Overview of Tourism Equity Fund (TEF) Objectives & Focus
The Tourism Equity Fund (TEF) is an equity acquisition fund managed by sefa on behalf of the Department of Tourism. It aims to promote black enterprise participation in the tourism industry by providing capital injection for acquisitions and de-risking funding for majority black-owned tourism enterprises. The fund targets various tourism sub-sectors, including accommodation, hospitality, travel services, and more, to support poverty alleviation, inequality reduction, and the growth of black-controlled businesses.
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DEPARTMENT OF TOURISM - TOURISM EQUITY FUND (TEF)
Contents 1. Purpose, Objectives, Focus & Governance of the Tourism Equity Fund 2. Financial and Non-Financial Support of the Tourism Equity Fund 3. Qualifying Criteria, Funding Requirements & Application Process 4. Fund Capitalization, Fund Allocation & Performance Indicators 2
Purpose, Objectives, Focus & Governance of the Tourism Equity Fund 3
a. The Tourism Equity Fund (TEF) is an equity acquisition fund that will be managed by sefa on behalf of the Department of Tourism. b. The Department of Tourism intends to pilot the TEF in partnership with sefa for a period of 3 years with a view to promote the participation of black enterprises within the tourism industry. c. TEF will be capitalised by the Department of Tourism to the value of R540 million over 3 years (i.e R180 million per annum over a 3 year period). This funding will be utilised as a capital injection of a grant contribution in funding acquisitions to a maximum of R20 million per enterprise. This capital injection will be used to leverage at least 50% additional funding per transaction. Purpose of the Tourism Equity Fund 4
a. Fund commercially viable and sustainable majority black owned (minimum 51%) tourism enterprises including enterprises in rural and township to promote alleviation of poverty, inequality and growth of black controlled tourism enterprises. b. De-risk the funding provided to tourism enterprises through patient capital that will ease the debt repayment ability of black controlled enterprises. c. Facilitate the participation of targeted groups such as women and youth in the priority tourism sectors as defined by the BBBEE sector codes. Objective of the Tourism Equity Fund 5
The fund will focus on the majority black owned (51%) and black management-controlled tourism enterprises in the following sub- sectors: a. Accommodation (e.g. Hotels, Lodges, Resorts and Self- catering Units, Backpacker Facilities); b. Hospitality and related services (e.g. Conference and convention venues attached to a substantial accommodation element, privately owned attractions in already developed tourism nodes; c. Travel and related services (e.g. Tour operators); d. Any other tourism related product 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. Focus of the Tourism Equity Fund 6
a. The sefa Board will approve the investment guidelines of the Tourism Equity Fund based on the agreed Memorandum of Agreement with the Department of Tourism. b. The Tourism Equity Fund is designed within the Delegation of Authority of sefa. c. The sefa Board will approve the co-option of representatives from Department of Tourism to the sefa EXCO. d. The Fund will follow sefa approval processes and will require a specific delegation for sefa EXCO to approve the maximum R20mil grant and the applicable debt portion funded by sefa. e. A dedicated portfolio management strategy will be applied to the ring- fenced fund with regards to funding allocation, accounting, and reporting. f. sefa will report to the Department of Tourism on a quarterly basis on the performance of the fund as well as consolidate the performance and outcomes of the Fund within its annual financial statements and annual report. g. sefa to hold quarterly meetings with representatives from the Department of Tourism to discuss matters relating to the performance of the Fund and other matters related to the Fund. Governance of the Tourism Equity Fund 7
Financial and Non-Financial Support of the Tourism Equity Fund 8
Financial support will be provided on the following basis: a. Funding to acquire controlling equity in entities in the Tourism sector; b. Funding of the assets of existing entities in the Tourism sector for the explicit purpose of setting up a new entity operating in the sector; c. Asset finance and working capital that would be required in relation to the acquisition of the Tourism entity for expansion or operational purposes; d. New Developments and Expansion Projects as applicable and in relation to the identified Tourism subsectors; The total funding required will be split between grant (Department of Tourism) and loan (sefa) based on the approved scorecard including the leveraged financing from the commercial bank. Financial Support 9
