Tourism Industry feeling the pinch

The tourism Industry, which before the pandemic accounted for 1,2 million jobs in South Africa and contributed to more than 8% of GDP has now almost ground to a halt. With no tourism happening currently because of the national lockdown, the tourism industry has taken a hard knock and the longer the lockdown continues the more dire the consequences will be, particularly for small operators in the hospitality sector.

As the country moves to alert level 3 from the 1^st of June, the tourism industry will however remain closed. Tourism has been assessed as a level 1 or 2 activity within the government’s risk-adjusted framework for returning to work under Covid-19. With the current trajectory, it is estimated that the corona virus will peak in July or August. That means the tourism industry or whatever is left of it could only start operating again at the end of year if they remain on level 2 and 1, and the question is how will the industry survive until then?

Earlier this month the Tourism Business Council of SA (TBCSA) confirmed they are working on developing protocols to be used when accommodation businesses start operating again and called on businesses to submit proposals to compile a plan to submit to government. It will be interesting to see what physical distancing measures they come up with. https://www.youtube.com/watch?v=ppW0rLhtRoE

With thousands and thousands of people losing their jobs in the tourism industry, it is reported that in the tourism industry alone about 600 000 employees have applied for UIF and TBCSA is in discussions with the Unemployment Insurance Fund to see if UIF can extend its payments on tourism claims until the end of the year when the industry is expected to start operating again.

President Cyril Ramaphosa confirmed during this address on the 24^th of May that government is considering proposals from the tourism industry on how the industry can operate safely at level 3 and also mentioned that they are discussing reopening accommodation and domestic travel in phases.

B-BBEE Covid-19 funding for SMMEs in the tourism industry

The Department of Tourism has encouraged eligible businesses to apply for the COVID-19 Tourism Relief Fund. This R200 million fund has been established as an intervention to alliviate against the impact of COVID-19 in the tourism sector.

The tourism industry consists mainly of Small Micro and Medium Sized Enterprises (SMMEs), most of which are said to be survivalists in nature, with limited access to funding from commercial institutions.

The fund provides a once-off grant assistance capped to R50 000 to SMMEs with turnover less than R2,5 million to ensure sustainability during and post the implementation of government measures to curb the spread of COVID-19 in South Africa. Applications for the fund are being accepted until the end of May.

The process will be guided by the Tourism Broad Based Black Economic Empowerment (B-BBEE) Codes of Good Practice gazetted in 2015

How does a business qualify for funding relief?

In terms of the qualifying criteria a business can get a maximum score of 100 points. The BEE criteria accounts for only 20 of the 100 points. The three main criterias which will be assessed are as follows:

The first criteria relates to formal and regulatory compliance matters such as company registration, tax registration and UIF contributions. This section has a total weighting of 25 points. A maximum of 25 points will be allocated for this.
The second criteria has a total weighting of 55 points and relates to functionality – this includes business profile, proof of financial statements, and the effect of Covid-19 on the business. A total of 55 points is allocated for this.
The third criteria relates to B-BBEE and has a weighting of 20 points. This criteria has four levels, ranging from 20 points for level one and 12 points for Level 4. A wholly black-owned business will get 20 points. A wholly white-owned business will get a minimum of 12 points, but could reach Level 2 status depending on other transformation initiatives it has implemented. In other words, there is a maximum of eight points that a white-owned company can lose in comparison to a black-owned one, but this could be as few as two points. https://www.groundup.org.za/media/uploads/documents/Solidarity%20and%20Afriforum%20and%20%20Minister%20of%20Tourism.pdf

Should broad-based black economic empowerment scores be used to determine who is eligible for the R200 million funding?

Trade union Solidarity and AfriForum challenged Minister of Tourism Kubayi Ngubane’s decision to use broad-based black economic empowerment scores as one of the qualifying criteria to determine which companies are eligible for the R200 million in emergency funding.

According to Solidarity, it is tragic that South Africa is still divided based on race during a pandemic that does not only affect certain people and that the whole of South Africa is in this crisis.

“The tourism sector is severely affected, yet the department of tourism will, other than the virus, look at your race and discriminate against you based on the colour of your skin,” said Solidarity CEO Dirk Hermann.https://www.businesslive.co.za/bd/national/2020-04-27-tourism-bee-covid-19-support-to-be-challenged-in-court/

The case was dismissed by the North Gauteng High Court at the end of April. Solidarity approached the Constitional Court on the matter, was turned away, and is now in the process of approaching the Supreme Court of Appeal.

The Black Business Council expressed its support for Kubayi-Ngubane, maintaining that she was right to prioritise B-BBEE policy to assist businesses in the tourism sector impacted by the lockdown restrictions.

“We will defend our policies because we believe they are fair and just and aimed at creating a more socially and economically just society. So, if it means going to the constitutional court to defend our stance, we won’t hesitate to do so,” said Minister Kubayi-Ngubane https://sundayworld.co.za/politics/kubayi-ngubane/

My view on this is that when the Broad-Based Black Economic Empowerment (BEE) Act of 2003 was gazetted, its primary objectives were to promote and enable meaningful participation by black people in the South African economy, and that is still the case. I therefore agree with the government’s decision to include B-BBEE as one of the criteria used to score companies that are eligible for funding.

People need to move away from the incorrect notion that B-BBEE means 100% black owned or that it means an immediate exclusion of white businesses. With a R200-million budget allocation, government cannot provide funding to all SMMEs in the tourism industry and therefore needs a system it can use for scoring companies. Businesses that have committed to aligning its strategies to comply with the government’s B-BEE policy can be rewarded for doing so during this economic turmoil.

Let’s pull together

Most of us are feeling the pinch right now. Government officials find themselves with the grim task of ensuring the safety of all South Africans while trying to save this sluggish economy. Businesses at large have been severely affected by this pandemic and are currently scrambling to keep their cashflow healthy. Schools had to quickly move to online learning and students now must adapt to this new way of learning. With most companies retrenching, parents find themselves struggling to pay the bills at the end of the month.

We need to unite against this virus to beat it. So, let us do our bit in the fight against the corona virus. Let us be kind to each other, more tolerant and this too shall pass.

Author – Silindile Ngidi, 27 May 2020