Success Stories infrastructure advisory This series provides an overview of successful public-private partnerships 53176 in various infrastructure sectors, where IFC was the lead advisor. Infrastructure Advisory Services 2121 Pennsylvania Avenue NW Washington DC 20433 ifc.org/infrastructureadvisory Tourism South Africa: National Parks IFC played a key role in helping South African National Parks (SANParks) structure and implement the initial landmark public- private partnerships for setting up nine ecotourism concessions, seven of which are in the world famous Kruger National Park, and awarding concessions to private operators for retail and restaurant facilities in several national parks. The transactions closed in 2000 and 2001, respectively. The highly successful SANParks ecotourism public-private partnerships have generated more than US$20 million in revenues to date. They have also developed infrastructure and assets worth more than US$36 million that will revert to SANParks at the end of the contractual periods. The commercialization strategy has vastly improved SANParks' standing in the eyes of stakeholders, reduced unemployment in neighboring communities, and created economic opportunities for previously disadvantaged ethnic groups. As a result, the government increasingly views national parks as a tool for economic development and has stepped up its annual financial commitment. Thanks to the increase in public funds and the additional revenue from its partnerships, SANParks has been able to expand the land under its protection. Background restaurant concessions in all national parks. SANParks is a successful parastatal entity and leader in the IFC structured the greenfield concessions as design, build, development of the ecotourism industry. Yet, despite managing operate, and transfer projects, each with a 20-year term. In these some of the world's most spectacular assets, it was failing to deliver concessions the private operator was granted exclusive use of the tourism products efficiently. In 1999, following a benchmarking land allocated to build accommodation facilities and provide exercise against similar private operations, SANParks realized that ecotourism activities, while SANParks retained ownership of it lacked the skills, incentives, and access to capital to make the the land and all buildings thereon. The ecotourism concession most of tourism opportunities. contracts had no right of renewal or first refusal on expiration. Deciding that it would not run commercial ventures, but instead The concessionaires pay SANParks an annual fee calculated as a focus on its core function of biodiversity management, SANParks percentage of the turnover bid during the tender process. developed the concept of commercialization as a conservation The restaurant and retail concessions were structured as strategy. This would allow the private sector to operate commercial rehabilitate, operate ,and transfer projects with a 10-year term. services and facilities, and generate additional revenues for the Again, SANParks retained ownership of all buildings and assets. organization through improved products. Employees at affected restaurants and shops were transferred to the IFc's role private operators at the same pay and under the same conditions. Operators bear the capital costs of all rehabilitation and SANParks SANParks sought the assistance of IFC as lead transaction adviser earns a fee that is the higher of fixed monthly rental or percentage because of its expertise in structuring complex transactions with a of turnover. high level of transparency. IFC's role involved: BIddIng · structuring the overall commercialization program, The nine ecotourism concessions awarded are all high-value, · analyzing the market potential for concessions and commercial exclusive, private lodges. The financial commitment made by the facilities, bidders was in the form of a guaranteed income to SANParks of · establishing strict environmental safeguards, US$35 million over 20 years. The investment mobilized by the · developing a strategy for promoting Black Economic Empow- private operators was US$15 million and 350 new beds were to be erment, developed, creating an estimated 700 new jobs. · defining contractual terms between SANParks and private The bids for retail and restaurant facilities resulted in 22 shops operators, and and 17 restaurants being awarded. Facilities were upgraded at · implementing a transparent bidding system. the operators' expense. The financial offers by private operators exceeded expectations. One year following the award of these concessions, retail turnover increased by 43 percent and restaurant A key element of the concession structure was that the turnover by 60 percent. concessionaires had to adhere to SANParks' environmental requirements. These included stringent limits on the carrying capacity of each bid site. All construction plans and activities posT-Tender resulTs were subject to environmental impact assessments, and SANParks · SANParks has a significant source of revenues to had to approve all design and environmental plans. Agreements help fund its conservation and biodiversity opera- included meaningful financial penalties, backed by performance tions in a sustainable manner. bonds, for noncompliance with the environmental requirements. · SANParks has developed significant expertise to Another key element of the concessions was a commitment to manage and implement PPPs --since 2001 it has empowering disadvantaged South Africans. As a result, more than successfully contracted 14 more concessions and 30 percent of the concessionaires are black-controlled companies and all concessionaires have substantial black shareholdings. has a well-established contract management unit. The concessionaires were also required to make minimum · The methodology developed by IFC was influential commitments to purchasing goods and services from community in the development of the Public-Private Partner- businesses surrounding the national parks. This was a pioneering ship Toolkit for Tourism issued by the South Afri- success for Black Economic Empowerment in South Africa's can National Treasury's PPP Unit in 2005. tourism sector. TransacTIon sTrucTure The project was structured in two phases. Phase I involved greenfield ecotourism concessions and phase II involved retail and 6/2009