The R1.2 billion (€641m) Tourism Equity Fund (TEF) is on hold again following the granting of an urgent interdict by the Gauteng High Court on Monday (April 26).

Lobby group, AfriForum and trade union, Solidarity, brought the case before the High Court as they believe the TEF “does not have the interests of all tourism players at heart”.

The equity fund is part of the Economic Reconstruction and Recovery Plan announced by President Cyril Ramaphosa in October last year and was launched in January by the Department of Tourism in partnership with the Small Enterprise Finance Agency.

The fund was launched to help new businesses successfully enter the tourism sector, with the Minister of Tourism, Mmamoloko Kubayi-Ngubane, saying the fund would aid transformation of the industry and support businesses owned by formerly excluded groups, including the black community, disabled community, the youth and women.

The fund, welcomed by many business and tourism leaders, also drew widespread criticism, with many in the industry questioning the timing of the announcement as numerous existing businesses are bleeding, facing closures and mass retrenchments and are in urgent need of relief.

“We are in a devastated tourism market and we are shrinking the cake instead of growing it where it is most beneficial to all South Africans. We have placed transformation ahead of a growing the industry, thus hurting the very people that such a fund should support – transformed tourism SMMEs with solid partnerships to help these businesses to survive and grow,” said Travel Destination Specialist, Alan Roxton Wiggill in a comment to Tourism Update.

Unsuccessful meeting

These concerns led AfriForum and Solidarity to threaten legal action against the TEF and implementation of the fund was suspended in February so that Kubayi-Ngubane could meet with the two organisations and discuss their concerns.

Following the meeting, both organisations announced their intent to forge ahead with legal action as they believed the Department of Tourism “never intended to really enter into a discussion and exchange ideas”.

Monique Taute, Head of Campaigns at AfriForum, said after the meeting: “Instead of her department reaching out to businesses that are in trouble, the department is now abusing the situation by using it as an opportunity to promote its race-driven goals.”

“Like all other small tourism businesses, those businesses owned by members of minority communities need urgent assistance. Many businesses already had to close their doors after the government’s severe COVID-19 restrictions. It is immoral for the government to now use lifebuoys to help the people on the riverside, while thousands of others are drowning.”

‘Increase diversification’

Kubayi-Ngubane has continuously reiterated that TEF was a not a relief fund but a new financial support mechanism to stimulate investment and transformation in the tourism sector, providing a combination of debt finance and grant funding to facilitate equity acquisition as well as new project development, to broaden participation by all South Africans and not just a few dominant players.

According to her, it was set up as a public/private partnership, in particular with commercial banks, in an effort to crowd-in investments in the tourism sector so as to increase diversification and the broadening of ownership of tourism attractions in South Africa.

She said in response to the interdict that she intended to abide by the court order, which “restrains the processing and making payments from the Tourism Equity Fund until the matter is finalised”.