GOVERNANCE & DEVELOPMENT WORKING GROUP MEETING CITY OF - - PowerPoint PPT Presentation

DRAFT TOURISM INVESTMENT MASTER PLAN

CHIEF DIRECTORATE: DESTINATION PLANNING AND INVESTMENT COORDINATION

GOVERNANCE & DEVELOPMENT WORKING GROUP MEETING

CITY OF MBOMBELA, 29-30 MAY 2017

Presentation Content

1. Purpose 2. Draft Tourism Investment Master Plan a. Objectives Analysis b. Draft Tourism Investment Master Plan Topic – Tourism Trends – Current Offer – Internationally Mobile Projects – Selection Criteria – Benchmark with International Competitor – Final Selection – Funding Partnership – Implementation Plan

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Purpose of the Presentation

• To present the Draft Tourism Investment Master Plan (Master Plan) to the MIPTECH

Governance and Development Working Group Meeting, following consultations with key stakeholders during the previous financial year (2016/17).

• Solicit inputs and comments on the Master Plan.
• Encourage/promote intergovernmental integrated approach to the mobilisation of tourism

investment.

• Encourage planning integration amongst the three tiers/spheres of government on

tourism investment-related matters.

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Objective Analysis

• The Master Plan seeks to establish a coherent national investment promotion strategy

which accommodates the three tiers of government, aimed at a step-change in the achievement of national tourism investment targets.

• The final Master Plan will entail the following: -

– Development of a best-practice model, drawing on current practices by provinces, with varied “options” for consideration by provinces, to ensure optimum buy in, while leaving ownership with provinces; – An agreed list of tourism investment projects that is adequately categorised and prioritised, inter alia to address provincial and rural/urban spread; – An agreed ‘roadmap’ for the development and promotion of investment projects; – Agreed criteria for inclusion of projects to be promoted; – Clear actions to be undertaken by the various role-players; – Identification of possible platforms/opportunities for investment promotion; – Clear and agreed institutional arrangements and modalities; – Identification and initiation

• f

key partnerships with relevant investor stakeholders/role-players.

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Overview of Tourism Trends

• Nationally and Internationally:
• Vibrant Niche Markets linked to Responsible Travel: Adventure Tourism, Agri-Tourism,

Gastronomic Tourism, Sharing Economy, and Wellness/Medical Tourism.

• Key Success Factors in Each Sector:
• Game Lodges: Important to closely manage the whole tourist experience in order to minimise

negative experiences

• Backpackers: A wide range of youth travel support services is important, graded bed and

breakfast accommodation, discount travel, etc.

• Theme Parks: Need sufficient discretionary per capita income in the target customer base.
• At Provincial, Municipal and Site Levels:
• Some of the potential projects submitted by provinces or product owners often lack a

detailed market analysis, esp. at site level.

• The Department has commissioned the University of Pretoria to develop a framework for

market analysis specifically focussing on municipal/site level variables.

• The study will solicit the views of tourism and other related stakeholders from both the

developer and investor perspective on their experiences and challenges.

• To develop a product-market match framework to inform product and infrastructure

development as well as investment facilitation.

• The focus will be at site level while accounting for international, regional, national and

municipal level.

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Current Offer

The general investment climate in South Africa:

• The South Africa’s Investors Handbook (InvestSA) and the Protection of Investment Act

set out the South African investment regime, i.e.:

• regulatory requirements for doing business, taxation, incentives and industrial financing; basic

legal conditions, safeguards for inward investors, transferability of profits, administrative burden to promote investments and clarifies the level of protection that an investor may expect in South Africa.

• South Africa is also a member of the World Trade Organisation (WTO) and a signatory to

the General Agreement on Trade in Services:

• According to the WTO Training Manual (2010: 10), “the pillars of GATS are a set of obligations,

applying to all WTO members and all services, such as the Most-Favoured Nation (MFN) treatment, which ensures non-discrimination between trading partners.

• MFN treatment obligation (Article II) – treating one’s trading partners equally.
• Under GATS, if a country allows foreign competition in a sector, equal opportunities should be

given to service providers from all other WTO members.

• Sector-specific commitments: In the majority of sectors including tourism, SA has no limitations
• n market access or national treatment, other than those indicated in the horizontal sector

(usually focussing on the employment of personnel)

• The GATS is the first multilateral agreement containing obligations on the treatment of foreign

investors.

• It does not cover investment policies per se, but does so to the extent that they relate to the

supply of services:

— It treats investment as a mode of service delivery (establishment) to which obligations of transparency, dispute settlement, MFN apply.

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Continues…..

• Drivers of growth
• Heritage and cultural tourism
• Wildlife and Safari
• Drivers of Growth not marketed (where SA has competitive advantage)
• Medical tourism
• Sports Tourism
• Beach Tourism

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Identify International Mobile Projects Funds

• FDI Mobility
• Concentrated in few areas: Accommodation, Restaurants, and Car Rental.
• Limited activity in high-profile sectors: Tour Operations, Reservation Systems and Airlines.
• UNCTAD: Developing country investors tend to invest in their regions (vicinity) – RSA hotel

groups active in the SADC region.

