PPPProgramme

BackgroundtothePark

“PovertyamidstPlenty”

•  Socio-economicneglectinformerhomeland

•  Low-roadgrowthpath

–  Stagna5on/decline–  Embeddedinregionalfundamentals

–  Human&ecologicaldisaster

•  Keychallenge:Shi$ingthedevelopmenttrajectory

LubomboSpa5alDevelopmentIni5a5ve•  3countries•  Anchorproject–iSimangaliso

iSimangalisowaslistedin1999forUniqueecologicalandbiologicalprocesses,superla5venaturalphenomena(senseofplace),&biologicaldiversity

Theinheritance:afailingstateasset•  drought,•  dryinguplakes,•  planta9ons&otherincompa9ble

landuses,•  16differentmanagementregimes,•  unauthoriseddevelopments,•  collapsinginfrastructure,•  threatofdunemining……

Unauthorisedagriculture

Collapsinginfrastructure

Unauthoriseddunedevelopment Swampforestdestruc>on

MajorTourismRoutes

TourismCommunityInvest&AccessRoads

InternalParkRoads

Consolida5onkeyecologicalareas(landrehabprogramme)

ParkFencing

Conserva5oninfrastructure(mg,rds,accommoda5on,bomasetc.)

Publicaccessinfrastructure(jeQy,hides,picnicsites,tourismroadsetc.

Transforma5on:Tourism–equity(transforma5onofsectorlocally–mandatorypartnerfocus);

Firststeps:

Landcare:rehabilita5onandaliencontrolBefore:

AHer:~20000haunderrehabilita5onandalien

control

ParkInfrastructure

Parkinfrastructureprogress

•  300kmoffencing•  290kmoftourismroads•  12ablu5ons•  8decks,viewpointsandpicnicsites•  3boardwalks(includingcanopy&aerial)•  4Newgatecomplexes•  Beachfrontfacili5es(carpark,showers,

braaiareas)•  8Hides•  5JeZes•  Signageinprocessofbeingupgraded•  Waterpipesandreservoirs•  Re5culatedwatertotourismcampsand

dayvisitorfacili5es•  2Campsite•  Variousroadrepairs•  Repairstoablu5ons•  Fundingsourcedfromgovernment&otherdonors

Transforma5on&EconomicEmpowerment

CommercialInfrastructure

ResourceBase(Land)

ASSETOWNERSHIP

PercentageRevenuesharing:GatesConcessionfeesGamesales

EquitypartnersinlargedevelopmentOwnershipoftourismac>vi>es

Naturalresourceuse(biologicalresources)

Access

PlansIMPLAP(inc.RollingBusinessplan)

ResourceBase(Land)

BuiltInfrastructure

ASSETGOVERNANCE

LocalManagementHigherEduca5onAccessProgInformedofvacanciesPrivatesectorobliga5ons

StructuresBoardCo-managementcommiQee

iSIMANGALISOWETLANDPARKNDPALINEDTRANSFORMATIONFRAMEWORK

LocalEconomicDevelopment

Procurement

SECONDARYENTERPRISE

MandatorypartnerstatusLandcarecontracts:contracts&jobsMaintenance&infrastructurecontractsTourismdevelopmentcontractsandemployment

RuralenterpriseprogrammeArtandCraWprogrammesTourismskillsdevelopment

Atlocallevelprotec5onofWorldHeritagevaluesrequiresthedeliveryofeconomicbenefitsandtransforma5onalempowerement.

Annualpaymentsof8%ofiSimangaliso’sgrosscommercialrevenuetolandclaimantswithwhomishassignedco-managementagreements(8trusts)

76%ofexpenditureisBEE;AllcontractsissuedbyiSimangalisohavejobcrea5onandSMMEsubcontrac5ngrequirements;1200permanentjobsand166503localcommunitytemporaryjobs+120SMMEannuallyLevel1&2BEE

CBNRM:harves5ngofnaturalresources

•  Ongoingsustainableresourceuse:(grazing,rushes,reeds,ilala,isikhonkho,fish)

•  Naturalresourceharves5ngforsome80000peopleincludingsome1000subsistencefishers;

•  3500womencollectincemaeachyear•  Agriculturalgardens

•  CraHs22groups+200craHers.9fromNorth

•  MrPrice•  50ar5sts;MosesMabhida

stadiumaswellasDubeTradeport.commissionsforR100000each

Higher Education Access Programme 87 bursaries to youth from the area. 18 of these (21%) of are from the

north. Pass rate 85%. 39 students have graduated to date

Tourismskillsdevelopment

•  hospitality•  chefs•  NQF2(site)&NQF4(regional)tourguides•  80%employment

Internship-14internsfromlocalcommunity.8nowstaffinorganisa5on

Capacitybuildingforco-management

Equitableaccess

+70000peoplegetfreeentryonNew

Year’sday.

