NTSAPHOKAZI MADYIBI: Transformation Fund — real growth or political gimmick?

SA continues to champion small businesses and entrepreneurship as a silver bullet for economic growth, yet the government has failed to develop industries that drive long-term progress in emerging markets.

During his state of the nation address the president unveiled an ambitious five-year plan for a R20bn Transformation Fund to assist black-owned and small businesses to drive economic inclusion and entrepreneur empowerment. Trade, industry & competition minister Parks Tau has since initiated the process of setting up this fund, which is now open for public comment.

The fund is punted to contribute to economic growth by funding small businesses in legacy sectors such as manufacturing, agriculture and tourism, but it fails to look at what other industries can be unlocked to drive growth, such as the green economy (with a focus on waste management) and infrastructure development (infrastructure is crumbling across the country).

This approach keeps us trapped in legacy industries established during colonial and apartheid eras, rather than fostering new sectors that can drive future growth. The government continues to do the same thing expecting different results. The question must be asked: how will this Transformation Fund be different from existing broad-based BEE policies, which were also put in place to support black entrepreneurs?

While the intention of BEE was noble, the policy has failed to free the majority of black people from poverty. It has made strides in ensuring that there are opportunities for black people to be in executive positions, but this doesn’t translate to transformation as far as ownership is concerned. Instead, it has been advantageous to those “black entrepreneurs” who are connected to politicians.

Promoting entrepreneurship (and SMMEs) without investing in real training and development sets entrepreneurs up for failure. Given the past behavioural patterns of the ANC we ought to be sceptical about the true intentions of this fund.

Another red flag is the question of how it will be managed, how feasible the fundraising process will be and why is it not focusing on new emerging industries that can unlock real growth and job creation, particularly for low skilled workers.

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We can throw as much money as we have in supporting entrepreneurship and small businesses, but if there is no deliberate co-ordination of outcomes we are just wasting resources. To realise the goal of growing the economy there must be deliberate communication and insights from government, institutions of higher education and industry.

The role of the government is to create an enabling environment where innovation and transformation (with new industries) can happen. SA is paraded as having strong educational institutions, but we don’t see the knowledge produced working for the benefit of the country.

Research & development is crucial for any country, particularly in identifying trends and creating goods, services and industries that align with global needs. Industry has the financial muscle to support emerging sectors, but its role is to empower entrepreneurs not compete with them.

While the Transformation Fund seems like a good idea on paper, it lacks the ambition to introduce new industries to the economy, drive innovation and train the individuals who could be drivers of these businesses. Studies have shown that most entrepreneurs fail do so in the first three years of running a business, yet the government has still not prioritised entrepreneurial education in schools and universities.

If we want to see real growth we need to know what outcomes we are looking for, not simply raise funds that will go to waste because there is no co-ordinated effort to change the culture of entrepreneurship in SA.

South Africans are resilient, but resilience alone won’t drive economic growth. Without serious investments in education and innovation the Transformation Fund risks becoming just another wasted opportunity.

• Madyibi, a former public candidate at Rise Mzansi, is founder of citizen engagement organisation Vuka Politics.