Business
New BEE Tax Plan Sparks Controversy Among South African Businesses

The Department of Trade, Industry, and Competition’s (DTIC) proposal to fund a R100 billion Transformation Fund through private sector contributions has faced significant backlash from political parties and business advocacy groups. The fund aims to support black-owned businesses and Small, Medium, and Micro Enterprises (SMMEs), but critics have raised concerns about its implementation and potential consequences for the economy.
The Transformation Fund Plan
DTIC Minister Parks Tau outlined the fund’s proposed structure, which would be financed by leveraging existing Broad-Based Black Economic Empowerment (BBBEE) regulations. Key elements include:
- Enterprise and Supplier Development (ESD) Allocations:
Companies already required to allocate 3% of annual net profit after tax to developing black-owned suppliers would instead funnel these contributions into the Transformation Fund. - Equity Equivalent Contributions:
Multinational companies that do not hand over equity to black partners would need to contribute up to 25% of the value of their South African operations as a cash contribution. - Public Interest Commitments:
Companies involved in mergers and acquisitions may be compelled to contribute to the fund as part of the Competition Act’s public interest clause.
Criticism from the Democratic Alliance (DA)
The Democratic Alliance (DA) has strongly opposed the fund, labeling it a “new tax on businesses” that undermines governance and investor confidence.
DA MP Toby Chance, spokesperson for the DTI portfolio, expressed the following concerns:
- Legal Challenges:
The DA argued that using BBBEE codes to enforce these contributions is uncompetitive and illegal, as any new tax requires explicit Cabinet and parliamentary approval. - Economic Impact:
The DA warned that such measures could drive investors away, especially multinationals and businesses considering mergers or acquisitions in South Africa. - Track Record of Fund Mismanagement:
Concerns were raised over the government’s history of mismanaging funds, with fears of potential looting. - Ineffectiveness of BBBEE:
The DA criticized the BBBEE framework as ineffective in addressing inequality and fostering high-growth enterprises. - Merit-Based Resource Allocation:
The DA called for a merit-based approach, focusing on business viability and growth potential, rather than race-based financing.
Business Advocacy Groups Speak Out
Sakeliga, a prominent business advocacy group, echoed the DA’s concerns, cautioning that the fund could erode investor confidence. The group also questioned the fairness of enforcing such contributions under the guise of BBBEE regulations.
Governance and Oversight Issues
Questions of legality and oversight were also raised. The National Treasury Act requires state revenues to be managed through the National Revenue Fund, and critics argue that the Transformation Fund would bypass this safeguard.
The proposal’s critics, including the DA, argue that the fund needs Cabinet approval before implementation and greater oversight to prevent potential misuse.
What’s Next for the Transformation Fund?
While the fund is still in its discussion phase, the backlash highlights significant resistance to the government’s approach to achieving economic transformation. As businesses and opposition parties push back, the DTIC may face challenges in securing support for its plans.
Critics have called for reforms to focus on enabling entrepreneurs across all demographics and creating an environment conducive to economic growth and job creation.
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