Caro Malherbe chats to tourism business owners and money lenders about the challenges of applying for funding and starting a tourism business.

The risks associated with start-up businesses, especially in the tourism industry – where monthly turnover is often unpredictable – means that applying for funding can be difficult. However, there are funding options available for those who have an established track record, and ways to create a good track record for those who don’t, business owners say.

Rob Hetem, Director of Tamrich Tours, and his partner started their business using personal savings. “We funded the business with our meagre life savings and all the office equipment that we could scrape together (we even threw in our car). I also kept my day job and worked evenings and weekends promoting our business while my partner handled all the operations,” he says. “I don’t believe it’s easy to get funding for any business. Certainly, in tour operating where the margins are tight, especially when you’re starting out.”

Hetem says the industry also faces a lack of training, mentorships and development vehicles. “There is also the challenge in cultivating a culture of tourism and service amongst the youth so that they can carry it forward.”

Anthony Botese, Owner of Bohlale Safari and Golf Tours – a self-funded business, explains why it’s so hard to find funding for a business in the tourism sector. “The tourism industry is so up and down. One month I could have 10 tourists and the next month there’s two. So there won’t be any secure funds to repay on a monthly basis and the banks won’t allow anything else but that kind of lending.”

Jabu Matsilele, Owner of Buja Tours based in Kempton Park, says in his experience of starting his tourism business he sought help from the National Youth Development Agency (NYDA), which helps entrepreneurs draw up their marketing and business plans, which they then take to banks and funding institutions.

Although Matsilele was not granted any funding, his business managed to grow organically through building relationships with tour operators abroad, attending road shows, online marketing, social media, sending newsletters and marketing at embassies. 

“We are now well established so it would be easier for us to go to a bank and ask for funding. But starting up is not easy,” says Matsilele. “We have security now when before there was not. We’ve got a bond; we’ve got two cars.”

The best way to start a business is by starting small and building a loyal client base and a reputation for integrity, Hetem suggests. “Keep borrowings to the minimum so that you can make it through any low seasons you may have. The process is painful to the extent that assistance is not easily available and competition is fierce. There’s a lot of trial and error to go through.”

Some available options

Salifou Siddo, Chief Executive of the Tourism Enterprise Partnership (TEP), says the lack of access to funds is one of the reasons TEP has set up a financing facility. “Small business owners always tell you about their difficultly in accessing finance from commercial banks,” explains Siddo. “Commercial banks look at risk and so they may be reluctant to lend to start-ups or micro enterprises in the tourism sector and we at TEP have identified that as a constraint in the growth of SMMEs. That is why we have gone out there to actively look at ways to address this constraint. The solution we came up with is the iKwezi Tourism Facility, which we have set up with SEFA (the Small Enterprise Finance Agency).”

“With the iKwezi fund, we don’t necessarily track hard-core financial returns, we are more interested in the impact that the fund will have on the small enterprise,” says Siddo. “This means we look at how this fund is going to impact the business. We measure impact in terms of how access to the fund will help turn over, ability to grow the business and job creation.” TEP also provides assistance with compiling business plans, business growth projection and risk assessment, Siddo adds.