Ido Lekota sat down with NEF Chief Executive Officer Mziwabantu Dayimani for a candid chat about the proposed Transformation Fund
The slow pace of transformation of the South African economy to bring about meaningful participation of black people continues to be a key challenge where ownership and control of most enterprises rest in the hands of the minority, despite various reforms of the B-BBEE Act and its Codes of Good Practice.
To redress the untenable situation, the government is proposing the establishment of R100 billion aggregated Fund to support the ever-growing funding requirements for businesses owned and managed by black entrepreneurs to propel inclusive growth across various sectors of South Africa’s economy. The Transformation Fund, capitalised through government allocation, the private sector, and international funders, is anticipated to be capitalised at R20 billion per annum over a five-year period.
Essentially, the Fund is aimed at moving the needle towards economic transformation through the provision of critical finance, mentorship, and business development support while focusing on sectors and enterprises most in need of the requisite transformation.
It would do so by providing critical financing, mentorship, and business development support, focusing on sectors and enterprises most in need of transformation. Additionally, it would promote greater compliance with B-BBEE requirements and create a more sustainable and inclusive economic ecosystem, ultimately contributing to the redress of past inequalities.
The National Empowerment Fund—regarded within government circles as the thought leader and driver in promoting and facilitating black economic empowerment—has been earmarked as the appropriate manager for the proposed Transformation Fund.
To find out more, BBQ Magazine engaged NEF Chief Executive Officer Mziwabantu Dayimani, picking his brain about the Fund’s vision, possible interventions, and its potential as an economic disruptor.
What mechanisms will be in place to ensure that the Draft Transformation Fund does not repeat past failures of B-BBEE—where benefits were concentrated among the politically connected?
The Fund is designed to be overseen by a Board of Directors comprising representatives from both the public and private sectors. The Board will operate in accordance with a formal Charter and will be guided by corporate governance best practices, with a clear separation of responsibilities. Its primary function will be to provide strategic oversight and ensure the integrity of the Fund’s implementation. In support of the Board, an Investment Committee—also inclusive of private sector representatives—will be established to evaluate and approve funding decisions. The Fund Manager will be responsible for conducting thorough due diligence on all prospective investments and will submit recommendations to the Investment Committee for final approval.
Will there be independent oversight (e.g. civil society, business associations) to monitor fund allocation and impact?
Yes. The Board will be composed of individuals with the necessary expertise from both the public and private sectors and will operate in accordance with a Board Charter and governance best practices. The private sector will also be represented on the Investment Committees, which will make funding decisions.
What KPIs will be used to measure the Fund’s success beyond just financial disbursements?
The Fund will incorporate both pre-investment and post-investment support structures. Pre-investment services will include business training for investees, while post-investment services will offer mentorship and market access. One of the key measures of success will be the impact achieved, and independent service providers will be engaged to assess and report on the Fund’s outcomes.
Will there be regular public reporting of the Fund’s performance—including failures and lessons learned?
Yes. The Fund will host an annual stakeholder webinar in the form of an AGM to present its performance, including lessons learned. In addition, the Fund’s activities will be subject to annual audits to ensure transparency and accountability.
What measures are in place to prevent the Fund from being used as a tool for patronage rather than genuine empowerment?
An Investment Charter will govern the Fund’s activities, ensuring that decisions are based on clear, objective criteria. Furthermore, the inclusion of private sector representatives on the Investment Committees will provide additional layers of transparency and integrity in the decision-making process.
How will the Fund tackle, for example, the dominance of retail chains like Pick n Pay and Checkers in the township—which stifle local black-owned businesses?
The Fund is designed to support the development of black-owned malls and retail centres, particularly those based in townships. It will also offer funding to township-based franchisees, ensuring that ownership and benefit remain local. Importantly, the township retail space is currently over-traded and largely dominated by foreign nationals. This Fund aims to change that by promoting local ownership and inclusive participation in the township economy.
How will the Fund ensure that the funded businesses move beyond survivalist models to sustainable, scalable enterprises?
The Fund will provide comprehensive post-investment support, including turnaround strategies, restructuring services, and ongoing monitoring. Each investee will be assessed against pre-agreed key performance indicators (KPIs) on a monthly basis. Where challenges arise, the Fund will implement targeted interventions to support the enterprise’s sustainability and growth.
What non-financial support (e.g. mentorship, market access, supply chain integration) will the Fund provide to beneficiaries?
The Fund is designed to support the development of black-owned malls and retail centres, particularly those based in townships. It will also offer funding to township-based franchisees, ensuring that ownership and benefit remain local. Importantly, the township retail space is currently over-traded and largely dominated by foreign nationals. This Fund aims to change that by promoting local ownership and inclusive participation in the township economy.
Will the Fund support policy interventions (e.g. zoning laws and preferential procurement) for township businesses?
Yes. The Fund will assist SMEs with compliance training and provide support in accessing government programmes and interventions that facilitate more favourable operating environments for township businesses.
What safeguards are in place to prevent international funders from imposing conditions that undermine radical economic transformation?
While the NEF welcomes international partnerships that align with national development priorities, all funding arrangements must reinforce South Africa’s commitment to inclusive growth and economic transformation. Any funder whose conditions—such as sovereign guarantees—conflict with these principles will be respectfully declined.
What key failures have been identified in the NEF’s previous funding models, and how will those be avoided to enhance the disruptiveness of the Fund?
The Fund will include project preparation support to ensure that all initiatives are well developed and ready for funding. This approach is intended to improve the quality of investment proposals, reduce risk, and enhance overall bankability. Additionally, the funding structure will incorporate grants and other concessionary funding instruments to avoid over-gearing and to give businesses the financial space to grow sustainably.
What percentage of NEF-funded businesses have historically succeeded versus failed; and what are the main reasons for the prevailing situation—how does the NEF see the Fund impacting this?
The NEF currently reports an impairment rate of approximately 30%, which reflects the developmental nature of its mandate and the inherent risk in funding early-stage businesses. Despite this, the NEF maintains a strong collection rate of 80% on retained instalments and achieves a return on investment of 9.5%. Since its initial capitalisation of R2 billion, the NEF has grown its balance sheet to over R14 billion, while delivering over two decades of clean audit outcomes. The Transformation Fund will use a blended finance model combining grants, ESD funding, and concessionary instruments. This structure is expected to reduce financial pressure on businesses and significantly improve their sustainability and success rates.
As Fund Manager, how will the NEF ensure that the Fund achieves its potential disruptive effect?
The Fund will be governed by a formal Investment Charter and overseen by an Investment Committee that includes private sector experts. This structure will ensure that all investment decisions are based on sound business principles and aligned with the Fund’s transformative objectives.
Ido Lekota is a former Sowetan Editor and regular contributor to BBQ Magazine.
Transformation
Transformation
- Essentially, the Fund is aimed at moving the needle towards economic transformation
