Tourism Equity Fund: Department wrongfully labelled as racists, minister tells Parliament | Fin24

Minister of Tourism Mmamoloko Kubayi-Ngubane.

• In January this year a Tourism Equity Fund was announced.
• The aim is to advance transformation in the tourism industry.
• Tourism Minister Mmamoloko Kubayi-Ngubane briefed Parliament’s National Council of Provinces about the fund. 

The Department of Tourism is wrongfully labelled as racists because the Tourism Equity Fund (TEF) – which aims to assist with transformation in the industry – does not require 100% black ownership, but only 51%, Tourism Minister Mmamoloko Kubayi-Ngubane told Parliament on Tuesday.

“It is important to reflect that, as the ANC, we have to build a nonracial society, while also having to redress the past. We hope all races and genders will support us,” she said.

The R1.2 billion fund was announced by President Cyril Ramaphosa in January this year. It comprises grant funding and debt financing. The idea is that the repayment of the loan component will recapitalise the fund and make it sustainable. Individual 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 the Small Enterprise Finance Agency (SEFA) and an, as yet unnamed, commercial bank partner for the blended financing model.

In April the North Gauteng High Court in Pretoria granted an urgent interdict to trade union Solidarity and lobby group AfriForum which put a pause on the making of payouts in terms of the fund until the matter can be heard and finalised in court. Solidarity and AfriForum claim the fund did not comply with the Constitution and other relevant laws.

Prior to the court interdict, the fund had already received more than 300 applications with a total value of R5.6 billion. About 188 of these applications – with a total value of about R4.1 billion – had already passed through the screening phase at the time of the court interdict, the committee was told on Tuesday. 

Despite the pending court case, her department remains firm about its intended implementation of the fund, Kubayi-Ngubane told the Select Committee on Trade and Industry, Economic Development, Small Business Development, Tourism, Employment and Labour of the National Council of Provinces during a briefing about the fund.  

“The need for the fund is based on reports we received and information we picked up quite often in the public domain. There seems to be, however, confusion between the Tourism Equity Fund and coronavirus relief for the tourism industry,” she explained. “If you look at a tourism transformation report from a few years ago, one sees there is a need for such tourism transformation assistance.

“The Tourism Equity Fund is a programme meant for real entrepreneurs who can play a role in the tourism sector. This is in response to mainly black entrepreneurs and communities in SA. An example I know of is someone who has been a manager in the industry for many years and managed to save some money to run his own business, but needs additional financial support,” said the minister.

“I have also heard of examples of someone with a tourism business who is now getting old and would be willing to pass it on to one of his staff who worked there for many years and knows the ropes. But the worker cannot afford to buy the business.”

Inclusivity

Victor Tharage, director-general of the Department of Tourism, told the committee that a report already suggested such a funding scheme back in 2017. 

“The key thing is that our tourism strategy, based on the Tourism Act, makes a strong call for us to ensure our efforts lead to an inclusive and transformed tourism economy and that we should put in place specific mechanisms to be able to do that,” said Tharage.

“We have clear indications from different entrepreneurs that access to finance, especially for black entrepreneurs who would want to buy into the sector or start something anew, is quite difficult to obtain. In the main, they say feedback from finance institutions relate to the feasibility of their business plans, which require dedicated finance support.”

He said a State of Tourism Transformation Report indicated that by 2012 only 23% of large tourism businesses managed to have 21% black ownership when the goal was to get all such businesses to reach that target. Only 12% could reach the target of having at least 50% black management control. By 2018, targets across all tourism categories were still not met.

“Management control is an important aspect for us. There are a lot of family-owned businesses in the tourism sector, and they are not generally interested in doing business with government – which is usually the carrot for transformation,” said Tharage.

“We want to create participation at scale, which is meaningful and contributes to investment and growth. The fund is not just a grant. A portion comes as a loan. We also want to see employment created because of it and there are, furthermore, components which focus on rural areas, townships and small towns, women, youth and people with disabilities.”