South Africa invests billions in transformation each year, yet the economy still lacks a significant pipeline of scaled black-owned enterprises. Enterprise and Supplier Development (ESD) programs were meant to build inclusive participation and transform ownership patterns, but too often, it remains a bureaucratic exercise rather than a catalyst for real growth. The link between policy ambition and entrepreneurial reality is still too weak.
Small, medium, and micro enterprises (SMMEs) are the backbone of South Africa’s economy. They create jobs, bring new ideas, and help communities grow. Nevertheless, despite years of ESD programs, many small businesses still struggle to access the funds and support they need. Organisations like the National Empowerment Fund (NEF) and the Small Enterprise Finance Agency (SEFA) have collected large sums from corporate ESD contributions. In 2023/24, NEF reported over R3.5 billion disbursed to black-owned businesses (NEF Annual Report, 2023/24). Yet, many small entrepreneurs, especially in townships and rural areas, remain left out.
The proposed R100 billion Transformation Fund, now under review by the Department of Trade, Industry, and Competition (DTIC), presents an opportunity to restore purpose to South Africa’s transformation agenda. The BMF supports the Fund’s goals, but success depends on transparent governance, local delivery mechanisms, and measurable developmental outcomes (National Treasury, 2024).
Why ESD is Not Reaching Small Businesses
ESD is designed to help black-owned businesses join supply chains and grow competitively under the B-BBEE framework (Broad-Based Black Economic Empowerment Act 53 of 2003) and Codes of Good Practice (2019). In implementation, however, progress has been uneven due to several structural and procedural barriers:
- Administrative bottlenecks: Application processes are lengthy and difficult to navigate, particularly for township or rural entrepreneurs (SEFA Annual Report, 2023).
- Unclear priorities: Many enterprises do not know what criteria to meet or which sectors receive priority.
- Fragmented institutions: Overlaps with programmes from DSBD, IDC, and provincial agencies, reducing impact.
- Weak accountability: Impact tracking is inconsistent, and few initiatives measure long-term (BMF, 2023).
The funding exists, what is lacking is the strategic coordination and urgency to ensure it reaches small businesses efficiently and fairly.
The Transformation Fund: Big Goals, Big Challenges.
The Transformation Fund, described in NEF’s March 2025 Concept Document, is a five-year, R100 billion public-private partnership aimed at empowering black-owned businesses across key sectors such as agriculture, ICT, tourism, and manufacturing, including informal traders and spaza shops (NEF, 2025). While the scale is promising, the fund faces operational and governance challenges:
- Centralised management could distance the Fund from regional business realities.
- Excessive compliance focus risks prioritising scorecard over sustainable business development.
- Governance safeguards must be strengthened to prevent political interference or misuse.
- Non-financial support, such as mentoring, technical guidance, and market access, remain poorly defined.
Coordination among delivery agents like SEFA, NEF, and IDC must be deliberate and outcome-orientated. A harmonised delivery model that encourages partnership rather than duplication is essential. Otherwise, the Fund could mirror past inefficiencies, benefiting a few while sidelining emerging enterprises (Phukubye, 2025; BMF, 2025).
Beyond Compliance: A New ESD Mandate
Real transformation cannot depend solely on meeting compliance metrics. It must create enduring value by developing entrepreneurial skills, expanding access to markets, and ensuring sustainable business growth.
The BMF recommends the following approach:
- Decentralised Delivery: Empower NEF, SEFA, IDC, and provincial agencies to manage funds at a local level with defined performance targets.
- Blended Finance Mechanisms: Adapt support to business maturity – grants for micro-enterprises, equity for growing businesses, and performance-linked loans for established entities (DTIC, 2024).
- Independent Governance: Boards should include entrepreneurs, finance specialists, and civil society members, ensuring independence from political or corporate influence.
- Outcome-Based Evaluation: Measure success through survival rates, job creation, skills transfer, and supply-chain participation.
- Public Awareness and Accessibility: Strengthen outreach and education so small business owners understand available funding and how to formalise operations (BMF, 2023).
The objective is not to adjust ESD at the margins but to reposition it as a strategic tool for economic restructuring.
Market Access: The Missing Link
Access to finance without access to markets leads to stagnation. South Africa’s public procurement, exceeding R1 trillion annually provides a major untapped channel for inclusive growth. Government and corporates must view ESD not as a compliance burden but as an investment in the country’s productive capacity.
Linking Transformation Fund beneficiaries directly to procurement networks, both private and public, would convert funding into genuine growth opportunities. This shift from grant dependency to market engagement ensures that black-owned businesses acquire customers, technical skills, and sustainable income streams (National Treasury, 2024).
The R100 billion Transformation Fund offers a critical opportunity to transform the structure of South Africa’s enterprise landscape. However, achieving this vision requires decisive implementation, not just ambitious design.
ESD must evolve from an administrative obligation into an instrument that drives measurable outcomes. Real transformation will come when supplier development delivers market access, when transformation funds build scale, and when agencies coordinate for shared impact.
To unlock inclusive economic growth, South Africa must move ESD from compliance to contribution, from intent to measurable performance.
About the Author
Vukosi R. Msimeki is a dedicated public servant and emerging leader in South Africa’s healthcare and business sectors. He serves as Executive Manager at Job Shimankana Tabane Tertiary Hospital, CEO of Msimeki Group, and Non-Executive Director for several organisations.
As Provincial Secretary of the BMF North West and member of the BMF Policy and Research Committee, he drives inclusive economic participation and SMME growth. He holds qualifications in Dietetics, Public Health, and Managerial Leadership programme form BMF. His work reflects a strong commitment to sustainable development and economic empowerment.
