1. TOURISM SUPPORT PROGRAMME
PRESENTATION TO THE PORTFOLIO COMMITTEE ON TOURISM
THE ENTERPRISE ORGANISATION
7TH SEPTEMBER 2010

2. CONTENTS Introduction Qualifying Assets Tourism Support Strategy
Tourism Support Programme Overview
Programme Description
Eligibility Criteria
Evaluation Criteria
Qualifying Activities
Non-Qualifying Activities
Qualifying Assets
Non-Qualifying Assets
Expansions
Key Conditionalities for Payment
Application Process
Summary of Programme Performance

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

4. Tourism Support Programme Strategy
The Tourism Act’s mandate is ...
Sustainable GDP Growth
Sustainable job creation
Redistribution and transformation
Increase in tourist volume
Increase in tourist spend
Increase length of stay
. . . through six key objectives . . .
Improve geographic spread
Improve seasonality patterns
Promote transformation
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
. . . by acting in a focused way to . . .

5. Tourism Support Programme Overview
AIM
To stimulate job creation outside the traditional tourism destination clusters
TARGETED OUTCOME
Increased BB-BEE participation
Increased Investment outside of the 3 metros of eThekwini, Cape Town and Joburg. Projects locating in marginalised areas within these are eligible to apply.
PROGRAMME DURATION
Effective from July 2008 & available for 6 years until 2014

6. Programme Description
OFFERING
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

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
Investment size
Minimum number of new jobs
Below R5m
8 jobs (3 for black owned enterprises)
≥R5m – 10m
10 jobs
≥R10 – R20m
12 jobs
≥R20m – 30m
15 jobs
≥R30m – R50m
20 jobs
≥R50m – R75m
30 jobs
≥R75m – R100m
50 jobs
≥R100m – R150m
70 jobs
≥R150m – R200m
85 jobs

9. TSP Eligibility Criteria
Wages in line with hospitality sector wages as determined by DoL
Achieve level (4) BB-BEE contributor status scoring >65 on BB-BEE scorecard
Locate outside Metros of Cape Town, eThekwini & Johannesburg (marginalised areas in metros excluded)
Apply & receive approval before taking assets into commercial operation

10. Evaluation Criteria Factor Project of R5m and Below Projects Above R5m
Barrier
Access to finance
Risk of and return on investments
Evaluation
Criteria
1) Demonstrate commitment to project (financing structure & funds sourced)
2) Viable project - business plan
3) Substantiate need for project - show how grant improves financial viability
4) Demonstrate need or funding gap in terms of cash flow, IRR/NPV, gearing, location
1) Fatal flaw analysis & business plan evaluation
2) Financial ratio analysis
3) Funding gap analysis
Below R5m – the bulk of applications simplified processes ; above R5m more rigorous project appraisal process
Above R5m included simple project additionality criteria & criteria to measure the likely net economic benefit:
Funding gap in cash flow
Reduce level of gearing to acceptable risk levels
Influence location in favour of RSA
Satisfy co. internal investment evaluation criterion IRR/NPV
Grant – a firm with qual costs of R5m could get grant of R1.5 & a R100m project could get a grant of R15m

11. Qualifying Activities
Accommodation 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 transfer services, 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.);

12. Non- Qualifying Activities
Fast food and take away restaurants, nightclubs, bars, gaming and gambling venues will not be considered
Franchised restaurants
Restaurants not attached to a tourism facility
Tourism investment as part of projects that include residential development, where the shareholder is one and the same as the residential developer, will not be considered – Policy to be reviewed

13. Non- Qualifying Activities
Conference facilities not attached to accommodation facilities
No investment in government-owned or partial government owned (e.g. PPP) projects will be considered.
No investment in arts and craft facilities will be considered as a separate development
No retail operations will be considered.

14. 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 land costs must be directly associated with the purchase, renovation, or construction of a new tourism facility for the investment project under consideration, and must be located on land that has been zoned for commercial activity or multi-zoned .
The cost of the land may not exceed 20% of the investment cost in buildings/ land improvements for the purpose of the grant calculation

15. QUALIFYING ASSETS
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.

16. NON-QUALIFYING ASSETS INVESTMENT COSTS
Assets acquired by way of an operational lease agreement
Passenger vehicles (i.e. non-commercial vehicles) and
Damaged assets or assets not utilised for the qualifying production process
Revaluated assets
VAT and finance charges on assets
Rates and taxes
Sports cars;
Commercial vehicles (e.g. trucks, tractors, bakkies, etc.);
Imported second-hand assets; and
Refurbished existing operations

17. Expansions
Expansion investment size
Minimum number of jobs to be achieved by project
Minimum net new additional number of jobs to be created
Below R5m
8 jobs 4
≥R5m – R10m
10 jobs 5
≥R10m – R20m
12 jobs 6
≥R20m – R30m
15 jobs 7
≥R30m – R50m
20 jobs 10
≥R50m – R75m
30 jobs 15
≥R75m – R100m
50 jobs 25
≥R100m – 150m
70 jobs 35
≥R150m – 200m
85 jobs 45
The project must increase capacity (rooms or seats etc) of current operations by 35% in year 1.
The entity must show an increase (over and above total qualifying historic costs) in qualifying investment of at least 35%;
The expansion must demonstrate an increase in projected revenue of 15% in the 1st year of operation and 25% increase in the 2nd year of operation above the revenue as reflected in the base year financial statements; and
The Entity must achieve both the minimum number of total jobs for the project and minimum net increase in new full-time employment opportunities from the base year as stipulated in the Table B below

18. 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

19. 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

20. SUMMARY OF PROGRAMME PERFORMANCE 2009/10
TSP approved 164 projects with projected investment of R2,3 bil and 4,770 projected jobs.
Grant commitments for the TSP total R417m, with a projected incentive per job ratio of R87,453.
Of the approved TSP projects, 140 are new establishment projects and 24 are expansion projects and 115 of all approved projects have started operation.
93% of approved projects are BEE level 4 contributors with the rest being expected to achieve level 3 contributor status by the end of the first year of being in operation.
Approved 69% of adjudicated applications

21. GEOGRAPHIC SPREAD 2009/10 Provincial Spread Gauteng: MIP: 27 %
North West:
MIP: 4 %
TSP: 11 %
Northern Cape:
MIP: 2 %
TSP: 2 %
Western Cape:
MIP: 28 %
TSP: 16 %
Eastern Cape:
MIP: 13 %
Kwa Zulu Natal:
MIP: 16 %
TSP: 9 %
Mpumalanga:
MIP: 3 %
Limpopo:
MIP: 5 %
TSP: 12 %
Gauteng:
MIP: 27 %
TSP: 22 %
Free State:
MIP: 1 %

22. Thank you