Govt continues Tourism Equity Fund despite legal action
Earlier this year, Afrikaner rights group AfriForum and trade union Solidarity contested the legality and rationality of the 51% black-owner/managed qualification criteria for the fund.
Author: Tebogo Mokwena
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The government and agencies supporting SMME growth in the tourism sector, which has been decimated by COVID-19 and the lockdown, plan on continuing to support the Tourism Equity Fund despite legal action. Earlier this year, Afrikaner rights group AfriForum and trade union Solidarity contested the legality and rationality of the 51% black-owner/managed qualification criteria for the fund.
They believe it deviates materially from the Broad-Based Black Economic Empowerment Act, read with the Tourism Code. According to government stakeholders, the fund received 481 applications valued at R8.2-billion by April before it was suspended due to the court case. Of these applications, 275 were successful at a cost of R6.4-billion.
The comments were made during a meeting of Parliament’s Select Committee on Trade and Industry, Economic Development, Small Business Development and Tourism last week. The aim of the meeting was to brief the committee on the progress of the fund, which has been suspended pending the outcome of the court case. Small Enterprise Finance Agency (SEFA) CEO Mxolisi Matshamba explained to the committee how the screening process for the fund took place.
“The screening process is based on the funding criteria which states that the business enterprises must be based either in peri-urban or rural areas… the company must be South African-owned and the deal must be more than R10-million,” he said. “That is the initial screening, not the approval process. Companies that went through the first round of the screening process met the screening requirements.”
Matshamba said the next step comprised exercising due diligence to ascertain if the business was viable and met all funding criteria of SEFA, the Tourism Department and Absa, which they have partnered with. He said there were also plans to expand who qualified for the fund.
“Heritage tourism will be considered for funding and will not be exempted,” the CEO told the committee. “There is going to be expansion and acquisition for tourism operators with establishments like restaurants linked to accommodation facilities,” Matshamba said that judging by the number of applications, the fund had been received favourably.
He said the department intended on partnering with SEFA for the next three years to promote the participation of black enterprises in the industry. He was backed up by SEFA chairperson Martin Mahosi, who told the committee that the relationship between the department and the agency had turned out well, based on engagements that started in December 2020.
Mahosi said that despite the legal challenge, the sector could still receive the necessary support. “Between SEDA (Small Enterprise Development Agency) and SEFA, there is a vast network in terms of footprint to enable those that need to physically contact the two entities for relevant support while waiting for the outcome of the court challenge,” he explained.
Tourism Minister Mmamoloko Kubayi-Ngubane reiterated that the fund was not aimed at discrimination, as alleged by Solidarity and AfriForum. “There has been misinformation that the programme is meant for people who are connected. It is a programme meant for entrepreneurs that are willing to play a role in the sector,” the minister said.
She said it was also aimed at helping black entrepreneurs and previously disadvantaged groups in communities who were keen to be involved in the industry.
And while some stakeholders believe the fund should not place transformation ahead of growing the tourism sector, the minister has previously stated that the fund was called for in the 2016/17 financial year, which was before the pandemic hit the country’s shores.
“There was no doubt as to the policy intention of the Tourism Equity Fund, which is to boost sector transformation. The TEF is not blind to the impact of COVID-19, but supports the transformative and inclusive reconstruction of the tourism sector,” she said at the end of May when announcing that her department would defend the court case.