1 TOURISM SUPPORT PROGRAMME TOURISM SUMMIT 28 TH FEBRUARY 2011

2 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

3 CONTENTS  Introduction  Tourism Support Strategy  Tourism Support Programme  Tourism Support Programme Performance  Non Financial Support  Policy

4 INTRODUCTION THE ENTERPRISE INVESTMENT PROGRAMME (EIP) MANUFACTURING INVESTMENTS TOURISM INVESTMENTS TOURISM SUPPORT PROGRAMME (TSP) MANUFACTURING INVESTMENT PROGRAMME (MIP)

5 Sustainable GDP Growth Sustainable job creation Redistribution and transformation The Tourism Act’s mandate is through six key objectives by acting in a focused way to... Understand the market Choose the attractive segments Market the Destination Facilitate the removal of obstacles Monitor and learn from tourist experience Facilitate the product platform Increase in tourist volume Increase in tourist spend Increase length of stay Improve geographic spread Improve seasonality patterns Promote transformation TOURISM SUPPORT STRATEGY

6 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

7 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

8 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)

9 EVALUATION CRITERIA FactorProject Below R5mProjects Above R5m BarrierAccess to financeRisk of and return on investments Evaluation Criteria 1) Demonstrate commitment to project 2) Viable project - business plan 3) Substantiate need for project - show how grant improves financial viability Evaluation 1) Fatal flaw analysis & business plan evaluation 2) Financial ratio analysis 3) Funding gap analysis

10 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.);

11 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.

12 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

13 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

14 TOURISM SUPPORT PROGRAMME ADJUDICATED PROJECTS

15 INCLUSIVE TOURSIM DEVELOPMENT PROVINCIAL PARTICIPATION

16 INCLUSIVE TOURISM GROWTH PROVINCIAL PARTICIPATION

17 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

18 INCLUSIVE TOURISM DEVELOPMENT Majority of participants are investors of projects of R5m investment and below INVESTMENT SIZE

19 TOURISM TRANSFORMATION SHAREHOLDING Majority Black Shareholding is : > 1/3 Approvals 28% Investment 32% Grant commitments

20 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 audited

21 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 CriterionProjected (2 years) Actual After 1 Year InvestmentR278mR206m Jobs GrantR30mR15m BEELevel 4 TurnoverR41mR25,6m

22 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

23 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

24 Thank you