Big business is to be asked to contribute 3% of their annual net profit to establish yet another fund for loans to small, medium and micro black enterprises – the fund will be managed by The National Empowerment Fund. Its not clear what constitutes a big business and no clarification as to whether this is voluntary or just another tax on South African Business.

The objective of the fund will be to make loans in the range of R250 000 and R75m – the fund will commence operations in July 2011. Companies contributing to the Fund will earn credits towards their Black Economic Empowerment Codes.

“The NEF will use the money from big businesses to help SMMEs to be well-developed and sustainable, operationally and financially independent,” said Mensah , who will administer the Fund.

This is another vehicle being created at the NEF to stimulate SME growth with a focus on black business , however initial response seems luke warm to the idea with black organizations welcoming the move with business being more restrained in their enthusiasm.

The idea does have several shortcomings and is unlikely to play a role in stimulating SME growth or the creation of more jobs , these include:

• Is it just another tax on business
• What criteria will be use to consider loans , if a proposal has profit potential then surely the market will allocate capital.
• Racially based – only targets black SMEs – Don’t bother applying for a loan if you are white , however SARS till wants your VAT and PAYE money paid on time.
• NEF is notoriously incompetent and will no doubt mismanage the Fund