KWANGCOLOSI TOURISM DEVELOPMENT BUSINESS PLAN PREPARED FOR THE RURAL ABM PROGRAMME BY GRAHAM MULLER ASSOCIATES. 3rd FEBRUARY 2006

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1 KWANGCOLOSI TOURISM DEVELOPMENT BUSINESS PLAN PREPARED FOR THE RURAL ABM PROGRAMME BY GRAHAM MULLER ASSOCIATES 3rd FEBRUARY

2 1. INTRODUCTION The Area-Based Management and Development Programme (ABM) is a multi-faceted development initiative implemented by the ethekwini Municipal Authority (EMA) with support from the European Commission that aims to enhance service delivery, address spatial and social inequalities and deepen democracy. The Rural Area Based Management and Development Programme office has been approached by a group of community members from the KwaNgcolosi tribal area for support in the establishment of a tourism development project. A business proposal has been submitted to the Rural ABM office outlining the objectives and product development options to be pursued. After perusing the submission, the Rural ABM appointed GMA to provide technical assistance to the initiative through their undertaking a detailed feasibility assessment and business planning exercise, with a view to assisting with the finalisation and implementation of the plans for this initiative. GMA has worked closely with the project proponents and their proposal to produce this business plan. A number of site visits and meetings with the proponents and other stakeholders have taken place. Secondary research and a review of the policy and planning framework for the dam have taken place. A careful look at feasibility considerations has underpinned this business plan. This business plan first looks at the background of the project in more detail before reviewing some of the important policies and plans that should inform this project proposal. The potential of the project site is then reviewed and its strengths and weaknesses identified. The product development proposals are then elaborated, through looking at market demand and matching it to the potential and feasibility constraints of the site. The financial feasibility and impact of the product development is then analysed and the institutional development to implement the project unpacked. Finally, the document describes important pre-conditions and actions that need to be attended to for any of the identified opportunities to be successfully unlocked. 2. BACKGROUND TO THE PROJECT 2.1 Locality and description of land The Inanda Dam is situated in the Valley of a Thousand Hills region in the outer western area of the ethekwini Municipal Authority. The dam was completed in 1989 and has a water surface area of approximately 1,500 hectares and an outer circumference of approximately 100 kilometres. The Dam is surrounded by 3 tribal authorities, namely Ngcolosi, Qadi and Maphephweni. The project site is located on the southwestern side of the Dam, adjacent to the main access road to the Mahlabatini Msinisi Resort, approximately two kilometres from the entrance. The project area is within the boundaries of the Ngcolosi Tribal Authority and Ward 2 of Ngcolosi Maphephethwa Project Area Qadi Mahlabathini node 2

3 the Municipality. The land in question is under the ownership of the Ngonyama Trust but administered by the local Tribal Authority. Msinsi administers and controls the surface of the water and the terrestrial buffer area below a demarcated purchase line. Figure 1: Locality Map of the project area Mahlabatini Msinsi Resort GOS Project KIDT Project The project area covers three residential plots and, according to the residents, the plots extend a few hundred metres down a very steep and densely vegetated slope to the water edge. Concrete bollards half way down the slope appear to represent the purchase line of the dam. The largest plot Local residents that are given permission to occupy plots of land by the Nkosi are apparently seen by the law as being the de-facto land rights holders of the land. Transactions between community members to buy and sell their plots are apparently commonplace in the Inanda area. 2.2 Proponent The project proponents are a group of KwaNgcolosi community members that seek to establish their area as a major tourist attraction. The KwaNgcolosi Inanda Dam Tourism Project (KIDTP) was conceptualised by the members and a committee established to pursue it. The land on which most of the project proposals relate to belong to three of the members, namely Mrs Ngcobo, Mr Nzuza and Mr Shezi. Mr Shange has played a project management role to date. It is envisaged that membership of the project will grow as the project demonstrates success. The proponents have in the past received some advice and assistance from the consulting firms Haley Sharpe and Qubani. Recently a Mr Duma from the Isithumba Tourism Project hosted the group on a familiarisation trip that further inspired them. 2.3 Stakeholder consultation The KIDTP and GMA have together consulted some of the relevant stakeholders to obtain their input, guidance and support to the project. Some of these interactions are summarised overleaf: 3

