Reference documents and sites:
BEE Act, 2003
BEE Amendment Act, 2013
Tourism Sector Code, 20 November 2015
Tourism Sector Code and Alignment, 27 September 2019 – DRAFT CODE
Tourism EME Affidavit
Tourism QSE Affidavit
Gazette 44172 dated 19 February 2021 – Qualification Criteria for the Tourism Equity Fund
Tourism Equity Fund Application Form
This article lists the basics of the Tourism Sector Code with a focus on the Ownership element in light of a recently published gazette (44172) of 19 February 2021 as listed in the extract below from the Minister of Trade, Industry and Competition.
- “The Department of Tourism (“the Department “) made an application in 2019, with a revised application made in 2021, requesting permission to specify qualification criteria for the Tourism Equity Fund, on Ownership and Management Control elements, which exceed those set out in the relevant Code of Good Practice.
- The Department has shown how doing so will promote the objectives of the BBBEE Act specifically and transformation in general in the tourism sector.
- I am satisfied that the application meets the requirements set out in section 9(6) of the Act.
- I therefore approve the request in accordance with section 9(6) of the Act, to enable the Department of Tourism to specify qualification criteria for the Tourism Equity Fund in accordance with its application, which exceed those in the relevant code.
- The permission to specify qualification criteria provided for above, is granted for the duration of the Tourism Equity Fund or a 10-year period, whichever is shorter.”
Whilst the gazette is concise (or rather, too concise), it does not give any detail as to the revised criteria to be used by the Department of Tourism. Additionally, no such detail is to be found on any of the relevant department’s websites other than the usual information of the Tourism Equity Fund and associated documents. This leaves businesses operating in the tourism sector in a cloud of uncertainty and only the current, known information will be discussed in this article. Other articles have been written for the Tourism Sector Code and a simple search on our website will provide the reader with access to these articles.
The Priority elements are as follows:
Ownership: The sub-minimum requirement for Ownership element is 40% of Net Value (40% of the 8 points).
Skills Development: The sub-minimum requirement for Skills Development element is 40% of the total weighting points (excluding bonus points).
Enterprise and Supplier Development: The sub-minimum requirement for Enterprise and Supplier Development element is 40% of the total weighting points of each of the three measuring categories within the Enterprise and Supplier Development element, namely; Preferential Procurement, Supplier Development and Enterprise Development.
The measured entity must achieve at least:
10 points under the Preferential Procurement;
4 points under the Supplier Development; and
2 points under the Enterprise Development.
Compliance to priority elements
Large Enterprises are required to comply with all the Priority elements. Qualifying Small Enterprises (QSEs) are required to comply with at least two priority elements, which are Ownership (compulsory element) and either Skills Development or Enterprise and Supplier Development.
Discounting principle effect
Non-compliance with the 40% sub-minimum requirements of any of the priority elements will result in the measured entity’s B-BBEE Status Level and corresponding B-BBEE Recognition Level being discounted
by one level down until the next applicable verification period in which the measured entity can demonstrate compliance with the 40% sub-minimum requirements. Only the discounted level will appear on the
What does Ownership element actually measure?
Direct ownership refers to ownership of an equity stake in the measured entity. Ownership is measured by the following:
- Exercisable Voting Rights: refers to the rights that Black People have to vote on all important issues at shareholders meetings.
- Economic Interests: refers to the rights that Black People have to receive dividends, capital gains and other economic benefits of shareholders
- Employee Share Ownership Programme: refers to an employee or owner programme that provides Black Workers with an ownership interest in the entity and meets the rules set out in the Amended Tourism B-BBEE Sector Code.
- Broad-Based Ownership Schemes: refers to a collective ownership scheme by Black People constituted with a view to facilitate the participation of specified Natural Persons in the benefits flowing
from the ownership by that scheme, or by its fiduciaries of an Equity Interest in the entity in accordance with the rules set out in the Amended Tourism B-BBEE Sector Code.
- Co-operative: refers to an autonomous association of persons united voluntarily to meet their common economic and social needs and aspirations through a jointly owned and democratically controlled
enterprise organised and operated on cooperative principles.
