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R1.2bn funding for tourism sector put on hold amid threat of court action

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Solidarity and AfriForum call for fund to be suspended, claiming “it is exclusive on the basis of race, and discriminates without any legal or justifiable basis”

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THE R1.2 billion Tourism Equity Fund (TEF) has been suspended after two organisations threatened to take legal action against the criteria that will be used to award funding to applicants.

The Covid-19 pandemic has brought the tourism sector to a grinding halt.

The fund, established by the Department of Tourism in partnership with the Small Enterprise Finance Agency, is a mechanism to 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 she had received a letter from attorneys representing trade union Solidarity and non-governmental organisation AfriForum.

Kubayi-Ngubane said the letter demanded that the operationalisation of the fund be suspended claiming “it is exclusive on the basis of race, and discriminates without any legal or justifiable basis”.

“It is not the first time that Solidarity and AfriForum have brought legal action against the department in an attempt to stifle transformation. Last year, these two organisations lost numerous court bids to challenge the implementation of the Covid-19 tourism relief fund,” Kubayi-Ngubane said.

She said both organisations were questioning the legality and rationality of the 51% black owner/managed qualification criteria for the fund, suggesting that it deviates materially from the provisions of the Broad-Based Black Economic Empowerment (B-BBEE) Act, read with the tourism code. The code prescribes a formula of allocating points for B-BBEE compliance.

Kubayi-Ngubane has called for enterprises that qualify to continue to apply. She said that B-BBEE was never designed to exclude established businesses or South Africans but to level the playing field in the economy.

President Cyril Ramaphosa said many jobs in the tourism and associated sectors in the value chain had been shed. According to Ramaphosa, tourism directly accounts for 2.9% of South Africa’s GDP and 8.6% indirectly. It supports about one-and-a-half million direct and indirect jobs.

“The fund will cater to the specific needs of black-owned businesses to acquire equity, invest in new developments or expand existing developments,” Ramaphosa said.

Kubayi-Ngubane explained that during this three-year period the Department of Tourism will capitalise the fund with an amount of R540 million. She said the funding from the department will be matched by a contribution of R120m from Sefa and R594m from commercial banks that will be participating in the programme. This combination will put the value of the Tourism Equity Fund at just over R1.2 billion.

Solidarity spokesperson Morné Malan said the government needed to reach out a hand to these businesses and support them, rather than abusing this opportunity to promote their racial ideology.

AfriForum spokesperson Monique Taute said the government had a responsibility towards all citizens as everyone in the tourism industry was currently in urgent need of help.

“The government cannot use a pandemic as an excuse to promote transformation while all South Africans are suffering,” Taute said.

Both parties welcomed the opportunity to enter into a discussion with Kubayi-Ngubane.