Tourism Minister Mmamoloko Kubayi-Ngubane on May 31 provided an update on the Tourism Equity Fund (TEF), saying the department intends to defend the matter in court.

The R1.2-billion fund was launched in January as part of the implementation of the commitments made during the State of the Nation Address 2020 and the department’s efforts to transform the sector.

Since the launch, the fund has been challenged in court, with applications lodged by unions AfriForum and Solidarity.

Last month, the High Court in Pretoria interdicted the processing of applications for the TEF.

“The court felt it necessary to temporarily halt the processing of TEF until such time that the main application in the matter can be heard. At the time, we announced that we would abide by the court order as we considered our options.

“The court application is in two parts, Part A focussed on the interdict to stop the implementation, while the court hears the matter,” Kubayi-Ngubane indicated.

Now, the department intends to defend the main case in court regarding the constitutionality of the criteria, which is Part B of the court application.

In particular, AfriForum and Solidarity are contesting the legality and rationality of the 51% black owner/managed qualification criteria for the fund, informed Kubayi-Ngubane.

They suggest it deviates materially from the Broad-Based Black Economic Empowerment (BBBEE) Act, read with the Tourism Code. The code prescribes a formula for allocating points for BBBEE compliance.

The TEF intended to fund majority black-owned and black management-controlled tourism enterprises (minimum 51%) in accommodation; hospitality and related services; and travel and related services, products and initiatives through a combination of grant funding, concessionary loans and debt finance to support equity acquisitions and new and expansion developments in the tourism sector.

In terms of the BBBEE Act, provision is made for executive authority to apply to the Department of Trade, Industry and Competition (DTIC) for the increase in the percentage, hence the application and gazetting for TEF to be at 51%.

“It must be noted that the application process was done by my predecessor with the approval of his then DTIC counterpart and, unfortunately, an administrative oversight occurred in that, at the time of announcement of the opening of the applications, administrative steps to gazette the approval had not yet taken place in line with approval granted.

“This oversight is regrettable and consequence management in the department is currently under way,” informed Kubayi-Ngubane.

She also mentioned that, after the announcement, she received a letter from AfriForum and Solidarity requesting information on the nature of the fund in light of the impact of Covid-19 on the tourism sector.

After receiving the letter from AfriForum and Solidarity, the implementing agent, Small Enterprise Finance Agency was entrusted to put on hold the implementation in terms of the assessment and adjudication of applications.

The Minister subsequently convened a meeting with AfriForum and Solidarity wherein the nature of the fund and its origins were clarified, she indicated.

“In essence, they were of the view that the Minister should repurpose the fund to provide for financial relief to businesses affected by Covid-19, arguing that transformation of the sector should be secondary to the Covid-19 relief measures.

“Given that the sector, based on State of Transformation reports had already called for such a fund as far back as 2016/17 financial year, there was no doubt as to the policy intention of the TEF which is to boost sector transformation. Furthermore, it was clarified that the TEF is not blind to the impact of Covid-19, but supports transformative and inclusive reconstruction of the tourism sector,” Kubayi-Ngubane said.

She noted that the department was aiming to get the matter through court processes, given the urgency of the matter, and that it was hopeful that Solidarity and AfriForum would agree to an expedited mechanism.

Kubayi-Ngubane bemoaned the state of the sector, indicating that it was not transformed at all, with many entities not meeting transformation ownership targets, and black entrepreneurs struggling to access funding.

“As the matter approaches its resolution in court, we appeal for patience from all applicants who have kept our lines busy seeking answers on when feedback on their applications would be provided and when processing of applications will commence.

“We further call on those who are working with these entrepreneurs to be patient and understand that the matter is in the hands of the courts. We extend our gratitude to those who have expressed words of solidarity with us as we fight for what is a just and fair cause,” Kubayi-Ngubane emphasised.

Meanwhile, Solidarity and AfriForum are ready to challenge Kubayi-Ngubane and will continue with a court application to have TEF declared illegal, Solidarity said in a statement.

Solidarity Legal Matters head Anton van der Bijl indicated that the department failed to follow the necessary administrative processes, and therefore wrongly established the fund.

“We cannot allow the government to establish race funds which ultimately harms everyone. It is not only black or white owners, but also numerous employees and families who are affected by the government’s short-sightedness. We will continue to be a watchdog and hold the government accountable,” claimed Van der Bijl.