President Cyril Ramaphosa says that black businesses in South Africa need the R100 billion transformation fund to boost the country’s economy – and private banks and businesses need to come on board.
Writing in his weekly letter to the nation, Ramaphosa said that Black Economic Empowerment (BEE) has successfully increased the wealth of black households in the country.
However, white households are still five times richer, which necessitates further state interventions to ‘close the gulf’, he said.
This can only be done by expanding opportunities through the country’s transformation laws, anchored in the Broad-Based Black Economic Empowerment Act and the Employment Equity Act.
“Transformation is not a favour. It is a necessity. The inequality of our past continues to shape the lives of millions of black South Africans,” he said.
The president also said it was a “false notion” that BEE was a cost to the economy and a choice between transformation and economic growth.
“Economic growth without transformation entrenches exclusion, and transformation without growth is unsustainable,” he said.
“Our task is to ensure that we pursue both growth and transformation in concert, with more vigour and with greater effect.”
Ramaphosa also slammed those who are challenging the country’s BEE and transformation laws in court, saying they are the ones who benefited from the country’s “legacy of exclusion”.
He said the government would pursue ways to further entrench BEE and transformation, including establishing the R100 billion Transformation Fund.
The fund is expected to make R20 billion a year available for black enterprises, funded by other profitable companies in the country.
The government plans for South African businesses to pay 3% of their annual net profit after tax into the fund, with more funding coming through the Competition Commission’s public interest participation.
In addition to contributing to the fund, Ramaphosa said the private sector should also help black businesses more.
He said private banks, in particular, have the resources to “make the greatest impact for black businesses,” adding that these banks need to review their lending practices.
“The private sector should use their supply chains far more deliberately to empower many more black-owned businesses, not just to improve their BBBEE scorecard, but to grow and diversify their supplier base,” the president noted.
“I call on all South Africans, and in particular the private sector, to recommit to economic transformation.”
Who really benefits from BEE
President Cyril Ramaphosa and Trade and Industry Minister Parks Tau are big proponents of a private-sector-funded R100 billion transformation pot. Despite Ramaphosa’s position that BEE serves the majority, the true benefactors of South Africa’s empowerment policies have come into question.
Critics have said that the reason the state defends BEE and transformation policies so militantly is because they are part of the very few who actually benefit from the programmes.
Research conducted by Professor William Gumede of the Wits School of Governance posited that BEE has led to increased poverty, unemployment, and inequality in South Africa, with only a few really benefiting.
Gumede stated that the government had asked him to conduct an assessment of black economic empowerment in South Africa.
He said it was very clear that BEE only benefits a tiny group of politically connected people linked to the African National Congress (ANC) and trade unions.
“Conservatively, R1 trillion has been moved between under 100 people since 1994. The same people have been empowered and re-empowered over and over,” he said.
“South Africa’s BEE model has created a model of corruption because people set up companies just to get a contract.”
Efficient Group chief economist Dawie Roodt has also been highly critical of BEE and Ramaphosa in particular.
He said that Ramaphosa, a rand billionaire, had become incredibly wealthy through BEE, not through building successful businesses.
The president was previously involved in various companies, including the Shanduka Group, and held directorships in prominent firms like Bidvest, MTN, and Mondi.
He exited his business interests when becoming president, and continued to oversee years of economic stagnation, where South Africans at large became poorer.
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Ramaphosa Calls on Private Banks and Businesses to Support BEE and Economic Transformation
President Cyril Ramaphosa has emphasized the critical need for black-owned businesses in South Africa to receive support from the proposed R100 billion transformation fund, aimed at revitalizing the nation’s economy. He urged private banks and companies to actively participate in this initiative.
In his weekly letter to the nation, Ramaphosa acknowledged that Black Economic Empowerment (BEE) policies have contributed to growing the wealth of black households across the country.
Nonetheless, he highlighted the stark reality that white households remain, on average, five times wealthier than black households — a disparity that calls for further government action to bridge the economic divide.
According to Ramaphosa, the way forward lies in expanding opportunities through existing transformation legislation, primarily the Broad-Based Black Economic Empowerment Act and the Employment Equity Act.
“Transformation isn’t a favor. It’s an absolute necessity,” Ramaphosa stated, noting that the lingering effects of South Africa’s unequal past continue to impact millions of black citizens.
He also challenged the misconception that BEE hampers economic growth or that it represents a choice between growth and transformation.
“Economic growth without transformation deepens exclusion, while transformation without growth cannot be sustained,” he explained.
“Our responsibility is to pursue growth and transformation together, with renewed energy and greater impact.”
Ramaphosa further criticized those who have taken legal action against the country’s BEE and transformation policies, arguing that these individuals are typically those who have benefited from a system built on exclusion.
He confirmed that the government intends to strengthen BEE measures further, including the launch of the R100 billion Transformation Fund.
This fund is projected to allocate around R20 billion annually to black-owned enterprises, financed by contributions from profitable companies within South Africa.
The government’s plan requires South African businesses to contribute 3% of their annual net profit after tax to the fund, with additional resources coming through the Competition Commission’s public interest interventions.
Beyond contributing financially, Ramaphosa called on the private sector to provide more direct support to black businesses.
He singled out private banks, noting they possess the financial capacity to create a significant positive impact and encouraged them to rethink their lending criteria.
“The private sector must leverage their supply chains intentionally to empower a broader range of black-owned businesses — not merely to enhance their BBBEE scorecards, but to expand and diversify their supplier networks,” the president added.
He concluded by urging all South Africans, especially those in private enterprise, to reaffirm their commitment to economic transformation.
Examining the Real Beneficiaries of BEE
While President Ramaphosa and Trade and Industry Minister Parks Tau champion the concept of a private-sector-funded R100 billion transformation fund, questions have been raised about who truly benefits from South Africa’s empowerment policies.
Critics argue that the government’s staunch defense of BEE is partly because the policies primarily enrich a small, politically connected elite.
Professor William Gumede of the Wits School of Governance conducted research that suggests BEE has inadvertently contributed to rising poverty, unemployment, and inequality in South Africa, benefiting only a select few.
Commissioned by the government to assess the impact of black economic empowerment, Gumede concluded that BEE predominantly advantages a tiny group linked to the African National Congress (ANC) and affiliated trade unions.
“Conservatively speaking, nearly R1 trillion has been transferred among fewer than 100 individuals since 1994,” Gumede remarked. “These same individuals have been empowered repeatedly.”
He warned that South Africa’s BEE framework has bred corruption, with companies being formed primarily to secure contracts rather than to build sustainable businesses.
Dawie Roodt, chief economist at Efficient Group, has also voiced strong criticism of BEE and of Ramaphosa personally.
Roodt pointed out that Ramaphosa, a billionaire in rand terms, accumulated his wealth largely through BEE-related deals, rather than by founding successful companies.
Before becoming president, Ramaphosa held stakes in various enterprises, including the Shanduka Group, and sat on the boards of major corporations such as Bidvest, MTN, and Mondi.
Although he divested from his business interests upon assuming the presidency, the country has since experienced years of economic stagnation, with many South Africans facing worsening financial hardship.
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