippling Trump tariffs
South African automotive component manufacturers are scaling down production in the face of sky-high tariffs imposed by US President Donald Trump, the National Association of Automotive Component and Allied Manufacturers said on Tuesday ahead of President Cyril Ramaphosa's crucial meeting with Trump. The CEO of the National Association of Automotive Component and Allied Manufacturers (Nacaam), Renai Moothilal, said they were extremely concerned that automotive component manufacturing in SA had slowed down significantly since the imposition of tariffs on South Africa by US President Donald Trump earlier this year. It is unclear at this stage how the 30% tariff base rate imposed on South Africa would relate to the generic 25% tariffs on foreign cars and parts. If it is more than 25%, South African automotive and component manufacturers will face an even bigger cost disadvantage than other countries. advertisement Don't want to see this? Remove ads Moothilal said Nacaam members that exported to the US were continuing to service those contracts. 'It will typically take nothing less than 12 months for such safety-critical parts to be substituted. The concern has come in where we have seen local component manufacturers who have products going into the US, already starting to reduce production. That impacts the entire supplier base, not just those exporting,' he said. The Department of Trade, Industry and Competition had been very proactive and regularly engaged with Naacam to help develop positions and info packs to aid those responsible for negotiating reduced tariffs, he said. 'A key point is that in the component tariff lines, the US holds a trade surplus relative to South Africa.' He said the priority for component manufacturers would be to find a way to stabilise the political relationship with the US and seek a mutually beneficial arrangement that preserved South Africa as a preferred exporter into the US. advertisement Don't want to see this? Remove ads 'Not just short term, but to some extent look for a continuation of Agoa [the African Growth and Opportunity Act], which has proven to benefit South Africa, wider African markets and jobs in the USA as well. 'There are a multitude of component investors from the USA located in SA, and we would not want to see a situation where this changes,' he added. President Cyril Ramaphosa is due to meet Trump at the White House in Washington on Wednesday, 21 May. He will be accompanied by International Relations and Cooperation Minister Ronald Lamola, Minister in the Presidency Khumbudzo Ntshavheni, Trade, Industry and Competition Minister Parks Tau, Agriculture Minister John Steenhuisen and Special Envoy to the US Mcebisi Jonas. Last week, Mikel Mabasa from Naamsa | The Automotive Business Council, said: 'Unlike past crises, the long-term implications of these tariffs are unclear, complicating production planning and investment decisions that typically stretch years ahead. 'Trade agreements remain essential for South Africa as they create a framework that facilitates smoother, more cost-effective and competitive trade between countries.' DM
Daily Maverick
20-05-2025
- Business
- Daily Maverick
After the Bell: Open for business — bring your own power and water
For as long as I can remember our government has been claiming to promote business, and to want economic growth. For the past 11 years we have even had a dedicated 'Small Business Development Ministry'. Whenever our ministers go to Western countries or places like Davos they will use the slogan 'South Africa is open for business'. And from time to time you will see President Cyril Ramaphosa or Department of Trade, Industry and Competition Minister Parks Tau arriving at some kind of launch, or the opening of a factory. But look at how tough it actually is to run a business in South Africa. Take Astral Foods. They produce something that probably three-quarters of South Africans consume. It's a simple business, they take maize, and feed it to chickens, which are then slaughtered and sold. It is a business replicated around the world, it happens almost everywhere people eat meat. And while we are not the biggest producer in the world (it has been said there is one farm in Brazil that literally produces as much chicken as we do) we are no slouches either. We have been doing it for a long time. All of this means that for Astral, to make money should not be hard. It should be one of the simplest businesses in the country. But because local government has been so useless, and it must be said, mainly because of the way the ANC has allowed its people to govern, it is now incredibly hard. In fact, Astral said in its results yesterday that it had been subsidising the price of chicken, it had actually been making a loss. It is true that this is a hugely competitive industry; like anything in the world, if it can be done here it can be done somewhere else, and the only argument is around pricing. For years the letters section of the Business Day newspaper was overtaken by the fight