The South African government has capitulated to the demand that it reduces the requirements for black ownership to be below 51% in the qualification criteria for the R1.2 billion Tourism Equity Fund (TEF).
The 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.
However, the fund was placed on hold after lobby group AfriForum and trade union Solidarity brought the case before the High Court, contesting the legality and rationality of the 51% black-owner/managed qualification criteria for the fund.
Last week, Tourism Minister Patricia de Lille confirmed that she would seek Cabinet approval for the TEF as her department has revised the qualification criteria after the fund was stalled for more than two years due to litigation.
Speaking during the post-Cabinet media briefing today, Minister in the Presidency Khumbudzo Ntshavheni said Cabinet was updated on the settlement reached on the implementation of the TEF as a result of the court case brought by AfriForum and Solidarity.
“Cabinet was updated on the actions taken to implement the settlement agreement and the changes to the TEF, effected on the basis of the settlement agreement,” Ntshavheni said.
“The department and the Minister of Tourism were taken to court by AfriForum and Solidarity, which delayed the implementation of the TEF, and because the case was being prolonged, it was prudent to find an out-of-court settlement. The settlement was then we are going to implement the TEF in line with the current BEE Codes applicable to the Department of Tourism.
“Accordingly, the TEF will be implemented in line with existing Tourism Sector Code targets of minimum 30% black ownership instead of the 51% originally proposed TEF targets. Cabinet supported the implementation of the TEF.”
The fund will 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.
The Department of Tourism will capitalise the fund with an amount of R540 million, which will be matched with a contribution of R120m from the Small Enterprise Finance Agency and R594m from commercial banks that will be participating in the programme.
The two groups who challenged the implementation of the TEF in court suggested that it deviated materially from the Broad-Based Black Economic Empowerment (B-BBEE) Act, read with the Tourism Code.
At the time, AfriForum and Solidarity said the Covid-19 crisis had highlighted the government’s race-based objectives and wanted to use the plight of people in the tourism industry as an opportunity to drive their transformation agenda, while cadres with political connections cannot use the crisis in the tourism sector as an opportunity to fill their pockets.
The court eventually ruled that the foundation of the TEF was unconstitutional.
However, in April this year, the department proposed to settle the matter, and the groups accepted the settlement and withdrew their litigation, thereby unblocking the TEF.
When De Lille reflected on her 100 days in office in June, she said the revised implementation plan was being finalised within the existing B-BBEE legislation and the Tourism B-BBEE Codes.
She said the target was to have the TEF fully disbursed by March 2024 and to develop and implement mechanisms to unlock the implementation of the TEF to ensure black ownership within the confines of the law and support small to medium enterprises in the tourism sector.