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TOURISM SUPPORT PROGRAMME

TOURISM SUMMIT

28TH FEBRUARY 2011

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DTI DELEGATION

Ms Tsepiso Makgothi

Acting Deputy Director General

The Enterprise Organisation

Ms Tumelo Nkoane

Chief Director Incentive Administration

The Enterprise Organisation

Mr Benhard Meyer

Director Tourism

Industrial Development Division

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CONTENTS

Introduction

Tourism Support Strategy

Tourism Support Programme

Tourism Support Programme Performance

Non Financial Support

Policy

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INTRODUCTION

THE ENTERPRISEINVESTMENTPROGRAMME

(EIP)MANUFACTURING INVESTMENTS

TOURISM INVESTMENTS

TOURISM

SUPPORT

PROGRAMME

(TSP)

MANUFACTURING

INVESTMENT

PROGRAMME

(MIP)

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Sustainable GDP Growth

Sustainable GDP Growth

Sustainable job creation

Sustainable job creation

Redistribution and transformation

Redistribution and transformation

The Tourism Act’s mandate

is ...

. . . through six key

objectives . . .

. . . by acting in a focused way to . . .

Understand the market

Understand the market

Choose the attractive segments

Choose the attractive segments

Market the DestinationMarket the Destination

Facilitate the removal of obstacles

Facilitate the removal of obstacles

Monitor and learn from tourist experience

Monitor and learn from tourist experience

Facilitate the product platform

Facilitate the product platform

Increase in tourist volume

Increase in tourist volume

Increase in tourist spend

Increase in tourist spend

Increase length of stay

Increase length of stay

Improve geographic

spread

Improve geographic

spread

Improve seasonality patterns

Improve seasonality patterns

Promote transformation

Promote transformation

TOURISM SUPPORT STRATEGY

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PROGRAMME DESCRIPTION

• Investment grant of up to 30% of qualifying investment costs in furniture, equipment,

vehicles, land & buildings

• Grant applicable is capped at a maximum of R30m, calculated in relation to the qualifying

investment costs:

– Investment projects ≤ R5m

• grant equal to 30% of their qualifying investment costs, payable 3 year period.

– Investment projects > R5m ≤ R30m

• grant of between 15% and 30% of their qualifying investment costs, calculated on a

regressive scale, payable over a period of two (2) years.

– Investment projects ≥ R30m

• 15% grant payable over a period of two (2) years

OFFERING

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PROGRAMME DESCRIPTION

TARGET PROJECTS

• Establishment of new or expansion of existing tourism facilities

• Investment by projects capped at R200 million

• Local and foreign owned projects

• Applicant must be a registered entity in RSA (Companies, CCs, Co-

ops, Community Trusts)

• Projects that have not taken their investment assets into commercial

operation

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TSP ELIGIBILITY CRITERIA

Minimum Job requirement with wages in line with hospitality

sector wages as determined by Department of Labour

Achieve level (4) BB-BEE contributor status as per Tourism

Code

Locate outside Metros of Cape Town, eThekwini &

Johannesburg (marginalised areas in metros excluded)

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EVALUATION CRITERIA

Factor Project Below R5m Projects Above R5m

     

Barrier Access to finance Risk of and return on investments

     

Evaluation Criteria

1) Demonstrate commitment to project 1) Demonstrate commitment to project

2) Viable project - business plan 2) Viable project - business plan

3) Substantiate need for project - show how grant improves financial viability

 

 

Evaluation1) Fatal flaw analysis &

business plan evaluation1) Fatal flaw analysis & business plan

evaluation

2) Financial ratio analysis 2) Financial ratio analysis

  3) Funding gap analysis

 

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QUALIFYING ACTIVITIES

ACCOMODATION services dedicated to tourists (e.g. hotels, lodges, resort accommodation, guest houses, Bed &Breakfasts, backpacker facilities, self catering accommodation);

Passenger TRANSPORT services including road, rail, water dedicated to tourists and must be registered in South Africa (e.g tourist trains, water, etc.);

TOUR OPERATORS

CULTURAL SERVICES dedicated to tourists (e.g. privately owned museums,);

RECREATION SERVICES dedicated to tourists (e.g. spa and wellness centres sport and recreation facilities that form part of other dedicated tourism products, etc.);

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QUALIFYING ASSETS

• Furniture, Fittings and Equipment

• Owned land and buildings at cost. – The investment in land and buildings must constitute newly acquired

land and buildings, whether as part of a new project or expansion, and must be owned by the applying entity.

– The cost of the land may not exceed 20% of the investment cost in buildings/ land improvements for the purpose of the grant calculation

• Lease for land and buildings

• Commercial Vehicles Only eligible if such vehicles are for tourist transfers from an accommodation facility, and/or have been specifically modified for particular tourism activities, e.g. tour operator vehicles and game drive vehicles.

