Investing in the economy

Summary of operational performance

Tourism SBU
Performance   2010   2011   2012   2013  
Total value of financing approved (Rm)  324   134   233   273  
Total number of jobs expected to be created or saved   489   276   447   838  
Impairments as a % of outstanding book (at cost excluding undrawn commitments)  5%   8%   12%   16%  
Focus areas   
Development of attractions, specifically in underdeveloped tourism nodes in South Africa and suitable to the domestic market  
Rest of Africa – Rehabilitation and refurbishment of existing properties; business hotels  


Highlights  

2009   2010   2011   2012   2013  
  • Tourism industry peaks due to growing economy and 2010 FIFA World Cup
  • Industry starts feeling the effect of the recession and room oversupply
  • Opportunity for beach resort in northern KwaZulu-Natal identified
  • IDC strategy changed to focus on niche tourism in underdeveloped nodes and the rest of Africa
  • Feasibility study for beach resort concluded
  • Funding for kite surfing facility in the Western Cape approved
  • Environmental impact assessment (EIA) on KZN beach resort commissioned
  • Two additional projects in underdeveloped areas identified
  • EIA on beach resort concluded
  • Feasibility studies on additional projects concluded
  • Six further projects in niche sectors or underdeveloped nodes identified and scoped
  • Road shows in East and West Africa and SADC resulted in two further projects being identified

 
Recent performance 

Although activity in the tourism industry is starting to increase, recovery from the recession has been slow, and IDC investment activity in the past year was mostly confined to the expansion or refurbishment of existing facilities. The IDC is currently developing 12 projects in South Africa and the rest of the continent focusing on community-based projects in lesser developed areas in niche tourism sectors including a beach resort, enhancement of natural attractions and reserves, a theme park and business hotels in the rest of Africa. The progress on these projects during the year under review was considered satisfactory.

Challenges  

In South Africa capacity oversupply, especially in metropolitan nodes, following the build-up to the FIFA World Cup in 2010, coupled with the global recession, has resulted in a large number of distressed properties in the market, with very few new developments coming through.

However, travel and tourism is one of the fastest-growing sectors in the world and South Africa’s tourism numbers grew by 10% in 2012, more than double the global growth of 4%. The industry is known for its cyclical trends and it is expected that the oversupply of hotel rooms will be extinguished once the industry reaches an equilibrium.

Strategy and prospects  

The IDC has been changing its approach to tourism development in favour of creating demand by developing niche attractions in under-developed regions. IDC aligns its strategy with the Department of Tourism’s National Tourism Sector Strategy.

Projects are developed in partnership with local tourism authorities, communities and other stakeholders, and include the following:
  • The Nonoti Beach Resort on the KwaZulu-Natal coast;
  • A skywalk at God’s Window in Mpumalanga;
  • A cable car at Blyde River Canyon in Mpumalanga; and
  • Development of Baviaanskloof in the Eastern Cape.

Additionally, South Africa has a rich cultural and natural heritage, yet many of its existing tourism facilities are not income-generating. The IDC aims to transform these attractions into sustainable businesses benefiting the surrounding communities.

IDC has embarked on a project in partnership with the National Department of Tourism to establish the extent of under-utilised state tourism assets that could be developed into viable tourist attractions and facilities aimed at the budget local tourism market.

In 2012, IDC’s Research and Information department did research on fast growing African countries where hotel infrastructure is either not sufficient or not of a standard that the market requires, also taking into account fast growing economic nodes. This has been used as a guide to pro-actively look for opportunities for the development of business hotels in the rest of the continent.

In IDC’s experience, hotel start-up transactions in the rest of Africa are time-consuming to reach bankability and implementation is challenging. Going forward, the IDC will insist on the appointment of a lenders’ technical advisor to strengthen adherence to project timelines, cost control and quality standards. The high demand for quality accommodation and the attractive rates that these hotels demand still result in viable transactions despite the challenges stated above.

Coega Dairy Holdings

The IDC has identified increased competition in the dairy value chain and import substitution in the cheese industry as key sector development goals. We also singled out the need for increased farmer (and specifically B-BBEE) participation in dairy value-adding initiatives.

Windtown Lagoon Resort 

The newly built Windtown Lagoon Resort and Spa reflects the IDC’s focus to funding community-based projects that have potential to create employment opportunities in far-flung regions.


APPROVALS
R13.1 billion
DISBURSEMENTS
R16.0 billion
JOBS FACILITATED
18 922
JOBS SAVED
3 950
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