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iSimangaliso Wetland Park, Terri Castis

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Presentation made at the CBD/IUCN TAPAS Group meeting on "Tourism partnerships and concessions in protected areas: Cooperating for success" meeting in the iSimangaliso Wetland Park

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iSimangaliso Wetland Park, Terri Castis

  1. 1. PPP Programme
  2. 2. Background to the Park
  3. 3. “Poverty amidst Plenty” •  Socio-economic neglect in former homeland •  Low-road growth path –  Stagna5on/decline –  Embedded in regional fundamentals –  Human & ecological disaster •  Key challenge: Shi$ing the development trajectory
  4. 4. Lubombo Spa5al Development Ini5a5ve •  3 countries •  Anchor project – iSimangaliso
  5. 5. iSimangaliso was listed in 1999 for Unique ecological and biological processes, superla5ve natural phenomena (sense of place), & biological diversity
  6. 6. The inheritance: a failing state asset •  drought, •  drying up lakes, •  planta9ons & other incompa9ble land uses, •  16 different management regimes, •  unauthorised developments, •  collapsing infrastructure, •  threat of dune mining ……
  7. 7. Unauthorised agriculture Collapsing infrastructure Unauthorised dune development Swamp forest destruc>on
  8. 8. Major Tourism Routes Tourism Community Invest & Access Roads Internal Park Roads Consolida5on key ecological areas (land rehab programme) Park Fencing Conserva5on infrastructure (mg, rds, accommoda5on, bomas etc.) Public access infrastructure (jeQy, hides, picnic sites, tourism roads etc. Transforma5on: Tourism – equity (transforma5on of sector locally – mandatory partner focus); First steps:
  9. 9. Land care: rehabilita5on and alien control Before:
  10. 10. AHer: ~20 000 ha under rehabilita5on and alien control
  11. 11. Park Infrastructure
  12. 12. Park infrastructure progress •  300km of fencing •  290 km of tourism roads •  12 ablu5ons •  8 decks, viewpoints and picnic sites •  3 boardwalks (including canopy & aerial) •  4 New gate complexes •  Beachfront facili5es (car park, showers, braai areas) •  8 Hides •  5 JeZes •  Signage in process of being upgraded •  Water pipes and reservoirs •  Re5culated water to tourism camps and day visitor facili5es •  2 Camp site •  Various road repairs •  Repairs to ablu5ons •  Funding sourced from government & other donors
  13. 13. Transforma5on & Economic Empowerment
  14. 14. Commercial Infrastructure Resource Base (Land) ASSET OWNERSHIP Percentage Revenue sharing: Gates Concession fees Game sales Equity partners in large development Ownership of tourism ac>vi>es Natural resource use (biological resources) Access Plans IMP LAP (inc. Rolling Business plan) Resource Base (Land) Built Infrastructure ASSET GOVERNANCE Local Management Higher Educa5on Access Prog Informed of vacancies Private sector obliga5ons Structures Board Co-management commiQee iSIMANGALISO WETLAND PARK NDP ALINED TRANSFORMATION FRAMEWORK Local Economic Development Procurement SECONDARY ENTERPRISE Mandatory partner status Land care contracts: contracts & jobs Maintenance & infrastructure contracts Tourism development contracts and employment Rural enterprise programme Art and CraW programmes Tourism skills development
  15. 15. At local level protec5on of World Heritage values requires the delivery of economic benefits and transforma5onal empowerement .
  16. 16. Annual payments of 8% of iSimangaliso’s gross commercial revenue to land claimants with whom is has signed co-management agreements (8 trusts)
  17. 17. 76% of expenditure is BEE; All contracts issued by iSimangaliso have job crea5on and SMME subcontrac5ng requirements; 1200 permanent jobs and 166 503 local community temporary jobs +120 SMME annually Level 1 & 2 BEE
  18. 18. CBNRM: harves5ng of natural resources •  Ongoing sustainable resource use: (grazing, rushes, reeds, ilala, isikhonkho, fish) •  Natural resource harves5ng for some 80 000 people including some 1000 subsistence fishers; •  3500 women collect incema each year •  Agricultural gardens