- Black Designated Groups: refers to:
Unemployed Black People not attending and not required by law to attend an educational institution and not awaiting admission to an educational institution;
Black People who are youths as defined in the National Youth Commission Act of 1996;
Black People who are persons with disabilities as defined in the Codes of Good Practice on employment of people with disabilities issued under the Employment Equity Act;
Black People living in rural and under developed areas; and
Black Military Veterans who qualify to be called a military veteran in terms of the Military Veterans Act No. 18 of 2011.
- Black New Entrants: refers to Black People who hold rights, of ownership in an entity and who, before holding those rights have not held an equity which has a total value of more than R50 million in any other entity.
- Net Value: refers to the accumulated net economic interest in the hands of Black People after the deduction of monies owed on the debt.
The total weighting points for the Ownership element are 27 on the Large Enterprise scorecard, whereas under the QSE scorecard are 26.
In order to score maximum points under the Ownership element, a measured entity is required to meet the following compliance targets:
a. 30% of exercisable voting rights and economic interest in the hands of Black People;
b. 15% of exercisable voting rights and economic interest in the hands of Black Women;
c. 3% of economic interest in the hands of Black Designated Groups, Black Participants in Employee Share Ownership programme, Black People in Broad-Based Ownership Schemes and Co-operatives;
d. 0% in the hands of Black New entrants; and
e. Compliance with the net value principles.
Below is the known and current information of the TOURISM EQUITY FUND.
The Tourism Equity Fund (TEF) is an equity acquisition fund that will be managed by “sefa” on behalf of the Department of Tourism. The purpose of the Fund is to promote the participation of Black enterprises within the tourism industry. “sefa” is the Small Enterprise Finance Agency and is a licensed credit provider.
Minimum Transaction sizes to be considered will be R10 million. Grant funding will be provided together with debt funding from sefa and its strategic bank co-funder.
- To fund commercially viable and sustainable majority Black owned (minimum 51%) tourism enterprises including enterprises in rural areas and townships.
- To facilitate the participation of targeted groups such as women and youth in the priority tourism sectors as defined by the B-BBEE sector codes.
The fund will focus on the majority black owned (51%) and black management controlled tourism enterprises in the following sub-sectors:
• Accommodation, e.g. Hotels, Lodges, Resorts and Self-catering Units, Backpacker facilities.
• Hospitality and related services, e.g. Conference and Convention venues attached to a substantial accommodation element, privately owned attractions in already developed tourism nodes.
• Travel and related services, e.g. Tour Operators.
• Any other tourism related products and initiatives not referred to above which supports tourism development imperatives and economic impact in terms of job creation, geographic spread and strengthening the tourism offering of South Africa.
• The enterprise must be a registered legal entity in South Africa in terms of the Companies Act, 1973 (as amended), Close Corporations Act, 1984 (as amended), and the Cooperatives Act, 2005 (as amended).
• The entity needs to be 100% owned by South African citizens.
• The entity needs to be predominantly Black owner-managed and controlled (51%).
• The entity needs to be registered and compliant with the South African Revenue Service.
• The entity must be operating in the qualifying sectors.
When completing the Tourism Equity Fund Application Form the following information is also required:
▪ Business Profile;
▪ B-BBEE certificate or affidavit in line with the amended Tourism Sector Codes;
▪ Company statutory documents;
▪ FICA documents;
▪ Certified ID copies of Directors/Members;
▪ 12 months bank statements;
▪ Latest Annual Financial Statements and Management Accounts not older than three months from date of application (Statement of Financial Performance and Statement of Financial Position)–where applicable;
▪ 5 year Cash Flow Projections (with clear assumptions)–where applicable;
▪ Relevant industry certification–where applicable;
▪ Facility Statements of Other Funders-where applicable.
This application form is a lengthy 13 page document and requires significant attention to detail in addition to the above documentary requirements.
As and when additional information for qualification criteria is made known such info will be published in follow up articles.
Author Craig Tonkin