New BEE incentives as transformation fund is revamped

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JIMMY MOYAHA: Sometime last year we heard plans from the Department of Trade, Industry and Competition [dtic] that they would be proposing a transformation fund.

We got word of this, and we discussed this at length last year as to how this fund would potentially work, some of the benefits of the fund, and indeed some of the pitfalls of the fund as to how we would raise R100 billion and where the R100 billion would be deployed.

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We seem to have a bit more colour and clarity around that. There’s been an updated ministerial briefing pack from the Department of Trade, Industry and Competition that hopefully sheds some light on some of the questions that we’ve asked.

For more on this, I’m joined on the line by the chief executive at the Black Business Council, Ntate Kganki Matabane, to take a look at this and see what we make of it.

Ntate Matabane, lovely having you on the show, as always. Thanks so much for taking the time. What do you make of the latest developments out of the Department of Trade, Industry and Competition?

We’ve already previously, you and I, discussed the importance of this transformation fund and its place in the South African economy. What do you make of these latest developments?

KGANKI MATABANE: Good evening, Jimmy, and good evening to the listeners. Thank you very much for having us.

As a start, we just need to re-emphasise the fact that as the Black Business Council, we support the transformation fund, and we can’t wait for it to come and be implemented so that most of the problems of our members can be resolved.

Because, as you know, it’s very, very difficult for black business and small business in general to have access to the fund.

We are fully involved in the task teams and the discussions regarding the transformation fund and the proposal.

The good thing with South Africa is that because we are a constitutional democracy, there are certain processes that have to happen before certain things can be implemented.

I’ve seen the article on Moneyweb, they are mainly quoting a discussion document, and some of the provisions or proposals in the document may not necessarily be implementable without changing the legislation or changing the regulation.

I think it’s important that when you read the document, you read it with the eye that states that South Africa is a constitutional democracy, there are certain processes and certain things can’t just be changed. For example, you can’t just wake up and change the code and change the allocations of the point without a consultative process.

That’s what we’re waiting for. I think the dtic is going to release a document next week, and we’ll then engage with the document.

All the public, the entire public, will be allowed and given an opportunity to give input. I think once everyone has given input, that’s when they will have a final document. So you’ve seen there are many proposals.

There’s a proposal about 30 points, there’s a proposal about you get to Level 3 if you pay 3% of your turnover.

Those are still proposals as we speak. So as things stand now, nothing has actually happened and nothing has actually changed. The codes as we know them, they are still the way they are. They act as we know it is still the way it is until we follow the process as prescribed by the legislation.

JIMMY MOYAHA: Of course, Ntate Matabane, I want to get your thoughts on some of these proposals that have been put forward. Are we moving in the right direction? Are we channelling our efforts towards having a fund that makes sense?

Because one of the concerns that we raised, and one of the concerns that you and I spoke about the last time we spoke on this fund, was the fact that we needed to ensure that whatever proposals were put forward and whatever direction we took this fund forward in, it was inclusive and it met the objectives with which we had set out the fund to be. Are we moving in that direction?

KGANKI MATABANE: Yes, I think so.

When you look at the proposal on the appointment of board members and also on the calibre of the board members, because the appointment process is one thing which we agreed, the appointment can only be done by the [dtic] minister [Parks Tau] because otherwise there’s not any other board that can appoint a board of this nature.

As we said, the model that is being adopted is one of a solidarity fund.

So even if the minister is the one who’s going to appoint [the board], the majority of the people on the board will be coming from the private sector, and the majority of the people on that board will be what you call self-actualised individuals.

So those will be individuals who themselves are not looking for funding from the transformation fund to avoid a conflict of interest so that they can do their job without fear or favour.

It’s very, very important that the calibre of board members who are being put there are people with credibility, people who have achieved, people who are not going to be tempted by seeing the funds there because they will have achieved themselves. But the minister is the one who will appoint the board.

The board will be accountable to the minister and the NEF [National Empowerment Fund] because the NEF is running the process now, but the NEF is going to be what you call the midwife.

They are only running the process, but they are not going to play any role post this because remember, the fund will be what you call, amongst others, it will be what you call fund of funds, which means that even the NEF itself can apply to have access to the fund if they want to fund black people somewhere else.

So we think we are still on track.

The current enterprise development processes in different companies are not going to be disturbed because if a company decides to put the money in the transformation fund, it will almost transfer everything else, including the current service provider.

So we don’t want the process to change anything or to delay. We just want it to add on top of what is already there and what is already happening.

JIMMY MOYAHA: Speaking of what is already happening, Ntate Matabane, I want to get your thoughts around some of the commitments we’ve already seen.

We are aiming to get to R100 billion within the fund, but even before this fund has been launched, we’ve seen commitments from various companies, various stakeholders, and as it stands, I think the commitments are just shy of the R20 billion mark, which means we are well on our way to potentially getting to that R100 billion with the collaborations that are out there.

What are your thoughts around the early committers and what that says around the strength of this potential initiative?

KGANKI MATABANE: Remember, the R100 billion target is over five years. So if already before the launch, we’ve got more than R20 billion, it shows the confidence that corporate South Africa and everyone else in South Africa has got in this fund.

It shows that people realise that we actually need this fund. Hence, they’re making commitments even before the launch, it tells you that people are welcoming it. It shows you that once the launch has actually happened, we’re going to see a lot of companies coming on board.

Remember, some of these companies that are running enterprise development funds, their core business is not to run enterprise development.

So when they see that there’s a credible institution with credible leaders, with proper corporate governance that is running this, and then potentially they will be getting points like they are getting points now, most of the companies will then say, but we don’t necessarily want to be running enterprise development funds, let’s transfer this enterprise development fund to a competent organisation that can run this on our behalf. Then they can focus on their core business.

We’re happy with that – if it comes up and if it gives confidence to the process.

JIMMY MOYAHA: Making a progress in our efforts to establish a transformation fund in South Africa and outlining what that fund would potentially look like and potentially benefit the economy with.

We’ll leave the conversation on that note. Thanks so much to the chief executive at the Black Business Council, Kganki Matabane, for joining us to take a look at this and what we make of it.

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