by Simon Capstick-Dale

Investment Tourism

Travel: A pillar of growth

Table Mountain
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Post-2010 tourism was recognised as one of the six core pillars of growth in South Africa’s New Growth Path, and strategies such as the National Tourism Sector Strategy (NTSS) are likely to carry this momentum forward. In its tourism growth forecast – Tourism 2020 Vision – the United Nations World Tourism Organization (UNWTO) predicts the sector will grow by an average of 4.1% per year for the next two decades, and projections for the year 2020 indicate that tourist arrivals will increase to 1.8 billion. 

Despite tourism being hit hard by the global crisis, the industry has emerged in recent years as a prime driver of world economies, particularly those of developing countries. 

According to UNWTO, international tourist arrivals surpassed 124 million in the first two months of 2011 – up from 119 million in the same period of 2010 – with emerging economies continuing to grow at a faster pace than advanced ones. This is a good recovery following the decline of 2009, for which the global economic recession was largely responsible. During this period, Africa was the only continent to experience positive growth.

South Africa’s membership of BRICS (Brazil, Russia, India, China and South Africa) has had a positive impact on the local tourism industry, with foreign direct investment and infrastructural development being key benefits of this coalition.

Research indicates, however, that there are still numerous opportunities for tourism growth not being fully exploited. Against this background, the new National Department of Tourism drafted the NTSS to encourage the country to reach its full tourism potential with steady goals set for 2020. 

Despite significant growth in the industry, the vast potential for the success of tourism-related small and medium enterprises has for the most part not come to bear. 
The NTSS identifies the high percentage of failure among small tourism entrepreneurs entering the industry on the following: poor planning and market analysis; inadequate business experience; a lack of support structures; insufficient personal equity to fund their businesses; and the fact that the tourism industry is regarded as a risky and unattractive investment option. 

The Tourism Support Programme (TSP) introduced by the Department of Trade and Industry (dti) is part of the broader Enterprise Investment Programme, and is one of many tourism investment initiatives aimed at funding entrepreneurial projects. It is an investment incentive grant payable over a period of two to three years, which aims to develop tourism enterprises and stimulate job creation in the tourism sector. 

The programme offers a grant of up to 30% toward investment costs for the establishment or expansion of existing operations in South Africa. It is available to foreign-owned enterprises and covers furniture, equipment, vehicles, land and buildings of up to R200- million. Investment projects of R5-million and below may qualify for investment grants equal to 30% of their qualifying investment costs, payable over a three-year period.

To ensure the incentive reaches disadvantaged communities, the dti specifies that projects must be located outside the metropolitan areas of Cape Town, eThekwini and Johannesburg. Projects located in marginalised areas within these metros, as determined by the dti, are eligible to apply for assistance via the TSP.

Part of its action plans to increase tourism investment, the DEAT suggests that all investment support and enterprise development structures such as the Public Investment Corporation, the Public-Private Partnership Unit, the Industrial Development Corporation, Developmental Bank of Southern Africa and the dti should be streamlined, and financing institutions should be engaged to improve tourism businesses’ access to finance. 

Given the success of the 2010 World Cup, statistics of positive growth since, and a number of tourism investment initiatives in place set up and run by both the public and private sector, there is no doubt that South Africa has great potential to expand its tourism industry to become a fundamental player in the country’s economic prosperity.

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Issue 72