(Ecofin Agency) - The South African government has just launched a fund of R1.2 billion ($79.4 million) to support the tourism industry. According to the authorities, the “Tourism Equity Fund” aims to speed up the sector and increase its weight in the economy (currently estimated at 2.9% of GDP directly and 8.6% indirectly).
President Cyril Ramaphosa said the facility will focus on easing the participation of black-owned companies into the targeted sector. Businesses run by women or people with disabilities are also included. In the long run, the government seeks to improve the employability in this sector that already has 1.5 million indirect and direct workers.
“The capital-intensive nature of the tourism industry prevents many black-owned tourism enterprises from growing,” the head of state said. In other words, the lack of financing of many black-owned businesses prevents them de facto from participating in tourism activity, thus depriving the sector of new income and potential workers. A situation that reflects the economic inequalities which mark the country of Nelson Mandela, where the white families earn 5 times more income than the blacks who nevertheless account for 80% of the total population. Moreover, for decades, many strategies have been adopted to reverse the trend (without success), as was the case with the Employment Equity Act, which gives priority to black populations in access to jobs.
Wishing to rely on the help of commercial banks, the authorities hope through their new strategy to provide grants and loans to enable black businesses to acquire the equity capital needed to invest in tourism.
"We are committed to ensuring that this Fund enables the black business to substantially benefit from the tourism economy, not be roped in by fronting companies or to be marginal bystanders and small-scale suppliers to larger tourism enterprises," said President Ramaphosa in his speech at the launch of the Fund on January 26, 2021.
“Whether it is in the coastal town, the Eastern Cape, or a wildlife-rich area in the North West or Limpopo, it is our aim, through this fund, to actively support black-owned businesses to run profitable and sustainable enterprises. It is also our aim to employ people to procure goods and services locally, and to make a real contribution to our economy,” he added.
Let’s however note that this initiative is taking place as a consequence of the covid-19 pandemic. According to the World Tourism Organization's scenarios, the collapse of the sector could lead to up to $2 trillion in lost revenue for the world's GDP. South Africa, for its part, sees this situation as an opportunity to "rebuild differently and better" this sector, which is vital to a national economy in crisis.
Moutiou Adjibi Nourou