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The Democratic Alliance has criticised the Department of Trade, Industry and Competition’s (DTIC ) new R100 billion ‘Transformation Fund’ which will tax private sector profits to fund black-owned businesses in the country exclusively.
The plans are still in the discussion stage and will need further engagement, but DTIC Minister Parks Tau said the idea is to fund would be financed through the private sector, and support black-owned businesses and Small, Medium, and Micro Enterprises (SMMEs).
This would be done through existing Broad-Based Black Economic Empowerment (BBBEE) regulations, but would effectively force companies to contribute proportions of their finances to the fund.
Tau says the Enterprise and Supplier Development (ESD) element of the B-BBEE Codes of Good Practice already mandates that companies allocate 3% of their annual net profit after tax to developing black-owned suppliers. This ‘new’ fund would just be the vessel through which those funds move.
Not happy with just local companies funding the plan, multi-national companies who refuse to hand over equity to black partners will also be expected to contribute “up to 25% of the value of their South African operations as an ‘equity equivalent’ cash contribution”.
The DA is not happy, calling it a “new tax on businesses”, with the Sakeliga commenting that it would chase away more investment than it brought in.
Besides the insult of added taxes, there are also serious, and justified, concerns over the government managing yet another fund.
The DA’s spokesperson on the DTI portfolio, Toby Chance, said that using the BBBEE codes to impose new rules and possible penalties on the private sector is uncompetitive and illegal. According to BusinessTech, Chance said that the fund would also have to go through Cabinet, as it is essentially a new tax.
Chance flagged the fund in November 2024 already when it was first proposed during the department’s revised Annual Performance Plan presentation to the Portfolio Committee, saying it was pretty much “race-based financing through a combination of grants, equity and loans”.
Words like ‘new taxes’ make everyone nervous, but thankfully we have Galbraith & Rushby in our corner to navigate – and mitigate – whatever the government throws at us. Their experts offer professional tax compliance and advisory services to individuals and businesses, and with practical, in-depth tax knowledge, they’d be able to help you navigate whether madness the government conjures up next.
[Source: BusinessTech]
