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South Africa’s black business lobby hails Tourism Equity Fund as a ‘good start’

By Xolisa Phillip, in Johannesburg
Posted on Monday, 8 February 2021 16:42

Virus Outbreak South Africa Tourism
Tour operators take part in a protest in Cape Town, South Africa, Friday July 31, 2020. Various tourism operators staged a slow drive protest as they struggle to make ends meet under the COVID-19 lockdown regulations. (Photo/Nardus Engelbrecht)

The establishment of South Africa’s Tourism Equity Fund (TEF) is a good start to advance black economic empowerment in the sector, says Black Business Council (BBC) CEO Kganki Matabane.

The BBC is the largest black business umbrella body in South Africa, representing professionals across sectors, business associations and chambers.

The Tourism Business Council of South Africa (TBCSA), an organisation comprising established players, including hotel groups and rental car companies, says the fund is “a step in the right direction,” according to CEO Tshifhiwa Tshivhengwa.

The fund’s goal is to provide funding for projects. “By providing access to finance for black-owned commercially viable tourism projects, the TEF is intended to address one of the major challenges to transformation of the tourism sector,” the tourism department explained.

The funds will be in the form of debt, concessionary loans and grants.

Tourism engine

Tourism is typically one of the biggest contributors to South Africa’s GDP. It is also one of the sectors that has experienced positive growth since 1994. Figures from Statistics South Africa (Stats SA) show that in 2018, non-resident visitors to the country spent R120bn ($8bn) within its borders.

In addition, South Africa has a “positive tourism trade balance with the rest of the world,” according to Stats SA. This means foreigners spend more money in the country than its citizens fork out when on overseas jaunts.

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The R1.2bn TEF has been set up by the tourism department in partnership with the Small Enterprise Finance Agency (SEFA), a subsidiary of the Industrial Development Corporation.

SEFA reports to the small business department. The initiative is part of President Cyril Ramaphosa’s economic reconstruction and recovery plan. Ramaphosa was also one of the officials at the fund’s virtual unveiling last Tuesday 2 February.

Transformation divide

However, detractors such as Afrikaner groups Solidarity and AfriForum have threatened court cases against the tourism minister, citing the fund’s “exclusionary” criteria. A key funding requirement is that entities be 51% black owned.

“We have welcomed it. Our president [Sandile Zungu] gave a few words. The other part we like is the transformation,” the BBC’s Matabane tells The Africa Report.

“If you look at tourism, it’s one of the least-transformed sectors in the country. We think it [fund] will bring much-needed transformation, where young people will benefit and buy stakes in companies,” he adds.

Matabane also foresees the fund assisting in recovery efforts because “there are a lot of companies struggling now. The injection will assist … to create jobs.”

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“It’s a good start – R1.2bn – because in the absence of nothing, you need … [a] kickstart. In the next six months or so, we will sit down and do a review with SEFA and the departments of tourism and small business,” says Matabane.

“If the uptake is huge and the money gets depleted, then we will have the right to go to National Treasury and say increase the amount allocated,” he adds.

The fund is intended for medium and small businesses.

“You are talking about people who’ve got a tour company. People who’ve got a B&B, here and there, and all those types,” says the BBC CEO.

Inclusivity by numbers

During the first three-year period, the tourism department will capitalise the fund to the tune of R540m. Sefa will contribute R120m and commercial banks participating in the programme will make provisions for R594m. Collectively, this makes the R1.2bn.

  • The minimum project value for applications is R10m. Qualifying ventures include travel and related services, according to the tourism department.

The TBCSA’s Tshivhengwa said: “Inclusivity and growth of the tourism sector has always been a priority for us. We believe this fund will do that, by supporting entrepreneurship and investing in transforming the … [sector].”

“The launch of this initiative is a step in the right direction and shows opening the … [sector] to new players is a prerogative to our government,” according to Tshivhengwa.

Threat of court challenge looms

But Solidarity and AfriForum do not agree.

Tourism minister Mmamoloko Kubayi-Ngubane revealed in a statement that hardly a week after the fund’s unveiling, she received an attorneys’ letter from the two organisations in which Solidarity and AfriForum “are tacitly threatening legal action against the criteria that will be used to award funding to applicants.”

“[They] … demand confirmation by no later than Tuesday 2 February 2021, that the operationalisation of the … [fund] be suspended claiming ‘it is exclusive on the basis of race, and discriminates without any legal or justifiable basis’,” according to the statement.

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In 2020, Solidarity and AfriForum lost multiple court attempts to challenge the implementation of the Covid-19 Tourism Relief Fund.

“The minister is considering the letter and will respond in due course,” according to the tourism ministry, which administered the relief fund.

Matabane says although South Africa’s empowerment legislation had set-asides for transformation purposes, this was not done in a way which would exclude white people.

“There is no way to exclude any race. People are trying to delay the implementation of transformation,” concludes Matabane.