Pla[ormCreated•  8000directjobs•  2000to2014:<89%

tourismbusinesses&<46%beds

•  7%ofKZNTand1%ofSouthAfrica’stourismGDP

•  Occupancy:frombelowna5onalave.toabove

•  Gatenumbers:yearonyearincreaseno.andrevenue

•  Businesslicenses•  Highervisitorno.sthan

otherareasinKZN

TourismDevelopment

PublicPrivatePartnerships

SouthAfricanLaw–PFMA&specificallythePPPregula5ons•  Accommoda5on•  Ac5vi5eslicenses

Accommoda5onPPPs

•  3community-private-publicpartnershipswithlocalcommunity-ThongaBeachLodge,RocktailBayBeachCamp,MabibiCamp–equityfrom17.5to62%

•  1EIAunderway(100%community-ownership)

•  1refurbishmentunderway•  14newsitesbeingscoped•  11exis5ngsiteshavebeen

earmarkedforredevelopment

TourismAc5vityLicenses

•  Propor5onoflicencesisreservedforcommunityowner/operatorswithequitypar5cipa5on–equitypar5cipa5ondependentonnatureofac5vity&riskprofile(usuallybetween60%and70%)

•  Currently5licenseholdersinplace

PPPs

•  InsourcingvsOutsourcing–shouldstatemoneybeusedtofundtourismgiventheinherentrisks

•  PPPframework–  risktransferfromstatetoprivatesector– Guaranteedincomestreamtothestate–  Communitybenefits–  Environmentalprac5ce–  Challengesthatmustbeovercometoincreasetheappealofthetransac5ons

Regular Tourism Investments v Protected-area PPP

A regular tourist-accommodation investment

A tourist-accommodation PPP in a protected area

Capital growth: The investor is able to sell the property at a value that generally exceeds the initial investment.

There is no capital growth. The facility automatically reverts to the state without compensation for the improvements effected by the investor. At best, the outgoing Private Party may recoup part of the value of any movables taken over by the new operator.

Collateral for debt financing: The property can serve as collateral for debt finance, even in the case where the investment is on leasehold property.

Collateral for debt financing is limited to the investor’s rights under the PPP agreement, which in financial terms, are very limited. The investor would have to encumber other assets to secure finance. This is obviously unattractive to investors, given that the PPP bears a much higher risk than other non-PPP tourism investments

Regular Tourism Investments v Protected-area PPP

A regular tourist-accommodation investment

A tourist-accommodation PPP in a protected area

Risk: The investor assumes the full operational risk, including the risk of bankruptcy. However the investor may sell the project at any time to mitigate losses or avert bankruptcy. If further capital has to be injected into the project, it may be recovered through future profits and/or capital appreciation.

The investor assumes the full operational risk, including the risk of bankruptcy. It has no option but to continue to operate the project irrespective of the losses being and its prospects of recovery. If further capital has to be injected into the project, it may never be recouped since the life of the project is finite and there is no capital appreciation.

Finance for land claimants & traditional councils ("mandatory partners"): The investor is not required to raise or underwrite any mandatory partner’s share of the investment.

Protected areas are required to create benefits for mandatory partners in the form of equity amongst other things. Since the mandatory partners have little or no capital or assets, the primary investor must underwrite or guarantee the mandatory partner’s equity and share of debt finance, resulting in a disproportionate risk vis-à-vis return on investment.

Regular Tourism Investments v Protected-area PPP

A regular tourist-accommodation investment

A tourist-accommodation PPP in a protected area

Capital expenditure & operating costs: Capex and operating costs are not impacted by environmental and related factors typical of protected areas.

Capex and operational costs are appreciably higher in response to environmental strictures. For example, construction costs are higher because building takes place in remote and/or inaccessible areas; waste must be removed from the Park; specialised plant must be installed to deal with sewage; etc.

Target market: The investment project typically has access to a variety of markets (leisure, business, etc), enabling it to diversify its business risk.

The investment project is reliant exclusively on the leisure market, which is notoriously fickle and subject to vagaries beyond the investor’s control.

In many cases, due to the environmental strictures the projects are small resulting in high rack rates to ensure their viability. This is the more vulnerable segment of the tourism market during recessionary cycles.

TypicalStructureofaPPPiniSimangaliso

•  Environmentalrequirementsinclude–  Parkparameterssuchasenergysaving,wastemanagement

–  Legalrequirementssuchasenvironmentalimpactassessments

•  BEEvsCommunityinclusion–  StandardrequirementisBEE–  iSimangalisoaddi5onal-defineamandatorypartner,equityrequirements,jobcrea5on,skillsdevelopment,procurement

•  Opera5onalandmarke5ngcapability•  PPPfee&paymentholidays•  Guarantees•  Financialcontribu5on

PPPProcess

•  TreasuryApproval(TA)I:feasibility–  Environmentalscoping–  Stakeholderanalysis– Marketreview–  Projectviability–  Ins5tu5onalcapacity–  Infrastructureassessment–  BEE–  Procurementprocess–  Riskanalysis–  Con5ngentliability

PPPProcess

•  TAI:feasibility–  Environmentalscoping–  Stakeholderanalysis– Marketreview–  Projectviability–  Ins5tu5onalcapacity–  Infrastructureassessment–  BEE–  Procurementprocess–  Riskanalysis–  Con5ngentliability

PPPProcess

•  TAII(a):approvalofprocurementdocumenta5on– Termrelatedtotheprojectedcapitalinvestmentandperiodtoensureareturn

– Periodcircumscribedbyna5onaltreasury– PPPfeebasedonprojectviabilityandtocoverthecostsofmanagementofthecontractandgiveareturntothepark;paymentholidayforEIAperiod

– Guarantees– Evalua5on&scoring

•  TAII(b)–approvaloftheadjudica5onoutcome

PPPProcess

•  TAIII:approvalofthecontractandmanagementplanformanagingthePPP

•  Forac5vitylicensesthereisdiscre5oninthetoolkit–processanddocumenta5onsameasPPPexcludesthetreasuryapprovalprocess

2017 – 2019 Taking radical transformation & empowerment to the next level