R1.2bn tourism transformation fund to be rolled-out 'with transparency and accountability'

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Minister Mmamoloko Kubayi-Nguban cleared up any confusion which might exist about the aim of the Tourism Equity Fund. (Supplied)
Minister Mmamoloko Kubayi-Nguban cleared up any confusion which might exist about the aim of the Tourism Equity Fund. (Supplied)
  • President Cyril Ramaphosa announced a new R1.2 billion Tourism Equity Fund in January this year.
  • Tourism Minister Mmamoloko Kubayi-Ngubane told Parliament that it is not a relief fund, but a fund aimed at transformation in the industry.
  • The aim of the fund is to promote the participation of 51% black-owned enterprises within the tourism industry in a commercially viable and sustainable way.

While implementing the new Tourism Equity Fund, the Department of Tourism undertakes to continuously learn lessons and respond to any irregularities and challenges timeously by ensuring transparency, accountability and sustainability, Tourism Minister Mmamoloko Kubayi-Ngubane said on Tuesday.

She was part of a delegation briefing Parliament's Portfolio Committee on Tourism on the new R1.2 billion fund announced by President Cyril Ramaphosa in January. The Small Enterprise Finance Agency (Sefa), which will manage the fund on behalf of the department, made presentations to the committee as well.

The minister cleared up any confusion which might exist about the aim of the Tourism Equity Fund.

"This fund is not a relief fund. This is a transformational fund, an equity fund that manages to assist us with transformation in the tourism industry. Reports done in 2015 and 2018 indicate that there was a regression in transformation in the industry," she said. 

"Other reports show that black women remain the face of poverty in SA and will continue to remain that and even become worse off with, no prospects of getting out of poverty unless government intervenes."

The aim of the fund is to promote the participation of 51% black-owned enterprises within the tourism industry in a commercially viable and sustainable way. Beneficiaries will include enterprises in rural and township areas to promote the alleviation of poverty, inequality, and growth of black-controlled tourism enterprises.

The fund comprises grant funding and debt financing. Initial seed funding amounting to R77 million was authorised for this financial year (2020/21) after approval by National Treasury. Thereafter, the Department of Tourism will contribute equal amounts of R180 million per year for three years starting in the 2021/22 financial year, amounting to a total of R540 million for grant funding and low-interest loans.

The repayment of the loan component will recapitalise the fund for sustainability. The grants will be capped to a maximum of R20 million. Project value is set at a minimum of R10 million. The remainder of the debt finance is provided for by SEFA and a commercial bank partner for the blended financing model.

The fund will focus on the majority black-owned and black-management-controlled tourism enterprises in the sub-sectors of accommodation; hospitality and related services; travel and related services; and any other tourism related products "and initiatives which support tourism development and makes an economic impact in terms of job creation, geographic spread and strengthening the tourism offering of SA", the committee heard.

The fund seeks to create a larger number of black-controlled "ownership equity" in the tourism sector to stimulate tourism investment in rural areas, townships and small towns and to empower women, young people and people with disabilities.

Non-financial support critical

Non-financial support like mentoring is regarded as a critical part of the process to ensure the overall sustainability of the fund.

"When the fund was launched, a lot of people raised issues that, when such funds were launched in the past, the money never reached those for whom it was intended. We will, however, continue to ensure transparency and accountability. Nothing will be hidden with this fund. We will ensure everyone intended to benefit, will. We want to ensure that genuine entrepreneurs, who work in the tourism area or show expertise, benefit," the minister said.

"The objective of this fund remains even more relevant and more urgent, especially after the impact of Covid-19 on our sector. We as leaders of this country must ensure that we do not find, two years after the pandemic is over, that the tourism industry looks like it did before 1994. We cannot build an economy that is exclusive. Our mandate is to ensure an inclusive economy."

To those who, when transformation in the tourism industry comes up, claim apartheid ended 25 years ago and the ANC has been in power since then, the minister said her response is that the lack of transformation in the industry since then is because every time negotiations were done on the topic, the industry advocated for "the middle ground".

Address painful past

"Then, when we agreed to go for the middle ground, transformation did not follow. If we had not previously compromised and looked for the middle ground, we would not have had a sector looking the way it does currently in terms of lack of transformation," she said. 

"We have to address the painful past. The scars are healing, and we must ensure the majority of people can play a part. Those saying we should not [implement such a transformation fund] are wrong, but we respect the right of all South Africans to access the courts. We will defend any such court action as we see our actions [with the fund] as justified. It is important to ensure that transformation includes enabling people to become owners of tourism products and not just workers."

A presentation made to the committee set out that less than 45% of tourism enterprises in the sub-sectors of accommodation, hospitality and travel had achieved the 30% ownership target set out in the Tourism B-BBEE Codes and it is estimated that only one in ten tourism enterprises had black shareholding.

Most black entrepreneurs indicate that access to funding has been the main challenge for them to either acquire equity in existing businesses or start new businesses in the sector. Many factors limit access to finance, including a perceived lack of viable and feasible business plans, limited experience in tourism, limited equity contributions, and a highly competitive industry, the committee was told.

Threat of legal action

Kubayi-Ngubane held a meeting with Solidarity and AfriForum on 15 February, following a letter from their attorneys in which they had threatened legal action against the roll-out of the Tourism Equity Fund. The organisations questioned the legality, morality and transformative outcome of the qualification criteria for the fund, suggesting that it deviates from the provisions of the B-BBEE Act.

"We believe that those who know and understand the history of this country, need little convincing that redress is a necessary mechanism towards building a non-racial society, as mandated by the Constitution. Our ultimate goal as government, is to ensure that we successfully implement our vision of building a rapidly and inclusively growing tourism economy that is innovative and leverages on our heritage," the minister said after the meeting.

"We communicated to Solidarity and AfriForum that the fund is a necessary intervention for creating an inclusive tourism economy, in which previously disadvantaged individuals, youth and women, are represented and can actively participate in ownership and control. This fund will support our collective efforts towards economic recovery and reconstruction so that we can move firmly towards the eradication of the legacy of colonialism and apartheid."

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