Tau Presses on With Unfunded, Unsupported Transformation Fund

Statement by Toby Chance MP – DA Spokesperson on Trade, Industry & Competition:

The recently gazetted draft changes to the B-BBEE codes of good practice are proof that Minister Parks Tau is determined to carry on with his flawed so-called Transformation Fund. This Fund has no real funding, organised business has no interest in it, and Tau has not answered how he will protect the billions he says he can raise from political interference and poor governance. It must be opposed in the strongest terms.

These changes come just days after the Presidency cancelled, for the second time, the Transformation Fund launch, a clear sign that support for the flawed plan is draining away fast. The launch would have had to include representatives from the business community to have any credibility. BUSA, BLSA and other organised business bodies have already voiced their doubts about the financial and operational feasibility of the Fund.

The Fund is a classic case of putting the cart before the horse. What is required is a full review of BEE and its impact on investment, innovation, job creation, economic inclusion, small businesses and growth. Until we have that data, it makes no sense to create yet another state-run fund whose very foundations are built on the discredited BEE framework.

The DTIC has yet to give details of how the Fund plans to reach its target of R20 billion in its first year of operation. Tau wants to rely on borrowing R10.8 billion from the African Export-Import Bank. The DA has been clear: the Transformation Fund is not going to be profitable. That means any loan will have to be guaranteed by the Treasury, and the losses will ultimately be paid by the South African taxpayer. Tau must come clean: if Treasury has not guaranteed his loan, there is no fund, because businesses are not keen to foot the bill for the ANC’s ideological projects.

Answering oral questions in Parliament in November, Minister Tau made it clear the ANC is wedded to its discredited BEE policy. These draft codes would further entrench a broken system. The ANC points the finger for its failures at loopholes in the BEE regulations, enabling businesses to game the system.

Now, with a bigger emphasis on enterprise and supplier development in the codes, Tau is giving businesses a carrot in the form of added points for handing their money over to the Transformation Fund. This amounts to the state telling business: “we are better at spending your money than you are”, despite the dreadful track record of the state’s financing institutions.

The DA reiterates our call for a root and branch review of BEE and will continue to oppose the Transformation Fund. Funding decisions must be made by professional investment managers who target innovation, job creation and growth, not racial box-ticking.