- The R1.2 billion Tourism Equity Fund (TEF) is set also assist new black entrants into the sector
- Initial seed money for the new fund, totaling R540 million, will come out of the Department of Tourism’s budget over the next three years
Mbabane: In a move to bolster transformation within South Africa’s embattled tourism and hospitality industry, the departments of tourism and small business development have joined forces and on Tuesday launched the R1.2 billion Tourism Equity Fund (TEF) to assist new black entrants into the sector.
Money web reported that during the virtual launch of the TEF on Tuesday January 26, 2021, President Cyril Ramaphosa and Black Business Council head Sandile Zungu backed the initiative.
President Cyril Ramaphosa had announced the plans to launch the fund in his State of the Nation Address in February 2020.
The fund aimed at reviving its ailing tourism industry and will be used in particular to help black entrepreneurs start businesses and projects in the sector, Tourism Minister Mmamoloko Kubayi-Ngubane during the launch.
In Eswatini tourism was also most affected by the covid-19 pandemic. In the beginning of covid-19 the industry was affected. The chief executive Officer of Eswatini tourism authority after the lifting of travel restrictions was quoted saying the industry is targeting about 2 billion in tourism receipts. Eswatini business CEO Nathi Dlamini was quotes saying the Industry Needs approximately 100 million bailout package urgently to keep the industry afloat.
The World Travel and Tourism Council 2020 recovery scenarios project that global travel and tourism will have experienced losses of over $2 billion (R30.1 billion) in the best-case scenario, and as much as $5.5 billion [R82.9 billion] in a worst-case scenario.
“Many jobs in the tourism and associated sectors in the value chain have been lost,” he added.
Ramaphosa stressed that the tourism sector, which directly accounts for around 2.9% of South Africa’s GDP and 8.6% indirectly and about 1.5 million jobs
While the economic fallout from the Covid-19 pandemic and lockdowns continues to have an especially devastating impact on the tourism industry at large, a lack of transformation in the sector has been a bugbear for government and organized black business bodies for years.
Initial seed money for the new fund, totaling R540 million, will come out of the Department of Tourism’s budget over the next three years, topped up with financial backing from the Small Enterprise Finance Agency (SEFA) and commercial banks.
“The TEF is a dedicated fund that will provide a combination of debt finance and grant funding to facilitate equity acquisition as well as new project development in the tourism sector by black entrepreneurs,” Tourism Minister Mmamoloko Kubayi-Ngubane said during the launch.
She noted that the fund would be managed by SEFA on behalf of her department over the initial three-year period, after which its success will be evaluated to improve the fund.
“During this three-year period, the Department of Tourism will capitalize the fund with an amount of R540 million,” Kubayi-Ngubane said, adding that Sefa would make an additional contribution of R120 million.
“Around R594 million will come from commercial banks that will be participating in this programme.… This will put the value of the Tourism Equity Fund at just over R1.2 billion.”
She said that in the wake of the devastation to the sector caused by the Covid-19 pandemic, government is committed to contributing towards the rejuvenation of the supply side of the tourism market.
“We believe that to deepen the diversification of the tourist attractions, we also have to pay attention to the diversification and transformation of the sector in terms of ownership and management control.
“Broadening participation in the tourism sector to South Africans of all races, ages and genders can only enrich the tourism sector to be more competitive and sustainable in the long run.”Kubayi-Ngubane said the launch of the TEF is timely and necessary.
“Though the conceptualisation of the fund preceded the pandemic, as it was announced by the president in the 2020 State of the Nation Address, the fund is timely in that it will be instrumental in helping in the recovery and the reconstruction of the sector after the devastating impact of the pandemic,” she noted.
“It is necessary because not only will this fund help us to crowd-in private sector investment in the rejuvenation of the supply side of the tourism market, but it will also help to transform the sector.”