• Growing trend in South-South mergers and acquisitions (e.g. intra-BRICS investments)

Project Mobility Table Source: UNCTAD

Activity Frequency with which FDI appear to occur Frequency Occasional Rare Hotels and similar



Restaurants and similar



Second homes



Passenger transport rental equipment



Railway passenger transport services



Air passenger transport services



Road passenger transport services



Water passenger transport services



Passenger transport supporting services



Travel agencies and similar



Cultural services



Sports and other recreational services



Continues…..

• FDI Trends
• Total FDI in 2005 stood at US$ 916 billion, with US$ 542 billion (59 per cent) received

by developed countries, the highest level ever recorded.

• M&A constitute a significant portion of total FDI.
• The number of cross-border M&A transactions reached 6 134 in 2005 totalling US$

716 billion in total value, which was almost 80 per cent of global FDI flows.

• UNCTAD argues that the number of these transactions involving countries in the

Global South (developing counties) is also on the increase.

• Africa’s share of global FDI remains very low compared to other developing regions.
• In Asia & Oceania FDI grew more than eight fold in 15 years (1990-2005) from US$

191 billion to US$ 1.5 trillion, with Latin America & the Caribbean (LAC) recording almost similar rates.

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• Fig. C.: Inward FDI stock, developed and developing economies,

Africa, Latin America & the Caribbean, Asia and Oceania: 1990, 2000, 2005 (Billions of US dollars)

Source: UNCTAD, FDI/TNC database

Selection Criteria

• White Paper states that FDI will not be encouraged in small, micro-enterprises or ancillary

services sector which are clearly within the reach of the local entrepreneurs and

• businesses. It further states that the government should encourage FDI that meets the

following criteria:

• Investors and companies that will develop, promote and implement responsible tourism;
• Investors that invest in rural communities and less developed geographic areas;
• Investors that develop products that help to diversify the tourism product e.g. cruise tourism,

ecotourism, heritage tourism, Afro-tourism, etc.;

• Investments that will result in the transfer of skills and technology to locals;
• Joint ventures with local partners and local communities; and
• Investors in tourism plant who have a proven track record in the industry.
• United Nations Conference on Trade & Development (UNCTAD): Opportunities/projects

to be ranked in form of priority and categorised. Criteria developed in order to select targeted projects, inter alia: -

• value of the opportunity, including the potential to stimulate other investment or economic

activity, community benefits;

• What exclusions (e.g. in favour of local investors, SMEs)
• State of readiness (pre-feasibility, feasibility/

bankability), and

• What minimum/core standards for feasibility analysis,

e.g. Resources required, and the difficulty/ease of accessing market. Nature/value proposition of the project – e.g. expansion of existing enterprise/activity or creation of new enterprise/activity

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Continues…

• The World T
• urism Organisation (UNWTO) also makes recommendations

from its case studies, which were conducted in various localities on tourism

• planning. It states that the criteria applied for selecting tourism projects for

investment should also take into account the physical factors of the tourism development areas and reflect specific and systematic approach to prepare the tourism structure plan, i.e., the tourism development area should have:

• One or more core attraction(s) within or near the area;
• Suitable

and environmentally attractive sites for development

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tourist accommodation (or existing building suitable for renovation) without creating undue social or environmental problems such as relocation of people or major economic activities;

• Adequate transportation linkages and access to the area from the tourist entry points

(airports and seaports) to the tourist attraction;

• Potential to develop infrastructure necessary to other tourist facilities, such as

adequate water, electric power, sanitary sewage disposal and internet connectivity; and

• Interest of local residents in having the tourism development for employment and

economic activities in or near their area.

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Continues…

• Master Plan Selection Criteria for National Prioritised Projects [DEAT -

Preliminary Tourism Investment Mobilisation Strategy, 2001-2011]:

• Starting point is to agree with provinces on the number of projects that will

be selected per province, while minimising urban bias and ensuring regional spread.

• Ensure that the selected projects do not have fundamental problems such

as disputes on ownership, unresolved land claims, etc., which are likely to undermine investor confidence in the selected prioritised projects.

• Ensure that the necessary critical/strategic infrastructure is either in place

[Engage relevant municipality, Dept. of Transport (DoT), Dept. of Rural Development & Land Reform (DRDLR), the dti, Dept. of Water & sanitation (DWS), and Dept. of Cooperative Governance (DCoG).

• Determine whether there are no existing local investors or developers that

could be paired with international investors. Verify the credibility of these local investors/developers.

• The size of investment should also be determined.
• Select high-impact projects with multiplier effects.

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Benchmark prospective projects against international competitors (filter)

• Identifying key competitors and comparing their offer to that of South

Africa, so that it is possible to judge to what extent, and how, to compete with them.