The funding terms will be as follows: a. The grant capital injection would be up a maximum of R20 million as determined by the scorecard for the fund. b. The sefa loan will be according to the following terms: Financial Support Funding of up to a maximum of R15 million per enterprise. The term of the funding will be determined by the business cash flows up to a maximum of 120 months per enterprise with a maximum moratorium of 12 months. The loan will be priced according to the sefa pricing matrix 10
Non-Financial support is a critical component in ensuring overall sustainability of the fund: a. Mentorship support will be provided to investees that require financial, technical or business support based on needs analysis assessments; b. Market access in order to ensure that entities are sustainable, market access will be facilitated with various industry partners; c. Investment monitoring and support; d. Technical committee of the Department of Tourism officials to assist enterprises requirements. Non-Financial Support 11 with qualification
Qualifying Criteria, Funding Requirements & Application Process 12
The fund will have the following qualifying criteria: a. 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) b. Be 100% owned by South African citizens. c. Be predominantly black-owned (51%). d. Be registered and compliant with the South African Revenue Service e. Be majority black owner-managed and controlled f. The entity must be operating in the qualifying sectors Qualifying Criteria 13
The following are the funding requirements: a. Business Profile b. BBBEE certificate* or affidavit c. Company statutory documents d. FICA documents e. Certified ID copies of Directors/Members f. 12 months bank statements g. 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 h. 5 year Cash Flow Projections (with clear assumptions) where applicable i. Relevant industry certification where applicable j. Facility Statements of Other Funders where applicable Funding Requirements 14 *This in line with the Amended Tourism Sector Codes
The following application process will be applied: a. All qualifying applications should be submitted to sefa with the application form and required documents to the dedicated email address tourismequityfund@sefa.org.za b. sefa Investment professionals will review applications and conduct vetting, due diligence and financial viability assessment for presentation to the approval committee c. The approval committee will be the sefa EXCO as per the sefa delegation of authority with two co-opted members from the Department of Tourism d. Legal contracting and disbursements will be conducted by sefa internal teams e. Once sefa has processed the due diligence and established viability, the proposal would be submitted to the participating bank for co-funding processing Application Process 15
The following process flow will be applicable to Enterprises applying to the Tourism Equity Fund: Prospective Clients with enquiries about the Tourism Equity Fund are able to get through to sefa via the Call Centre (012 748 9600), Helpline (helpline@sefa.org.za) and via our regional presence (re-offices) where colleagues are knowledgeable about the Tourism Equity Fund and can provide guidance. Stage 1 Successful Applications on Initial Screening are sent through to Investment Professionals for further processing Applications are screened to ensure Minimum Documentary and Criteria are met Applications that are unsuccessful at screening stage may be declined outright Applications are sent to designated Email Address sefa Process Flow Stage 2 Basic Assessment Report is prepared and Reviewed by Head of Department for Approval to proceed with Due Diligence Due Diligence is undertaken, and information is shared with co-funder for consideration and processing Investment Proposal is Prepared and submitted for consideration 16 Stage 3 Deal is Approved by sefa s EXCO committee including 2 Department of Tourism Representatives Post Investment Monitoring, Collections and Reporting Legal Contracting and Disbursement
Fund Capitalization, Fund Allocation & Performance Indicators 17
It is proposed that the fund be capitalised as follows over 3 years: Source of Funds Allocation Utilisation of Funds Department of Tourism R405 000 000 Grant Senior Debt @ concessionary rates Department of Tourism R135 000 000 Fund Capitalization sefa R120 000 000 Senior Debt OPTION 1 Subtotal of ringfenced funds R660 000 000 18 Commercial Bank co-funder R594 000 000 Senior Debt Total Fund R1 254 000 000 The ringfenced funds are dependant on the contribution towards the recurring fund from the Department of Tourism
It is proposed that the fund be capitalised as follows over 3 years: AREA OF APPLICATION ALLOCATION Available for investment to enterprises R1 254 000 000 Anticipated average deal size R40 000 000** Performance Indicators Number of Enterprises 31 Number of Jobs (@R250k cost per job) 5016 Black women ownership 40% 19 Black youth ownership 30% Enterprises in Peri-Urban and Rural Areas 40% **Minimum Deal Size: R10 000 000
THANK YOU 20
