BEE3: The Transformation Fund
Funding for township and rural black entrepreneurs.
BEE3 proposes a R120 billion fund that puts capital directly into the hands of black entrepreneurs in townships and the rural economy. It also offers companies a simple, voluntary alternative to the B-BBEE scorecard.
The case for change
What works, and what does not
B-BBEE has shifted ownership, built diversity in management and contributed to growth, and the policy should continue. Two problems remain.
For all businesses
Compliance is complex
The scorecard creates administrative cost and distraction. It deters investment and slows the formation of new businesses.
For black-owned businesses
Capital is hard to reach
Access to affordable capital remains a critical constraint, and the existing framework has not solved it.
BEE3 addresses both: a simple levy for companies that choose it, and a capable fund that places that capital with black entrepreneurs.
The proposal
Four pillars
01 Governance
A credible leader
The market will judge the fund by the reputation of the person who runs it, so it needs a leader whose standing inspires confidence.
02 Structure
Mirror the PIC
An arm's length fund modelled on the Public Investment Corporation, placed under the DTIC, with a mandate to fund black-owned venture capital funds.
03 Beneficiaries
Township and rural entrepreneurs
All funding goes to entrepreneurs in townships, low-income communities and the rural economy, through a simple and quick application process.
04 Funding
A turnover levy
Companies may choose a 3% levy on turnover, collected by SARS, in exchange for a Level 3 B-BBEE certificate.
The mechanism
How the levy works
Companies that choose the levy pay 3% of gross revenue, collected by SARS, and receive a Level 3 B-BBEE certificate in return. The levy is voluntary and sits alongside the existing scorecard rather than replacing it. Level 1 remains achievable by also meeting employment equity targets.
The levy satisfies the 51% black ownership requirement, enterprise and supplier development, and socio-economic development. Employment equity is still required separately, and employee share ownership is not included.
The levy is available only to companies that are not listed on the JSE. Listed companies continue to follow the existing scorecard.
The numbers
Why revenue, and where R120 billion comes from
Why revenue, not profit
Revenue is hard to manipulate. Profit can be reduced through accounting choices such as expense classification, transfer pricing and depreciation policy. SARS already tracks revenue for VAT. For a company with a 20% margin, the levy is modest:
| Revenue | R100 million |
|---|---|
| Profit at a 20% margin | R20 million |
| Company tax (27% of profit) | R5.4 million |
| Transformation levy (3% of revenue) | R3 million |
| Total tax | R8.4 million |
| Effective rate on profit | 42% |
Where R120 billion comes from
Formal business revenue in South Africa was about R12.7 trillion in 2022, of which unlisted companies accounted for about R8.7 trillion. If 15% of unlisted revenue is not B-BBEE compliant, a 3% levy on that base raises about R40 billion a year.
| Total formal business revenue (2022) | about R12.7 trillion |
|---|---|
| JSE-listed companies | about R4 trillion |
| Unlisted companies | about R8.7 trillion |
| Assumed non-compliant (15%) | about R1.35 trillion |
| 3% levy per year | about R40 billion |
| Over three years | about R120 billion |
By comparison, enterprise and supplier development contributions from the same companies are estimated at about R4 billion a year.
The fund
How the fund would be run
The fund would operate as a fund of funds under the DTIC, investing through a network of black-owned venture capital managers. The DTIC sets policy, professional managers make the investment decisions, and reporting is public.
Fund entrepreneurs
Capital goes to black-owned businesses in townships and the rural economy, not to government departments and not as grants.
Soft finance, not hand-outs
Interest-free loans and convertible notes, on better terms than commercial funding, so that capital is repaid and recycled into the next business.
Deploy, do not hoard
Fund managers are penalised for holding cash. The aim is to place capital with entrepreneurs who need it.
Formal submission
Kululeko's submission to the DTIC
On 4 March 2026 Kululeko made a formal submission to the DTIC on the funding mechanism for the proposed Transformation Fund. It argues that a levy on turnover is simpler, harder to game and raises more than a mechanism based on net profit after tax.
The submission urges the DTIC to build the fund on the PIC model, appoint a credible leader, focus funding on black entrepreneurs in townships, and simplify compliance so that more companies take part.
Summary
Summary recommendations
The recommendations to the DTIC, in brief.
Submission
Full submission to the DTIC
The formal submission of 4 March 2026.
White paper
Transformation white paper
The case for the Transformation Fund in full.