Activities on the Tourism Equity Fund (TEF) – launched on January 26 – have been suspended to allow the Minister of Tourism, Mmamoloko Kubayi-Ngubane, to meet with the Afrikaner rights group, Afriforum, and trade union, Solidarity, and address their concerns about what they term the “racist” criteria of the fund.

Both groups wrote to Kubayi-Ngubane threatening legal action on the basis that the TEF is “exclusive on the basis of race, and discriminates without any legal or justifiable basis”.

The organisations are questioning the legality 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.

In a statement, the Minister emphasise that B-BBEE was never designed to exclude established businesses but to level the playing field in the economy. “As government, we remain steadfast in our commitment to advancing the transformation agenda through creating equitable opportunities, as we strive to create an inclusive and revived tourism economy as part of our country’s economic reconstruction and recovery plan,” said Kubayi-Ngubane.

LLB, MBA and finance specialist, Brett Evans, said those that criticise the Tourism Equity Fund for being exclusive when it comes to white-owned businesses are missing the point. “It is an equity fund, which is a different initiative entirely from a COVID-19 relief scheme.”

Strong reaction

However, many in the tourism industry had a strong reaction to the launch of the TEF, especially given the current situation the tourism industry finds itself in following the devastation caused by COVID-19, the subsequent travel and hospitality restrictions and a lack of funding for relief measures for the sector.

Tourism consultant, Adrienne Harris, said in reaction to the launch of the fund: “This feels like government is handing out a few expensive parachutes to passengers on a ship in trouble, because they were unable to organise life rafts on board.

“Transformation is still needed. The sad thing, however, is that this type of initiative should have been done 20 years ago. Certainly not in the middle of a global tourism crisis.”

Chief Executive of SME TradeLinks, Dr Salifou Siddo, welcomed the fund but recognised that many in the industry had had a negative reaction. “To those emerging entrepreneurs who have only known frustration and disappointment in trying to secure funding to grow their assets, this new fund offers hope; but many in the industry, given the devastation that COVID has visited on tourism businesses, see the introduction of TEF at this point as a misguided initiative, as it is only open to black-owned entrepreneurs.”

Economic development consultant, Paul Zille, echoed the sentiments of many in the tourism industry when he wrote in a column for Daily Maverick that the R1.2bn (€65m) Tourism Equity Fund was, in principle, to be welcomed but it was unlikely to meet the objective of broad-based transformation and, in its current form, would retard prospects for an inclusive recovery.

He referred to it as a “blunt, racially exclusive and one-dimensional BEE ownership instrument”, pointing out that while the purpose of the fund – to provide debt and grant funding to facilitate equity ownership and project development by black entrepreneurs – was clear and urgently needed, this single-minded focus on majority black ownership was “unnecessarily restrictive, divisive and distortionary”.

Founder of Tourism SMME network, SEEZA, Septi Bukula – while also welcoming the fund – expressed concerns that it would exclude many small, medium and micro-enterprises from receiving funding.

“The minimum loan amount of R10m (€557 000) is simply too big for small businesses,” he said.

It is not known when the Minister will meet with Afriforum and Solidarity.