  19. 19. •  CraHs 22 groups + 200 craHers. 9 from North •  Mr Price •  50 ar5sts; Moses Mabhida stadium as well as Dube Tradeport. commissions for R100 000 each
  20. 20. 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
  21. 21. Tourism skills development •  hospitality •  chefs •  NQF 2 (site) & NQF 4 (regional) tour guides •  80 % employment
  22. 22. Internship - 14 interns from local community. 8 now staff in organisa5on
  23. 23. Capacity building for co-management
  24. 24. Equitable access +70 000 people get free entry on New Year’s day.
  25. 25. Pla[orm Created •  8000 direct jobs •  2000 to 2014: <89% tourism businesses & < 46% beds •  7% of KZN T and 1% of South Africa’s tourism GDP •  Occupancy: from below na5onal ave. to above •  Gate numbers: year on year increase no. and revenue •  Business licenses •  Higher visitor no.s than other areas in KZN
  26. 26. Tourism Development
  27. 27. Public Private Partnerships South African Law – PFMA & specifically the PPP regula5ons •  Accommoda5on •  Ac5vi5es licenses
  28. 28. Accommoda5on PPPs •  3 community-private-public partnerships with local community - Thonga Beach Lodge, Rocktail Bay Beach Camp, Mabibi Camp – equity from 17.5 to 62% •  1 EIA underway (100% community-ownership) •  1 refurbishment underway •  14 new sites being scoped •  11 exis5ng sites have been earmarked for redevelopment
  29. 29. Tourism Ac5vity Licenses •  Propor5on of licences is reserved for community owner/operators with equity par5cipa5on – equity par5cipa5on dependent on nature of ac5vity & risk profile (usually between 60% and 70%) •  Currently 5 license holders in place
  30. 30. PPPs •  Insourcing vs Outsourcing – should state money be used to fund tourism given the inherent risks •  PPP framework –  risk transfer from state to private sector –  Guaranteed income stream to the state –  Community benefits –  Environmental prac5ce –  Challenges that must be overcome to increase the appeal of the transac5ons
  31. 31. 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
  32. 32. 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.
  33. 33. 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.
  34. 34. Typical Structure of a PPP in iSimangaliso •  Environmental requirements include –  Park parameters such as energy saving, waste management –  Legal requirements such as environmental impact assessments •  BEE vs Community inclusion –  Standard requirement is BEE –  iSimangaliso addi5onal - define a mandatory partner, equity requirements, job crea5on, skills development, procurement •  Opera5onal and marke5ng capability •  PPP fee & payment holidays •  Guarantees •  Financial contribu5on
  35. 35. PPP Process •  Treasury Approval (TA) I: feasibility –  Environmental scoping –  Stakeholder analysis –  Market review –  Project viability –  Ins5tu5onal capacity –  Infrastructure assessment –  BEE –  Procurement process –  Risk analysis –  Con5ngent liability
  36. 36. PPP Process •  TAI: feasibility –  Environmental scoping –  Stakeholder analysis –  Market review –  Project viability –  Ins5tu5onal capacity –  Infrastructure assessment –  BEE –  Procurement process –  Risk analysis –  Con5ngent liability
  37. 37. PPP Process •  TAII(a): approval of procurement documenta5on – Term related to the projected capital investment and period to ensure a return – Period circumscribed by na5onal treasury – PPP fee based on project viability and to cover the costs of management of the contract and give a return to the park; payment holiday for EIA period – Guarantees – Evalua5on & scoring •  TAII(b) – approval of the adjudica5on outcome
  38. 38. PPP Process •  TAIII: approval of the contract and management plan for managing the PPP •  For ac5vity licenses there is discre5on in the toolkit – process and documenta5on same as PPP excludes the treasury approval process
  39. 39. 2017 – 2019 Taking radical transformation & empowerment to the next level

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