Millions spent, jobs lost as Tourism Equity Fund scandal exposed
Image: Ayanda Ndamane/Independent Media
IN a tense and revealing session recently, the Select Committee on Economic Development and Trade convened to hear testimony from the Department of Tourism regarding the beleaguered Tourism Equity Fund (TEF).
The meeting, led by Minister Patricia de Lille, exposed a web of implementation challenges, transparency failures, and accountability concerns that have plagued the fund since its inception.
The TEF, launched in 2021 with the aim of driving transformation and inclusive growth in South Africa's tourism sector, has been mired in legal battles, administrative delays, and allegations of mismanagement. A court challenge brought by AfriForum and Solidarity initially halted the fund, which was only revived after an out-of-court settlement in mid-2023.
Despite this, the fund's rollout has continued to face serious hurdles — most notably, the refusal of the Small Enterprise Finance Agency (Sefa), now known as Sedfa, to release critical beneficiary information to the Department of Tourism.
De Lille opened the meeting by acknowledging the complexity of the situation: 'We appreciate the opportunity to present on the TEF, and we request the Committee's support in helping us move the process forward.'
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She explained how her predecessor had initially set the fund's black economic empowerment threshold at 51%, exceeding the legislated 30% requirement under the Broad-Based Black Economic Empowerment (B-BBEE) codes. This decision was challenged in court by AfriForum and Solidarity, and the government lost the case on jurisdictional grounds.
Following her appointment in 2023, de Lille engaged directly with the litigants and brokered a settlement to unblock the R2.1 billion fund. She described the decision-making process in candid terms: 'I made a deliberate decision to set aside political pride to serve the interests of the sector and the country… I proposed a settlement in the spirit of recovery and collaboration, given the urgency of economic reconstruction following the pandemic.'
The revised framework, approved by Cabinet in August 2023, allocates 80% of funding to existing SMMEs and 20% to new entrants, a policy shift that drew sharp criticism from several committee members.
The Department outlined how Sefa, appointed as the implementing agent for the TEF, had failed to meet expectations: 'Due to ongoing challenges with Sefa's performance, the Department informed them in early 2025 of our decision to terminate the agreement,' De Lille said.
Despite terminating the service-level agreement, the Department is still awaiting a full close-out report from Sefa. More troublingly, Sefa has refused to disclose details of beneficiaries, citing the Protection of Personal Information Act (Popia). 'They refuse to disclose the names of applicants who benefited from the TEF,' the Minister said. 'We disagree with their position and have sought legal opinion confirming that the Department is entitled to receive this information.'
Legal advice obtained by the Department supports this view, reinforcing that Parliament, as an oversight body, also has a right to access such data. The legal opinion, circulated during the meeting, recommended including confidentiality clauses in future agreements to ensure Popia compliance while maintaining transparency. 'Parliament must be able to exercise its oversight function,' said Mmaditonki Setwaba, the deputy director-general of Tourism Sector Support Services.
Committee members raised urgent questions about the cost per job created through the TEF. The DA's Nicolaas Pienaar expressed alarm: 'Based on the figures presented, nearly R1 million has been spent per job created. In my view, R1m should result in at least four jobs.'
His sentiment was echoed by the FF+'s Hendrik van den Berg, who pointed to staggering disparities: 'In the Northern Cape, two jobs were created at a cost of R4.4m each. In the North West, ten jobs came at a cost of over R8m per job.'
Setwaba responded that while some projects were capital-intensive, particularly in the accommodation and travel sectors, the Department was aware of the need for better value-for-money outcomes. 'We are learning from the rollout and working on enhanced pre-investment support and streamlined compliance processes,' she said.
The lack of detailed breakdowns on the nature of these jobs — whether part-time, seasonal, or permanent — further deepened scepticism among members.
The PA's Bino Farmer questioned the regional distribution of funds and the effectiveness of outreach campaigns in rural areas: 'How many applications came from the Western Cape? How many were rejected and why? If the fund is meant to drive transformation, why allocate 80% to existing businesses when new entrants are the ones most in need?'
He highlighted the case of Lamberts Bay, where tourism remains racially exclusive and ownership opportunities for black entrepreneurs are limited. 'Communities like mine want to know how people are informed about such funding opportunities. Tourism is spoken about in terms of job creation, but not ownership.'
The ANC's Patrick Mabilo lamented the minimal investment in his province despite its rich natural and cultural assets: 'Only one project received funding in the Northern Cape, valued at R8.8 million. Given the scenic richness of the province, including Unesco sites, why hasn't there been more meaningful participation?'
He called for clarity on outreach efforts and asked whether the Department could quantify results in rural townships.
The chairperson, Sonja Boshoff, from the DA, acknowledged the severity of the situation: 'This is not just about administration, it affects the lives of ordinary South Africans. We cannot allow SEFA to hold the Department or Parliament to ransom.'
The Committee resolved to summon Sefa before Parliament, even if it required convening outside normal hours. It also agreed to send a letter to the Minister of Small Business Development, Stella Ndabeni-Abrahams, requesting her urgent engagement with Sefa ahead of their scheduled meeting the following week. 'We expect feedback from her then so that we can determine how best to support the Department going forward,' said the chairperson.
The ANC's Mpho Modise supported the idea of a joint session involving both Ministers and Sefa: 'All relevant stakeholders need to be in the same room so we can ask direct questions and get comprehensive answers.'
The Minister welcomed the suggestion: 'I welcome the Committee's oversight and support any parliamentary investigation into the administration and outcomes of the Fund.'
De Lille did not shy away from the legal and reputational risks involved: 'As the accounting authority, I am fully aware of the possibility of personal liability. But I remain committed to preserving my integrity and resolving this matter as quickly as possible.'
Director-general Victor Vele confirmed that no fruitless or wasteful expenditure had yet been recorded, though he admitted that the full financial picture would only emerge once SEFA released its complete records. 'From the perspective of an accounting officer, there is currently no record of fruitless or wasteful expenditure associated with the Fund,' he said.
Meanwhile, the Department has identified the Public Investment Corporation (PIC) as the new implementing agent, aligning with the TEF's objective of promoting transformation in the tourism sector. 'We are working on a formal handover process to a new implementing agency, which will be announced following legal and operational finalisation,' said Setwaba.
The TEF was conceived as a vehicle for economic transformation and inclusion. Yet five years after its launch, it stands as a cautionary tale of poor governance, legal entanglements, and institutional dysfunction.
With Sefa refusing to share basic information, the Department hamstrung by outdated contracts, and Parliament demanding accountability, the TEF has become emblematic of the broader crisis in public administration.
Unless swift and decisive action is taken — including full disclosure of beneficiaries, independent auditing, and reform of implementation frameworks — the TEF may well go down as another failed attempt at redress in post-apartheid South Africa.
For now, all eyes are on the upcoming joint meeting between the Departments of Tourism and Small Business Development, and on whether SEFA will finally answer the call for transparency. Get the real story on the go: Follow the Sunday Independent on WhatsApp.
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