Industrial multinationals in SA: 2026 is the year you rethink your ESD strategies
By Nadia Rawjee (Uzenzele) and Marc Ashton (Decusatio)
As we move into 2026, the South African regulatory landscape is reaching a critical inflection point. For multinational corporations (MNCs) operating in the industrial and manufacturing sectors, the “business as usual” approach to Broad-Based Black Economic Empowerment (B-BBEE) is no longer a viable long-term strategy.
The Department of Trade, Industry and Competition (the dtic) has recently gazetted far-reaching amendments to the B-BBEE Codes of Good Practice. The most significant of these is the introduction of the Transformation Fund – an alternative mechanism where companies can contribute 3% of Net Profit After Tax (NPAT) to a centralized pool in exchange for 20 ESD points. While this offers a “clean” compliance path, it masks a deeper, structural crisis in our economy: the steady de-industrialization of South Africa and the hollowing out of our local manufacturing capacity.
The “services trap” in ESD deployment
Historically, multinational ESD budgets have followed the path of least resistance. Because South Africa has lost significant manufacturing muscle over the last two decades, industrial giants often find their supply chains dominated by service-based enterprises. Consequently, ESD spend gravitates toward transport, stationery, IT, marketing, and HR services.
While these businesses are vital to the economy, they operate in highly commoditised, high-competition fields. For the MNC, “developing” these suppliers often leads to a cycle of dependency where the beneficiary relies on soft funding and ongoing grants to survive. When the grant ends, the business stalls.
Take the medical device sector as a prime example. Currently, the market is dominated by major players from the US and Europe. Despite our sophisticated healthcare system, there is a glaring absence of a local manufacturing value chain. We are effectively subsidizing service-level compliance while importing 90% of our high-value medical technology.
The automotive OEM warning sign
The South African automotive value chain – the crown jewel of our manufacturing sector – is now under significant threat. While the government has historically incentivised Original Equipment Manufacturers (OEMs) to build locally, shifting global markets and crumbling domestic infrastructure have put us on the back foot. We are being disrupted by aggressive imports that our local capacity simply cannot match.
We must, however, commend the Automotive Industry Transformation Fund (AITF). They have been bold enough to move beyond “tick-box” compliance. By recognising the importance of long-term investment and deeply understanding the local value chain, the AITF provides a blueprint for how collective industrial action can stem the tide of de-industrialization.
The R50m turnover threshold conundrum
One of the most persistent structural challenges in the ESD ecosystem is what we call the “R50m Conundrum.” To scale a manufacturing business, you need massive capital injection. Yet, the current B-BBEE framework classifies Qualifying Small Enterprises (QSEs) as those with a turnover below R50 million. Organizations are often wary of supporting a beneficiary to scale beyond this threshold because once the beneficiary breaches R50 million, the sponsoring entity loses the enhanced B-BBEE recognition associated with QSEs.
This creates a perverse incentive: it is safer to keep a service provider small and compliant than to help an industrialist become a mid-cap powerhouse. In 2026, we must ask: Are we measuring transformation by the size of the impact, or the size of the scorecard?
Is there capital for Black Industrialists?
The answer is an unequivocal yes.
There is a persistent myth that there is no money for black-owned manufacturing. In our experience, the capital exists. Through our fundraising activities, we have successfully unlocked between R400m and R600m per project by blending:
- Government Grants & Incentives (dtic, AIS, etc.)
- Development Finance (IDC, DBSA)
- Private Capital & ESD “Soft” Loans
The funding is not the bottleneck. The bottleneck is an ecosystem that is not prepared to invest for the long-haul. Developing industrial capacity does not happen over a 12-month fiscal cycle; it requires 5-to-10-year horizons and off-take agreements that are not wholly dependent on the “handout” nature of traditional ESD.
Beyond compliance
Industrial multinationals need to stop viewing ESD as a “tax” and start viewing it as Industrial Risk Management.
If we do not build local capacity, your global supply chain remains vulnerable to local infrastructure failure and currency volatility. To develop black-owned manufacturing, we need a “Total Capital” approach:
- Support via ESD for early-stage tooling and capacity.
- Leveraging DTIC grants focused specifically on industrialization.
- Unlocking private capital for scaling.
Most importantly, these emerging industrialists need access to professionals who can guide them through the funding readiness and capital raising journeys. You cannot expect a brilliant engineer or manufacturer to also be a master of the complex “capital stack” required to build a R100m+ factory.
In 2026, the boldest multinationals will be those who stop funding stationery and start funding the factories of the future. The funding is there. The policy is shifting. The only thing missing is the long-term commitment to build.
Nadia Rawjee is a Director at Uzenzele Holdings – a specialist capital raising consultancy. Marc Ashton is CEO of advisory firm Decusatio and heads up Decusatio Investor Communications.
