The Transformation Fund: What It Means for South Africa's Economic Future
On 19 March 2025, the Department of Trade, Industry and Competition (“DTIC”) published the Transformation Fund draft policy for public comment. The proposed Fund was first announced by the Minister of Trade, Industry and Competition in January 2025. The proposed Transformation Fund aims to address structural barriers that hinder entrepreneurship in South Africa, particularly in under-resourced areas like townships and rural communities. Despite strong entrepreneurial ambition and a well-established transformation policy framework, many black-owned businesses remain unsupported due to limited access to infrastructure, funding, and markets.
What is the Transformation Fund?
The Transformation Fund, led by the DTIC, is a R100 billion initiative aimed at advancing economic inclusion for black-owned businesses in South Africa. Aligned with the B-BBEE Act, it will provide financial and non-financial support to help SMMEs grow and create jobs, especially in underserved townships and rural areas.
The fund focuses on five pillars:
- Market Access & Technical Support
- Improved Accessibility
- Financial & Non-Financial Support
- Dedicated Township & Rural Fundin
- Investment in High-Impact Sectors
The Transformation Fund is designed to drive lasting, inclusive change in South Africa by empowering businesses representing the future economy. Rooted in constitutional principles and B-BBEE legislation, it promotes equitable economic participation for historically disadvantaged groups like women, youth, and people with disabilities.
What this means for your business:
The Transformation Fund will be mobilized through collaborative funding from government departments, donor agencies, development banks, philanthropists, and private sector partnerships. The DTIC emphasizes that existing B-BBEE frameworks will guide corporate contributions, and aligning the Fund with corporate ESD and EEIP contributions will be key to maximizing its impact:
- EEIP: Multinational companies can direct 25% of the value of their South African operations towards the Fund to address transformation challenges.
- ESD: The government is reviewing ESD codes to allow businesses to contribute to the Fund and receive B-BBEE recognition for their contributions.
The concept document does not give much detail regarding the proposed amendments to the ESD provisions of the Codes. In terms of the B-BBEE Act, any amendments to the Codes must be published by the Minister in the Government Gazette for public comment for at least 60 days.
Concerns raised
The Transformation Fund has been praised as a step toward inclusive growth, but it also faces several concerns:
- Governance and Oversight: There’s a lack of clarity around who will manage the fund and how accountability will be ensured, raising fears of mismanagement.
- Contribution Expectations: Uncertainty exists over whether contributions will be voluntary or mandatory, and how businesses will calculate their contributions. There’s concern this could disrupt existing projects.
- Duplication with Existing Initiatives: There are questions about how the new Fund will align with current transformation mechanisms to avoid redundancy.
- Impact Measurement: The Fund lacks clear success metrics and monitoring systems, which could hinder its effectiveness.
Conclusion:
This new fund, outlined by the DTIC, could significantly impact current BEE strategies, ESD budgets, and support for black-owned businesses by promoting more inclusive and targeted support.
Follow us on LinkedIn or on our website at elevateadvisory.co.za for updates on this topic and how this fund will impact your B-BBEE strategy.