– Investment in vehicles by projects other than tour operators is capped at 20% of the qualifying investment.

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KEY CONDITIONALITIES FOR GRANT PAYMENT

• Achieve 70% of projected investment

• Achieve 70% of projected turnover

• Maintain 100% of stipulated employment levels

• Pay wages in line with hospitality sector rates

• Achieve and maintain BB-BEE level 4 contributor status

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APPLICATION PROCEDURE

Project application: The dti approval

process:

Implementation and

monitoring:

• Applicant

complete

application form

and send to the

dti

• The dti pre-

screens

application

• The dti

evaluates

application

• The dti

feedback on

approval

• The dti offers a

grant contract

to approved

project

• The applicant

establishes the

investment project

• The dti monitors project

performance against set

targets

• The project claims the

approved grant bi-

annually / annually

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TOURISM SUPPORT PROGRAMME

ADJUDICATED PROJECTS

0

100

200

300

400

500

600

Adjudicated Approved NotApproved/Cancelled

Apr 2010 - Dec 2010

Feb 2009 - Mar 2010

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INCLUSIVE TOURSIM DEVELOPMENT

0

102030405060708090

EC FS GP KZN LP MP NW NC WC

TSP Approvals

Apr 10 to Dec 10

Feb09 to Mar10

PROVINCIAL PARTICIPATION

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INCLUSIVE TOURISM GROWTH

0

200,000,000

400,000,000

600,000,000

800,000,000

1,000,000,000

1,200,000,000

EC FS GP KZN LP MP NW NC WC

Amount Planned Investment and Committed Grant

Grant

Investment

PROVINCIAL PARTICIPATION

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INCLUSIVE TOURISM GROWTH

• Despite dominance of accommodation services, a significant percentage of these investments are coupled with recreation and entertainment services

• Majority qualitatively new investments

• 20% Substantial expansions (35% increase in asset base)

INVESTMENT TYPE

Project Type

76%

4%

20%New Entities

Existing Entities with NewProjects

Expansion Projects

Expected Investments by Tourism Activity

98%

2%

Accommodation Services

Transport Services

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INCLUSIVE TOURISM DEVELOPMENT

• Majority of participants are investors of projects of R5m investment and below

Size of Expected Investments

57%

43%Small Projects

Medium to Large Projects

INVESTMENT SIZE

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TOURISM TRANSFORMATION

SHAREHOLDINGSupported Projects by Shareholding

36%

64%

Majority Black Shareholding

Majority White Shareholding

0

500,000,000

1,000,000,000

1,500,000,000

2,000,000,000

2,500,000,000

Majority Black Shareholding 364,969,856 63,349,605 811,771,701 113,197,668

Majority White Shareholding 2,464,384,40 338,989,397 1,690,696,21 216,620,399

Investment Grant Investment Grant

Feb 2009 - Mar 2010 Apr 2010 - Dec 2010

Majority Black Shareholding is :• > 1/3 Approvals• 28% Investment• 32% Grant commitments

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INCLUSIVE TOURISM GROWTH

DISBURSEMENTS

• R800m Investment already inspected and audited• R48m Paid• 567 Jobs

• 15% of expected investment in place and verified

• 7% of committed grants, paid

• 35% of expected jobs in place and audited0

50

100

150

200

250

300

Grant Disbursements

Grant / R'm

Investment / R'm

Grant / R'm 18.1 2.3 14.6 2.7 0.97 0.22 9.2

Investment / R'm 239 21 271 33 16 5 217

EC FS GP KZN LP NC WC

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INCLUSIVE TOURISM GROWTH

• BEE company, Auspex Hotel and Leisure Management Company approved for a hotel in PE

• Owned by Kuhuni Mukanya Trust

• First 5-star hotel in PE

• 173 luxury suites

• First hotel in PE and EC that’s operated by an international hotel group – Radisson

• Funded through bank loan, IDC funding, TSP and shareholder contribution

CASE STUDY: RADISSON

Criterion Projected (2 years)

Actual After 1 Year

Investment R278m R206m

Jobs 107 113

Grant R30m R15m

BEE Level 4 Level 4

Turnover R41m R25,6m

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WORKING TOGETHER FOR BETTER TOURISM OPPORTUNITIES

• Additional Mentorship (preliminary discussions with TEP)

• Business development support, particularly for small enterprises (SEDA/TEP)

• Encourage participation in business/industry association by applicants

• Facilitating access to incentive

• Marketing

– Roadshows

– Partners in provinces and industry associations

– Events/presentations on request

NON FINANCIAL SUPPORT

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WORKING TOGETHER FOR BETTER TOURISM OPPORTUNITIES

• Customised Sector Programme forms part of the National Industrial Policy Framework

• Industrial Policy Action Plan Projects

– Niche Tourism

– Tourism Export Development

• Close working relationship with NDT

POLICY

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Thank you