18 March 2014

Sectors covered by SBU:
Accommodation : hotels, guest houses, game lodges (efficiency of room size currently under review)
Niche Tourism : adventure & sports tourism, business tourism, attractions (including theme parks and natural attractions), health tourism.
Exclusions : stand alone restaurants (unless linked to an attraction), casinos and gambling facilities, property development, timeshare/fractional developments.
SBU Approach to development of these sectors
• Aligning activities with industry goals as indicated in National Tourism Sector Strategy and
IPAP2/NGP
• Proactive development of projects in subsectors through identifying potential projects, project scoping, pre-feasibility and feasibility studies.
• Assessment and funding of applications as received
• Support for the dti programs in some subsectors (Arts and Crafts, backpackers, avitourism)
• Active participation and sponsorship of industry events (HICA, Sports Exhibitions, Imvelo)
2

IDC offers a wide array of financial instruments, including:
 Equity
 Quasi-equity
 Commercial debt
 Guarantees
These may be provided as a single facility or in combination
• R3 m minimum loan amount and financial contribution of between 40%-
50% from the shareholders
3 3

IDC Business
Support Unit
€47m
Development Funds Department
R 100 m
R2bn R 1 bn R10bn
4

• Consider funding of start-ups, expansions and refurbishments
• Project must demonstrate significant development impact
• Security is tailored to the transaction and may include personal suretyship, corporate guarantees, bonds over fixed and movable assets, pledge and cession of shares
• Comprehensive business plan must be submitted .
5 5

• Focused management team with ability to adapt to market forces
• Product specifications to be in line with intended grading with upfront input from management and marketing company
• Approved buildings plans and building cost estimates prepared by a
QS
• Clearly defined marketing strategy in terms of product offering, target market, key success factors
• Financial contribution of at least 40% from the shareholders
6 6

• The Tourism SBU played and active role in the industry over the past 10 years
• Current exposure of ca R2.56 billion (of which R800 million is still to be drawn) to 88 clients.
• Geographical spread (value and number)
Number of clients per province
(%)
5%
4% Eastern Cape
13%
23%
Free State
25%
Gauteng
0%
10%
10% 8% KwaZulu Natal
4%
Limpopo
Mpumalanga
Exposure per province
(%)
2%
0%
3%
2%
10%
2%
23%
12%
45%
1% Eastern Cape
Free State
Gauteng
KwaZulu Natal
Limpopo
Mpumalanga
• A total of 53% in value and 47% in number of transactions are to BEE:
- Black owned (10% in value, 11% in number), Empowered (43% in value, 32% in number), 4 companies are owned by Black Women.
• Most of the exposure is to the accommodation sector with:
- 4 in Other recreational facilities (Sandown Bay Fishing, Knysna Elephant Park, Tourvest Guma)
- 3 Restaurants (Wandies, Eagle’s Fare)
- 1 Sporting activity (Cape Epic)
- 1 Travel Agency (Basfour)
7

Change in environment
Successful hosting of 2010 SWC
New and upgraded tourism infrastructure
Current overcapacity in accommodation sector in certain nodes
Continued depressed economic climate
Implications for Industry and SBU Sector Strategies
Country image enhanced which is expected to result in increased visitor numbers and improved industry performance. SA is seen as an investment destination with potential investment opportunities in the long term.
Improved capacity to handle projected growth in visitor numbers will lead to improved industry performance and should mitigate market risk for tourism investments.
Hotel performance to remain strained for some time, cautious investment in accommodation sub-sector in over developed nodes. Strategic focus on improved geographic spread and development of nonaccommodation sub-sectors.
Tighter credit markets thus difficulty in raising finance, new developments stalled, trading conditions strained, lower travel volumes due to strong Rand.
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Constraint
Air access
Safety and Security concerns
Legal requirements Long lead times and difficulty to obtain
EIA’s and rezoning approvals
Unresolved Land
Claims
Community disillusionment, ineffective use of resources, limited industry growth
Inadequate Skills
Regulation
Service levels compromised, tourism not seen as long term career
Health Tourism opportunities limited until regulation issues resolved
Support from provincial government
Implications if constraint not provinces addressed
Limited growth in inbound arrivals
Limited visitor numbers due to negative country image
Limited development in underdeveloped
Responsible party
Dept of
Tourism and
Transport
Possible solutions
Deregulation of airline industry to improve inbound and regional air access
Government Effective policing, pro-active country marketing and effective responses to bad news dti, DWA
Department of Rural
Development and
Land Reform
Effective implementation of legislation with minimal bureaucracy
Fiscal support for land settlements
Government, private sector
Dept of
Health and
Tourism
Provincial government
Apprenticeship programs, offer tourism studies at tertiary level
Regulatory issues relating to medical visas, post hospital care, transportation of bodies and capacity issues to be resolved.
Provincial government to be better organised with regards to tourism opportunities.
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1.
Grow tourism sector’s absolute contribution to GDP by more than average GDP growth
2.
Achieve transformation within tourism sector
3.
Provide excellent people development and decent work within the tourism sector
4.
Entrench culture of travel amongst South Africans
5.
Deliver a world class visitor experience
6.
Address geographic, seasonal and rural spread
.
1.
Prioritise development outside established tourist nodes
2.
Active development of subsectors outside of accommodation
3.
Entrench a culture of travel amongst South Africans
4.
Transformation of sector through support to BEE to own start-ups.
Improved Geographic Spread
SA
• KZN Beach Tourism
• Mpumalanga
Limpopo projects and attraction
• 500
Rest of Africa
Development
• SADC opportunities
• East & West Africa –
Business Hotels
• 0 in SA
Subsector Development
Adventure & Sports
Tourism
• Western Cape kite surfing facility
• Northern Cape Extreme
Sports facility
• Eastern opportunities cape
• 100
•
•
•
Theme Park development
Backpackers
300
Niche Tourism
Travel culture
Domestic travel facilities
• Develop or refurbish facilities suitable and affordable for domestic market
• Suitable Land (location, price, zoning)
• Equity partners
• Community buy-in
• Onerous EIA requirements
• Bulk infrastructure (water, electricity)
• Air Access
• Provincial and local government support 10

Industrial Development Corporation
19 Fredman Drive, Sandown
PO Box 784055, Sandton, 2146
South Africa
Telephone (011) 269 3000
Facsimile (011) 269 3116
E-mail callcentre@idc.co.za