Tourism

Tourism

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The Tourism Strategic Business Unit concentrates on the accommodation sub-sector but plans to diversify into other categories as well, like business and adventure tourism, while supporting township tourism developments.

We focus on asset-based finance, with the bulk of our portfolio invested in the accommodation sector.

Our Strategic Business Unit is determined to contribute to the government’s strategy for the tourism industry by participating in the establishment of good quality hotels in South Africa and the rest of Africa.

We plan to diversify our portfolio into other sub-sectors such as niche sports markets, adventure tourism and business tourism.

The unit supports Broad-based Black Economic Empowerment (BBBEE) projects with significant development impact in townships and rural areas while adhering to the Tourism BEE Charter requirements.

Who should apply for funding?

  • Projects that show profitability and sustainable commercial viability;
  • Projects seeking the financing of fixed assets and capital expenditure;
  • A product or facility for which there is an identifiable demand from a quantifiable market;
  • Projects which have a significant developmental impact, such as job creation, empowerment and rural development.

Funding criteria

Economic viability of the project is the overriding criterion. We assess the sustainability of the project, with a minimum 40% owners’ contribution.

A meaningful contribution of finance and assets from the owners will be required. Generally this will be guided by the financial model. BBBEE applications qualify for a reduction in the owners’ contribution.

The minimum loan amount is R1-million. Security is required. This might include the registration of bonds over fixed and movable assets and a pledge of personal suretyships.

Our Tourism Strategic Business Unit structures financial instruments to fit the risk profile and cash flow of the business.

  • Commercial debt:
    • Minimum loan amount of R1-million;
    • Market-related interest rate;
    • A five-to-10 year loan term;
    • Negotiable “grace periods” including a moratorium on capital repayments and capitalisation of interest.
  • Risk participation (taking up equity or quasi–equity)
    • For applications from historically disadvantaged persons, where the promoters are not in a position to provide sufficient capital and the business shows economic merit, the IDC might consider taking equity in addition to loan finance to ensure an acceptable financial structure;
    • We only interested in a meaningful minority stake of a temporary nature;
    • Capital repayments will be structured to ensure a meaningful and acceptable rate of return to the IDC;
    • We will consider equity participation for strategic projects or projects that would not ordinarily happen without IDC participation.

We have funded successful tourism businesses, such as

  • Protea Wanderers Hotel, Johannesburg
  • Arabella Sheraton Hotel, Cape Town

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