between domestic poultry producers and people who imported chicken on the question of whether Brazil was dumping chicken here. In other words, selling it for less than it cost to produce (for reasons that are not clear to me, people in Europe prefer the white breast milk of chickens, while most of us — correctly! — prefer the drumsticks, thighs and wings, meaning Brazilian producers could sell the bony parts at a loss). It's also true that the avian flu outbreak in Brazil might well make life a lot easier for Astral pretty soon. But we shouldn't forget the real reasons for this. On Monday night this week, Astral's CEO Gary Arnold said on The Money Show that the fact that the Lekwa Municipality around Standerton could not provide enough water and electricity for their big plant there was costing them R10-million a month. It's been so bad for so long that this is now an embedded cost; Astral budgets for it every year. This is R10-million a month that could be going to profit, or to higher salaries for all of the people who work there. Or even lower prices for people who buy what they produce. They are not the only ones hit by problems in councils, virtually everyone outside of the Western Cape is. Earlier today the CEO of the Minerals Council, Mzila Mthenjane, said that: 'In remote and rural areas where the bulk of mining happens, the dysfunctionality of municipalities makes daily operation difficult and unattractive for investments for any companies considering setting up businesses.' No one is going to invest in places where people are desperate for jobs. Joburg is now so bad, with so little prospect of a recovery in the medium term that some firms must be wondering how hard it would be to move, no matter what the cost. The main reasons for this are not about resources or the ability of South Africans. It's all about politics. And so often, the politics of the ANC. It's usually (but not always) in the councils where they provide the mayor, or are the biggest party, where this happens. Ditsobotla Municipality is the best example. For a very long time it was known as the town 'with two mayors'. This was not a fight between parties, it was a fight between two factions of the same party. Both of these 'mayors' came from the ANC. Unfortunately, local government is not the only problem companies like Astral face. As they put it in their results yesterday: 'On the global front, the uncertain landscape characterised by trade wars, various conflicts and shifting alliances poses risks for an economic slowdown, market uncertainty and currency volatility.' Again, this is all the fault of politicians. Some of them here, some of them in other places. So this evening, raise a glass to people who run businesses. It's hell out there. And we all know who to blame for that. DM
IOL News
20-05-2025
- Business
- IOL News
Proposed regulations could ban blank guns in South Africa
The Department of Trade, Industry and Competition has published draft regulations proposing a ban on the importing of blank gunds Image: File As concerns rise over the growing use of blank guns in criminal activity, the Department of Trade, Industry and Competition has published draft regulations proposing a ban on their import into South Africa. This move follows concerns raised by the South African Police Service (SAPS), which has noted a rise in the use of replica and modified guns in crimes across the country. Blank guns, which produce a loud noise and flash without firing bullets, were initially used for police and military training, film props, and signalling at sports events. Although non-lethal in their original form, some models can be modified to fire live ammunition, turning them into dangerous weapons. "What makes policing blank guns difficult is the fact that they are not fully regulated under the Firearms Control Act of 2000 (FCA), particularly when it comes to possession," the department said in the draft regulations. The proposed amendments would place blank guns under stricter controls, treating them similarly to regular firearms, especially in terms of importation. "In light of the urgency of the matter, the SAPS approached the International Trade Administration Commission of South Africa ('the Commission') with a request for the immediate imposition of controls on the importation of blank guns, such as imposing specific conditions on the issuing of permits for the importation of blank guns or an outright ban on the importation of blank guns," the department noted. Video Player is loading. Play Video Play Unmute Current Time 0:00 / Duration -:- Loaded : 0% Stream Type LIVE Seek to live, currently behind live LIVE Remaining Time - 0:00 This is a modal window. Beginning of dialog window. Escape will cancel and close the window. Text Color White Black Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Background Color Black White Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Transparent Window Color Black White Red Green Blue Yellow Magenta Cyan Transparency Transparent Semi-Transparent Opaque Font Size 50% 