• Brazil, Russia, India, China (BRIC) Countries - Events, Business, etc.
• Colombia, Indonesia, Vietnam, Egypt, and Turkey (CIVIT) countries -

Wildlife, Culture & Heritage, Beach Tourism & Resorts

• Thailand - Beach Tourism, Sports Tourism & Medical/Wellness Tourism
• Mexico - Culture and Heritage, Nature Reserves, Beach Resorts
• Australia - Beach Tourism, Events, Edu-Tourism, Adventure, Wildlife, etc.
• United States and United Kingdom - Events, Business, Culture & Heritage

and Edu-Tourism

• Kenya, Tanzania – Wildlife & Safari, Beach Tourism, etc. (Strategic Partners)
• Learning more about good practices by those competitors and what

investors think about the areas in question, so that the Department and provinces can define or redefine the offer accordingly.

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Final Selection

• Agreement on institutional arrangements/modalities for final selection
• f projects – who, when, how. Tourism Infrastructure, Product

Development and Investment Master Plan initiatives should be harmonised in identifying projects for the immediate term, as well as a longer term pipeline.

• Phase 1 (2017/18 implementation) - A first portfolio of projects will entail a

consolidated picture of state owned assets (mapped), heritage assets and current product development/enhancement projects to be targeted for immediate attention;

• Phase 2 (2018 onwards) - A longer term pipeline of projects will entail a

consolidated picture (mapped) of all projects prioritised for development, drawn from the plans of provinces, as well as priorities set by the Department.

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Developing Funding Partnerships (Pots of Funds)

While the Master Plan focusses on mobilising private investment, some projects would need public funding – either in their entirety, or as part of public-private partnerhips. It would thus be crucial that an available pool of public funds be identified, and clear mechanisms should be established for accessing such funds.

• Private Sector Financing:
• There are three principal sources of finance for private sector developers of

infrastructure projects, namely: – Financing from their own investment or equity funds; – Financing from other partner investors or shareholders such as from the capital markets; and – Loan financing from lenders or financing institutions.

• Project Finance Structuring:
• the structuring of project financing is fundamentally concerned with the

sharing or allocation of risks. i.e. risks must be allocated to the participants that are best equipped to bear the respective risks. – Build-Own-Operate (BOO) – High levels of privatisation – Build-Operate-Transfer (BOT) – Low to medium levels of privatisation – Build-Own-Operate- Transfer (BOOT) – Where a residual value has to be paid the variation, it is known as Built-Own-Operate-Sell (BOOS). Medium to high levels of privatisation – Lease-Refurbish/Rehabilitate-Operate-Transfer (LROT) – Low levels of privatisation.

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Continues…

• Public Finance:
• Department of Tourism: TIP, Working for Tourism (SRI)
• Department of Trade and Industry: Critical Infrastructure Programme and

Capital Projects Feasibility Programme (CPFP)

• Department of Cooperative Governance: Municipal Infrastructure Grant (MIG)
• Development Assistance:
• USAID
• EU-Africa Infrastructure Fund
• World Bank (WB) – Selected projects: The Sustainable Tourism Coastal Project

in Morocco with WB commitment of US$2.20 million (total cost: US$2.64 million and Tourism Development Projects for Ethiopia with WB commitment

• f US$35 million (Total cost: US$39.50 million)
• Borrowing from Financial Institutions
• Commercial banks
• Internally Generated Revenue
• SANParks, SA Tourism, Ezemvelo KZN Wildlife, Gauteng Tourism Authority

(GTA), North West Parks Board.

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Investment Promotion Work Plan (2017/18)

Event Convener/Venue Date Details Development of a Tourism Investment Promotion Base Presentation for South African Missions in Key Source Markets for Investment CD: Destination Planning and Investment Coordination (DPIC) - SA Diplomatic Missions April

• Septemb

er 2017  Institutionalisation

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tourism investment promotion in selected SA Diplomatic Missions.  Draft a standard Tourism Investment Promotion presentation for SA Diplomatic Missions. Tourism Investment Forum for Africa (INVESTOUR) [On the margins of the FITUR World Tourism Organisation (UNWTO) – Madrid, Spain January 2018  To promote South Africa’s packaged tourism opportunities.  Engage in Business-to-Business Platforms.  Convene a Tourism Investment Seminar on the sidelines of INVESTOUR. Gulf Cooperation Council (GCC) Countries Tourism Investment Roadshow South African Mission in Dubai and the DPIC – Dubai, United Arab Emirates March 2018  Convene a Tourism Investment Seminar (TIS) targeting High- Net-Worth Investors (HNWI) and big corporates in the GCC. Indaba 2018 SA Tourism (SAT) – Durban, South Africa May 2018  Africa’s Top Travel Show  Convene a Tourism Investment Seminar (TIS) on the sidelines

• f Indaba 2018 to showcase and promote Tourism Investment

Opportunities.

Thank you. Question…??? Inputs and Comments…!!!

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