Back in 2015, I explained how government funding programs were being increasingly aligned to Broad-Based Black Economic Empowerment (B-BBEE) compliance and why I expected that trend to intensify.
Last year, I predicted that majority black ownership would become a mandatory qualification requirement for government funding, regardless of an applicant's commercial merit or social impact.
Lo and behold, the future of government funding has arrived.
A few weeks ago, the Department of Tourism announced the Tourism Equity Fund (TEF). Just like its predecessor, the Tourism Transformation Fund (TTF), the TEF is a grant funding program reserved exclusively for black entrepreneurs.
However, while the TTF was designed to help sustainable black-owned enterprises scale further, the TEF will provide black entrepreneurs with acquisition finance. This is problematic for several reasons.
For starters, the TEF will do nothing to drive economic growth. It will simply transfer existing jobs, income streams, and assets from one set of owners to another.
Furthermore, the timing of the TEF couldn't be more repugnant. The tourism industry has been devastated by COVID, yet relief funding (in the form of the Tourism Relief Fund) was limited to black-owned enterprises. Introducing an acquisition fund on the back of these developments appears to be a brazen attempt to extort discounted buyouts from financially distressed companies.
Thankfully, the TEF has not escaped notice. Daily Maverick published an extensive critique, while threats of legal action from Solidarity and AfriForum precipitated the TEF's temporary suspension. Minister of Tourism Mmamoloko Kubayi-Ngubane has predictably accused critics of attempting to "stifle transformation".
So far, none of this is particularly surprising. Anyone who has been paying attention to government funding trends over the last several years would have anticipated this. However, there is a disturbing footnote to this story that appears to have escaped everyone's attention.
Buried in the TEF brochure published by the Small Enterprise Finance Agency (SEFA) is the following concerning provision: "we might require step-in rights if we are concerned that the business may fail."
So let's get this straight:
1. Government deliberately excluded some enterprises from relief funding.
2. It's planning to use taxpayer money to finance acquisitions in the same sector.
3. It can potentially take over the acquisitions that it funds.
This isn't transformation. It's a land grab.