Ann Bernstein on the R100bn Transformation Fund - it’s wrong, wrong, wrong.

South Africa’s proposed R100 billion Transformation Fund aims to boost black-owned businesses, but experts warn it’s built on vague assumptions and misplaced trust in state efficiency. Ann Bernstein of the CDE advocates for evidence-based policymaking and greater private sector involvement to achieve real, sustainable economic transformation and inclusive growth..Sign up for your early morning brew of the BizNews Insider to keep you up to speed with the content that matters. The newsletter will land in your inbox at 5:30am weekdays. Register here.Support South Africa’s bastion of independent journalism, offering balanced insights on investments, business, and the political economy, by joining BizNews Premium. Register here.If you prefer WhatsApp for updates, sign up to the BizNews channel here.The auditorium doors will open for BNIC#2 on 10 September 2025 in Hermanus. For more information and tickets, click here..Watch here.Listen here.BizNews Reporter .South Africa’s government is once again pushing forward with an ambitious economic plan - this time in the form of a proposed R100 billion Transformation Fund aimed at promoting black-owned small businesses. But according to Ann Bernstein, head of the Centre for Development and Enterprise (CDE), the plan is riddled with vague goals, untested assumptions, and a dangerous overreliance on the state’s ability to allocate capital effectively.In a recent interview with Alec Hogg, Bernstein outlined deep concerns about the fund's foundation and the lack of a solid evidence base to support it. She described the government’s concept document as worryingly unclear, with more questions than answers. “We don’t know if this is an endowment fund or a short-term pot of cash. We don’t even know if it’s exclusively for small business,” she explained.Although pitched as a mechanism for inclusive growth, Bernstein suggests that the fund leans heavily on ideology over practicality. Crucially, the document makes no meaningful attempt to analyse why current programmes such as the National Empowerment Fund or the Black Industrialist Fund have failed or succeeded. Instead, it assumes - without scrutiny - that a mega-fund run by the state is the right solution.Underlying all of this is a deep-seated faith in state capability, something Bernstein finds mystifying given the widespread acknowledgement of South Africa’s weak and often corrupt governance structures. “People in government will tell you the state is weak and ineffective,” she said, “and then, in the same breath, propose it as the lead actor for solving our biggest economic challenges.”The proposed fund also threatens to derail what may be one of the few relatively successful outcomes of Black Economic Empowerment (BEE) -private sector-driven supply chain integration. Bernstein pointed to data showing that roughly R26 billion a year is already spent by major companies mentoring and developing black-owned suppliers. Yet the Transformation Fund envisions redirecting this into a centralised pool, with the risk of it becoming mandatory through revisions to BEE codes if companies don’t comply voluntarily.“Why take something that’s working - real business activity that is sustainable - and dismantle it in favour of a bureaucratic gamble?” she asked.The broader problem, Bernstein argues, lies in the failure to conduct rigorous, evidence-based policy design. The CDE is calling for a full-scale audit of what has and hasn't worked over the last two decades of empowerment policy. “We need to understand the impact - both positive and negative - of existing interventions. Only then can we design something better.”Some data, though contested, paints a stark picture. A recent report by the Free Market Foundation and the Solidarity Research Institute estimated that BEE policies, as implemented, may have cost the country four million jobs and suppressed economic growth. Bernstein hasn’t yet reviewed the report, but agrees that the concerns it raises deserve further investigation.Overregulation, inefficient procurement policies, and ideological rigidity are other key barriers to small business growth. According to the OECD, South Africa has the worst regulatory environment for entrepreneurship among the countries it assessed.Bernstein believes the private sector should play a leading role in nurturing small businesses. She proposes a bold alternative: redirect half the state’s annual R6 billion spend on small business support into a competitive, transparent scheme managed by experienced private entities. These companies would be required to measure and report on their impact, bringing accountability and real-world insights into the mix.Ultimately, Bernstein says South Africa must get serious about inclusive growth - but not through unproven mega-funds or misguided state faith. “We need a dramatically expanded structure of opportunity,” she said. “Not just more spending, but better, smarter ways to support the emergence of a black middle class and entrepreneurial sector that is truly sustainable.”Without economic growth and a functional education and skills pipeline, transformation will remain a slogan - not a reality.

Ann Bernstein on the R100bn Transformation Fund - it’s wrong, wrong, wrong.

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