Money and aid for tourism entrepreneurs

As tourist establishments along the Garden Route spruce up and gear themselves for the 2003/4 season, many will find themselves short of funds for essential improvements and expansion. New operations will find capital costs higher than they'd originally planned for. There is help out there, but it's not always easy to find. Tourism entrepreneurs know from hard experience the frustration of approaching government departments and the impossibility of appealing to banks. But since the 2001 White Paper on tourism, the state has intoduced some high-powered initiatives for financial aid and support to blossoming tourism-related enterprises. Many entrepreneurs aren't aware of all the schemes out there, and many don't realise they fall into a funded category or that such a category exists. Below is a brief guide to the main funding agencies of the departments of Trade & Industry (DTI) and Environment Affairs & Tourism (DEAT) and the types of funds and support programmes available.

TEP (Tourism Enterprise Programme )
The Tourism Enterprise Programme (TEP) is an initiative of the Business Trust and managed by Ebony Consulting International and a number of designated sub-contractors in some of the provinces. The main aim of TEP is to encourage and facilitate the growth and expansion of tourism enterprises in response to the increasing demand for tourism activity. TEP assists large operators, investors, SMMEs, and HDE's identify viable linkages or business opportunities. Resources are then tapped to make this opportunity a reality. This often includes assisting the SMME obtain the requisite professional services such as ISO/ SABS quality certification, debt and equity finance, proper business planning, packaging, legal advice, technology needs and marketing. TEP has a Training and Technical Assistance Fund (TTAF), which is utilised on a cost-sharing basis with the enterprise.

Tourism Investment Promotion
Cabinet has identified tourism as one of the top five priority areas for the promotion of economic development and job creation in South Africa. An implementable tourism investment promotion strategy is being developed in collaboration with Trade & Investment South Africa (TISA). Partnerships were created with South African Tourism (SAT), Development Bank of Southern Africa (DBSA) and the Council for Scientific and Industrial Research (CSIR).

The DTI SMEDP
(Dept of Trade & Industry Small & Medium Enterprise Development Programme) SMEDP is a cash grant incentive scheme, which offers assistance to tourism related enterprises within South Africa. Assistance is provided to either new or expansion projects.
The criteria for companies are:
Enterprises that are located in South Africa
New projects and expansion of existing projects
Businesses with a capacity expansion of at least 25% in accommodation and / or in tourism vehicles must be demonstrated within the first financial year of the expansion Businesses classified as providers of short term accommodation e.g. hotels, bed and breakfast, lodges and chalets Tour operators that are solely serving tourists
Business that have funicular or private railways, aerial cableways, water transportation vehicles on dams, lakes and others Benefits:
A tax free cash grant for two years based on the cost of the investment in buildings, furniture, equipment and vehicles Additional cash grant for the third year to enterprises provided that the ratio of the Human Resource Remuneration, expressed in terms of operational cost, be a minimum of 30% A maximum incentive of R3 050 000 million per annum, for enterprises with an investment in buildings, furniture, equipment and vehicles


DBSA
(The Development Bank of South Africa)
Small Business Development is not a core function of the DBSA. Nevertheless, tourism enterprise is considered for support within the following criteria: a significant impact to socio-economic development
alignment with national, provincial or local priorities
financial and economic feasibility and sustainability
substantial resources by proponents to invest in the project
a significant contribution to the transformation of the tourism industry. ]


Type of tourism investments
attractions (natural, cultural or man-made)
facilities and services (e.g. accommodation)
transport (air, road, water, rail)
supportive services (e.g. safety, information)
enabling infrastructure (e.g. transportation, telecommunication, water)
institutional infrastructure (e.g. education and training, capacity building).

IDC
(Industrial Development Corporation)
The IDC's Tourism Business Unit finances capital expenditure in tourism businesses. This finance is focused towards businesses offering accommodation to bona fide tourists but also extends to other capital-intensive tourism projects with the potential to significantly impact on the growth of the tourism industry.

The main criteria for selection are:
Projects must be economically viable
The IDC loan amount must be larger than R1 million
An owner's contribution of at least 40% of the total project value is needed. This can be reduced to 20% for empowerment projects.

The type of projects that would qualify for funding include:
Accommodation facilities
Buildings
Furniture, fittings & equipment
Renovations
Refurbishments
Expansions
Immediate infrastructure


Other capital intensive projects: Developments in conservation areas and game reserves, including concession areas The type of finance facilities available include:
Mainly loans of between 5 to 15 years
Repayments to suit cash flow
A possible capital moratorium of up to 2 years
Capitalisation of interest of up to 2 years
The business plan should contain adequate information about the applicant, the project, costing, marketing plans, employment and at least 5 years' budgets, to enable IDC to assess the merits of the business case. Closer guidelines are available from the Tourism SBU.


KHULA FINANCE
Khula Credit Guarantee Scheme
The Khula Scheme facilitates finance for SMMEs, by providing guarantees to banks which then acts as collateral for 80% of the total loan amount (with a loan maximum of R1 million).

The Credit Guarantee and Support Services are available to:
People who want to borrow between R50 000 and R1 million
Who will be involved in the day to day running of the business on a full-time basis Who can provide an own cash contribution of at least 10% towards the start-up or expansion of the business

The Credit Guarantee is available both for new business ventures or existing businesses wishing to expand.

Business Partners Business Partners recently announced its investment budget for the 2003/2004 financial year with the tourism industry earmarked with a R91 million allocation. Travel and tourism-related businesses account for 10% of the overall investment portfolio.The group invests in a wide variety of entrepreneurial enterprises operating in the sector, including guest houses, hotels, caravan parks, restaurants and local tour operators. INVESTMENT CRITERIA Business Partners is a viability-based investment group and does not have the same security requirements that commercial banks do. Potential investments are assessed on the viability of a sound business plan and on levels of contribution that the entrepreneur may be able to offer.
Some of the many services the group offers to assist and enable entrepreneurs are: a free business planning model, which is accessible on the Business Partners web site at www.businesspartners.co.za Call the Business Partners office closest to you:

Western Cape Department Of Economic Development And Tourism
TYPES OF FUNDING
1. PROVINCIAL PROJECT FUND
Training (e.g. tour guides, customer care, small business development, product development, skills development) Infrastructure directly linked to tourism sites (e.g. buildings, roads, road signage, landscaping) Conferences aimed specifically at development issues in tourism. Development of tourist routes Exhibitions aimed at exposing SMME's to the market. Craft development Tourist information centres Literature related to small business development. Signage Feasibility studies Mentorship TOURISM HELP DESK
The department is setting up a number of tourism help desks in various areas of the province in partnership with local government. The THD's will filter micro projects, which can be funded by the department.