One of IDC’s objectives, through its Tourism Strategic Business Unit (SBU), is to help facilitate job creation in both the local economies and those in the rest of Africa. The Tourism SBU primarily invests in the accommodation sub-sector, with a particular focus on business hotels in fast-growing areas. In South Africa investments focus on high impact, sustainable, tourist attractions that provide niche product offerings.
What do we fund in the Tourism industry?
Funding is considered for Tourism businesses looking to invest in the following areas:
- High impact tourism ventures
- Tourist attractions
- Niche product offerings
- Hotel developments
Who should apply for funding?
- Companies within the tourism sector that need funding for new projects, expansions or refurbishment.
How do we fund businesses in the Tourism Industry?
- South Africa’s funding amount of more than R1 million.
- Southern African Customs Union project size of at least R5 million for new projects and expansions with an existing asset base of at least R2.5 million.
- SADC project size of at least USD3 million for new projects and expansions with an existing asset base of at least USD3 million.
- Rest of Africa project size of at least USD10 million for new projects and expansions with an existing asset base of at least USD5 million.
- In all instances, the funding provided by the IDC should not exceed ZAR1 billion.
How do we structure funding?
Funding will be structured to suit the business needs utilising a wide array of instruments including:
- Senior debt as our preferred funding mechanism.
- Equity, which could be considered in strategic investments.
- Quasi-equity, which could be considered in specific instances.
How to apply for funding?
- An applicant should have a comprehensive marketing study that as a minimum defines the target market, key drivers of demand and analyses the industry landscape.
- Financial forecasts until the project reaches maturity (at least 3 years post commencement of operations).
- Appropriate zoning for the property.
- Approved building plans with detailed bill of quantities.
- Approved Environmental Impact Assessment and/or Geotechnical Report.
- Suitably qualified construction company has been identified and JBCC/FIDIC contract signed.
What are the minimum requirements?
- The project/business must exhibit economic merit in terms of profitability and sustainability.
- A reasonable financial contribution from the shareholders/project sponsors is expected, generally 40% to 50% of the total project costs. Black Economic Empowerment applications may qualify for a reduction in owner’s contribution based on special funding schemes that may be available from time to time.
- Security, which may include bonds over fixed and movable assets of the business as well as personal surety and corporate guarantees, will be required.
- Compliance with international environmental standards.
Are there any additional requirements for transactions in the rest of Africa?
Yes, there may be additional requirements which include:
- May require political and/or commercial risk insurance.
- Should demonstrate benefit to South Africa (generally through the export of goods and services) and the host country.
- May require the appointment of a Lender’s Technical Advisor for the construction period.
The costs associated with the above measures will be factored into the total project cost.
What we do not fund?
- Gambling facilities.
- Property development including, residential, office or commercial developments or timeshare and fractional ownership schemes.
- The acquisition of game.
- Golf courses.
- Student or long-term rental accommodation.
- Stand-alone tour operators and/or travel agents.
Are there any additional funding considerations?
- The acquisition of land/property may form part of the total project cost, but should be funded from the shareholders’ contribution.
- Funding of restaurants may be considered if it forms an integral part of a tourism attraction or accommodation establishment.
- The refinancing of assets will not be considered as it does not contribute to the expansion of the tourism asset base.
- Funding of acquisitions would only be considered for black industrialists that meet the criteria for such funding.
Additional services
IDC’s business support programme offers non-financial support to entrepreneurs. The support is available during pre- and post-approval stages, including assistance to distressed clients.
Application for funding should be in writing and should include an executive summary and a business plan. Please refer to this website for a comprehensive business plan guideline and further information. Click here to apply online.
Source: IDC
Main pic: Blyde River Canyon
