Picture: 123RF/TRANIKOV STUDIO
By Fatgiyah Bardien
Of all the industries that have been battered by Covid-19, few can have had it as tough as tourism. An industry that is dependent on people travelling is bound to suffer when there is so little leisure travel. Tourism needs all the help it can get.
On January 26 the government launched its R1.2bn Tourism Equity Fund (TEF), with the specific aim of boosting transformation in an industry that is falling behind in adapting its profile to that of our rainbow nation.
“The fund recognises that the capital-intensive nature of the industry is preventing new and existing black-owned tourism enterprises from meaningfully participating in and contributing towards this sector,” we were told by the tourism department. “By providing access to finance for black-owned commercially viable tourism projects, the TEF is intended to address one of the major challenges to transformation of the tourism sector.”
Then came the backlash. It was so fierce that the rationale of the fund has been challenged in court. Last month the high court in Pretoria granted an interim injunction to suspend the activities of the fund. The support is now available to no-one.
Other Covid-19 support measures that were offered, such as the Temporary Employer/Employee Relief Scheme (Ters) and the R350 a month Social Relief of Distress grant, which have both now ended, had no such race restriction. So why is it OK to discriminate against white-owned guest houses and other tourism businesses?
The answer lies in a long-standing government policy of tilting its support in favour of transformation. Most government incentive programmes have a specific government or market failure they are trying to redress. If there were no failures there would be no need for any incentive.
Most existing government incentives underpin the imperative for BEE through a minimum BEE level — level 4 is the entry point for most incentive programmes. Majority white-owned companies are not, by definition nor by intent, covered by the Black Industrialists Programme, for example.
This has a specific target market of 51% black-owned businesses. Hence the name. It makes policy sense to create black-owned manufacturing companies of scale. If many already existed, there would be no need for the incentive. They do not.
The government’s largest incentive scheme is for the motor industry — the auto sector Masterplan. This has empowerment and localisation at its core, even though the special challenges of dealing with multinationals that are unwilling to surrender share ownership have required creative ways of advancing transformation, specifically through supplier development.
Is it not, therefore, consistent and logical for the government to say that its new tourism support measure will be offered only to black-owned businesses?
If it were unconstitutional for this scheme in the tourism sector to have these requirements, surely this would mean that almost every incentive scheme to date has been in one way or another unconstitutional — because they have a BEE target level or other transformation requirements? That does not make sense to me.
Let us instead take a step back. Let us not see this fund as something that is being put in place solely in the context of the Covid-19 pandemic, which of course has no racial preference in the way in which it selects its victims.
Let us instead see the TEF as a measure that was launched against the backdrop of an industry ravaged by a pandemic, but which still needs to be rebuilt on more transformative lines.
It was not designed in the same way as Ters and the special social grant, to provide short-term help in a dire situation. It has a longer time frame and falls within an established philosophy. The tourism industry does need to be transformed. The government is well within its rights to design an incentive that is trying to fix a market failure.
By its nature, it does exclude many businesses that are in trouble and would clearly benefit from more support, but in practical terms it is there to help those thousands of floundering or fledgeling businesses owned and operated by black South Africans.
The government has many existing incentives with rules that result in deserving applicants, many of them black, not being able to qualify. I support the need for rules. While R1.2bn may seem a lot of money, and it can do a lot of good, it is not going to help every business owner in the tourism sector, and never could.
There is other funding available from the government, such as the government’s R200bn loan guarantee scheme, which could be used more effectively and certainly could help restart the broader tourism industry. Perhaps the tourism sector should be putting more pressure on the banks to ensure they fund the recovery in this sector? However, we still need to prioritise, to rebuild the sector in a more balanced way by bringing in more black businesses.
The court challenge, and the consequent delay in rolling out support to desperate black tourism entrepreneurs, is a destructive way forward. Instead of tearing down a support programme and suspending payments of the few resources we have, why not be constructive?
Why not accept that tourism is one of the biggest industries we have in SA, with immense possibilities for growth and employment as we crawl our way out of this pandemic — and accept that it is not yet very transformed? Black entrepreneurs are part of the solution, they are not the problem.
• Bardien is a senior manager at Cova Advisory.