The speed at which decisions are taken on Tourism Equity Fund (TEF) applications and the rate at which these funds are disbursed to approved applicants are “painfully slow” and could halt growth.

So said Minister of Tourism Patricia de Lille in a press statement, highlighting the challenges tourism businesses face in accessing finance. Delays retard the sector’s transformation and creation of much-needed jobs in the tourism sector.

Ongoing battles and delays

The R1.2 billion (€62m) TEF was launched in January 2021 by the Department of Tourism to provide a new financial support mechanism to stimulate investment and transformation in the tourism sector, combining debt finance and grant funding to facilitate equity acquisition and new project development.

However, the fund was placed on hold after lobby group AfriForum and trade union Solidarity contested the legality and rationality of the 51% black-owner/managed qualification criteria for the fund in the High Court.

They suggested it deviates materially from the Broad-Based Black Economic Empowerment Act read with the Tourism Code. The Supreme Court eventually ruled that the foundation of the TEF was unconstitutional.

However, the Department of Tourism appealed this ruling. In February 2023, the Constitutional Court dismissed this appeal with costs. By May of that year, the then newly appointed Minister of Tourism De Lillie announced that she had settled this matter.

She noted at the time that she had written to the Tourism Business Council of South Africa for their opinion on the way forward.

De Lille also acknowledged industry concerns that, once the fund was back in play, responses to applications had to be more speedily addressed.

According to the minister, there was a “lot of interest” in leveraging the TEF for growth.

By early November 2023, applications for the revised TEF eventually opened – managed by the Small Enterprise Finance Agency (Sefa) on behalf of the Department of Tourism.

The funding model follows a blended finance approach to provide a combination of debt and grant financing to facilitate equity acquisition and new project development in the tourism sector by entrepreneurs.

Slow progress

De Lille highlighted that the first year of the application adjudication process was slow and a number of interventions were made to enhance the administration of the TEF by Sefa.

However, to date, only 20 applications from businesses have been approved under the TEF. KwaZulu-Natal leads in submissions and approvals with five approvals – followed by businesses in Gauteng, the Eastern Cape, Limpopo, the Western Cape and the Free State.

Two of the approved applications are for new businesses and 18 for expansion of existing businesses.

“Administration of this fund and application processing has been too slow and, despite all Sefa has done to improve the management of the TEF, I remain seriously concerned about the speed at which decisions are taken on TEF applications and the rate at which Sefa disburses funds to the approved applicants.

De Lille pointed out that Sefa is expanding on outreach activities hosting webinars to provide step-by-step guidance to help applicants navigate the TEF application process to improve their chances of success.

Appeal to Sefa

“I am appealing to Sefa to continue putting more meaningful work and effort into ensuring that applicants access the TEF urgently and, as agreed with them, to be diligent in discharging their responsibilities in managing the TEF.

“The Department of Tourism will not be renewing its contract with Sefa for the next phase of the Tourism Equity Fund and I want to apologise to the tourism sector for the poor performance of the application adjudication process.”