75% 100% 125% 150% 175% 200% 300% 400% Text Edge Style None Raised Depressed Uniform Dropshadow Font Family Proportional Sans-Serif Monospace Sans-Serif Proportional Serif Monospace Serif Casual Script Small Caps Reset restore all settings to the default values Done Close Modal Dialog End of dialog window. Advertisement Next Stay Close ✕ However, the department also acknowledged the legitimate uses of blank guns. "Legitimate uses of blank guns should also be considered. These guns are used for police and military training. Film production companies and private security firms also rely on blank guns for professional purposes. Therefore, an outright ban might materially and negatively impact these sectors." "This raises the issue of whether a permit system would be a more balanced regulatory approach, as it would allow authorities to scrutinize importers and related end-users, ensuring blank guns are only accessible to those with valid and verified needs." The International Trade Administration Act of 2002 grants Minister Park Tau, the authority to regulate the importation of goods like blank guns, either through a ban or a permit system. The draft regulations are now open for public consultation, giving members of the public the opportunity to provide feedback before any final decisions are made. IOL Business Get your news on the go, click here to join the IOL News WhatsApp channel
IOL News
20-05-2025
- Business
- IOL News
Proposed regulations could ban blank guns in South Africa
The Department of Trade, Industry and Competition has published draft regulations proposing a ban on the importing of blank gunds Image: File As concerns rise over the growing use of blank guns in criminal activity, the Department of Trade, Industry and Competition has published draft regulations proposing a ban on their import into South Africa. This move follows concerns raised by the South African Police Service (SAPS), which has noted a rise in the use of replica and modified guns in crimes across the country. Blank guns, which produce a loud noise and flash without firing bullets, were initially used for police and military training, film props, and signalling at sports events. Although non-lethal in their original form, some models can be modified to fire live ammunition, turning them into dangerous weapons. "What makes policing blank guns difficult is the fact that they are not fully regulated under the Firearms Control Act of 2000 (FCA), particularly when it comes to possession," the department said in the draft regulations. The proposed amendments would place blank guns under stricter controls, treating them similarly to regular firearms, especially in terms of importation. "In light of the urgency of the matter, the SAPS approached the International Trade Administration Commission of South Africa ('the Commission') with a request for the immediate imposition of controls on the importation of blank guns, such as imposing specific conditions on the issuing of permits for the importation of blank guns or an outright ban on the importation of blank guns," the department noted. Video Player is loading. Play Video Play Unmute Current Time 0:00 / Duration -:- Loaded : 0% Stream Type LIVE Seek to live, currently behind live LIVE Remaining Time - 0:00 This is a modal window. Beginning of dialog window. Escape will cancel and close the window. Text Color White Black Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Background Color Black White Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Transparent Window Color Black White Red Green Blue Yellow Magenta Cyan Transparency Transparent Semi-Transparent Opaque Font Size 50% 75% 100% 125% 150% 175% 200% 300% 400% Text Edge Style None Raised Depressed Uniform Dropshadow Font Family Proportional Sans-Serif Monospace Sans-Serif Proportional Serif Monospace Serif Casual Script Small Caps Reset restore all settings to the default values Done Close Modal Dialog End of dialog window. Advertisement Next Stay Close ✕ However, the department also acknowledged the legitimate uses of blank guns. "Legitimate uses of blank guns should also be considered. These guns are used for police and military training. Film production companies and private security firms also rely on blank guns for professional purposes. Therefore, an outright ban might materially and negatively impact these sectors." "This raises the issue of whether a permit system would be a more balanced regulatory approach, as it would allow authorities to scrutinize importers and related end-users, ensuring blank guns are only accessible to those with valid and verified needs." The International Trade Administration Act of 2002 grants Minister Park Tau, the authority to regulate the importation of goods like blank guns, either through a ban or a permit system. The draft regulations are now open for public consultation, giving members of the public the opportunity to provide feedback before any final decisions are made. IOL Business Get your news on the go, click here to join the IOL News WhatsApp channel
