Use of BEE criteria for govt's R200m Covid-19 tourism relief is unlawful, SCA finds

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Government in April 2020 announced a Tourism Relief Fund of R200 million allocated to provide once-off payments of up to a maximum of R50 000 to businesses in the tourism industry that were adversely affected.
Government in April 2020 announced a Tourism Relief Fund of R200 million allocated to provide once-off payments of up to a maximum of R50 000 to businesses in the tourism industry that were adversely affected.
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  • The Supreme Court of Appeal has ruled in favour of AfriForum and Solidarity regarding selection criteria for payment in terms of government's R200 million Covid-19 tourism relief fund.
  • The minister of tourism claimed that BEE needed to be part of the criteria and this was challenged by AfriForum and Solidarity.
  • The SCA ruling does not, however, mean that monies already paid out from the fund must now be recovered.

The Supreme Court of Appeal (SCA) found on Wednesday that it was unlawful for the tourism minister to require that tourism businesses meet Broad-based Black Economic Empowerment (B-BBEE) requirements in order to be considered for relief from government's Covid-19 fund.

To mitigate the impact of the coronavirus lockdowns on the tourism industry, government in April 2020 announced a Tourism Relief Fund of R200 million allocated to provide once-off payments of up to a maximum of R50 000 to businesses in the tourism industry that were adversely affected. This industry was one of the first economic casualties of the pandemic as international travel was closed down and, during the lockdown, domestic tourism also ground to a halt.

The Solidarity Trade Union and lobby group AfriForum applied urgently, in separate cases, in the North Gauteng Division of the High Court in Pretoria, to review and set aside what they described as "race-based criteria" for eligibility for financial assistance from the fund. Their applications were dismissed with costs and they were refused leave to appeal. 

The SCA ruled in favour of AfriForum and Solidarity, who had challenged the minister's approach. At the same time, AfriForum and Solidarity agreed that it would not be practical and perhaps even impossible for the minister to try to recover any of the funds already disbursed from the fund. 

They wanted the declaratory order from the SCA to the effect that the minister was not legally obliged by the B-BBEE Act to make eligibility for assistance from the fund subject to the Tourism Sector Code and that her direction was consequently unlawful, which the court granted. 

The office of the tourism minister had argued that government was obliged by statute to include B-BBEE criteria in the directions for eligibility to financial assistance. 

"It is apparent that the purposes of the DMA [Disaster Management Act], on the one hand, and the B-BBEE Act, on the other, are very different and that each statute is directed at achieving different goals: the DMA is aimed at preventing or limiting disasters, mitigating their impact and enabling post-disaster recovery, while the B-BBEE Act is aimed at promoting black economic empowerment in order to enable black people to participate meaningfully in the economy," the SCA ruling stated.

"It is also clear that the minister was in no doubt as to the purpose of her direction."

The minister said in it that the fund was established to provide "grant assistance" to small businesses in the tourism industry to mitigate the impact of Covid-19 "in order to ensure their sustainability", the ruling argued. However, it added, it was not open to the minister to justify the inclusion of B-BBEE status levels. 

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