4 Project Stakeholder Discussion Points representative KIDTP Tribal Authority Project Proposal and in-principle support. Land use rights, KIDTP Ward Councillor Project Proposal and in-principle support GMA TKZN Route Development, Inanda Product Development, future support GMA 1000 Hills Tourism Marketing and promotion. Product support opportunities GMA Inanda Dam Feasibility study consortium Feasibility Study, Inanda Dam Management Forum GMA Msinsi Mahlabatini resort plans, business objectives, business linkages with surrounding communities GMA Inanda Dam Management Forum Unable to contact 2.4 Business proposal The KIDTP committee have listed the following business objectives for the development initiative: To promote tourism-led economic development in the KwaNgcolosi community through establishing a number of demonstration projects, To gradually grow the local economy through a phased approach to development, To create job opportunities for the local community, To develop local skills and capacity in the business over time, To benefit from the existing through-flow of tourists and recreational visitors on their way to Mahlabatini Resort. To create meaningful business linkages with Mahlabatini Resort. The KIDTP committee has formulated a draft business proposal. According to the committee, the proposal has the support of the broader community and the Nkosi. The potential opportunities listed by the project are to: Create bed and breakfast, camping and 4 star chalet accommodation as well as a restaurant catering for 80 people, Provide facilities and equipment for water sports and adventure activities, Provide a boat harbour to allow for the ferrying of guests and community members, Create a further restaurant and bar on the waters edge, Establish a conference centre, Art and craft workshop and curio shop (long term). These development proposals will be scrutinised further on in the report (Site analysis, Product Development Concepts). 3. CONTEXT FOR PROJECT PLANNING There are a number of planning and development considerations that should inform the KwaNgcolosi Business Plan. For the purposes of this report the planning and development context will be briefly summarised. 4

5 4.1 Rural Development Framework According to the ethekwini Municipality Rural Development Framework (2003), the main economic principles that should be respected are: Respecting key policy issues such as gender equity, youth development and poverty alleviation and BEE Following a market orientated approach, relating to well-defined and accessible markets. Economic development should take place in a structured and planned manner, based on a municipal analysis of available resources, threats, and opportunities. The municipalities role in economic development is to facilitate, support and promote rural economic development, rather than implement. The municipality needs to form partnerships with both the private and public (other government departments) sector to support development. Economic development cannot be a top-down process, but needs to be initiated and driven by local communities. The municipality supports the community driven nature of economic development and the importance of partnership formation. The municipality actively promotes LandCare that focuses on developing demand-driven, community-based approaches to resource management, in which those who occupy the land actively participate in the management and sustainable utilisation of their local resources for multiple purposes According to the spatial development framework section of the RDF: More efficient utilisation of the agricultural opportunities in the rural periphery must be one of the foremost aims of rural development. Depending on appropriate detail investigations, it is expected that the agricultural development should cover a variety of products, both common and niche products, that wherever possible beneficiation should take place locally and the development should allow for both larger scale commercial, smaller semi-commercial as well as subsistence individual activities. The RDF highlighted a great variety of tourism and recreation opportunities, which are severely under-utilised. Of relevance is the assertion that many of the opportunities identified in the RDF will only have a limited success if they remain as isolated events. It appears therefore important that the opportunities in the rural periphery be integrated into a wider metropolitan tourism system and routes. Both sides of Inanda Dam were identified as the main tourism opportunities in the RDF. The RDF discusses repeatedly the importance of appropriate protection, management and utilisation of the environmental resources of the rural periphery, and its integration into the development of the rural areas forms one of the structuring elements of the SDF. This business plan has been formulated under the guidance of all of the above principles and guidelines. 3.2 Inanda Dam Community Based Tourism Feasibility Report A tourism feasibility assessment and development plan of Inanda Dam has been formulated for the Economic Development unit of the ethekwini Municipality (2004). The main aims of the project were to involve and organise stakeholders, identify and package tourism initiatives and attract investment and donor funding. The report was based on market research. Tourism product concepts were developed and the feasibility of two of the concepts, namely 3-star and 4/5-star hotels, were assessed in some detail. The market research showed potential for Inanda Dam with market surveys indicating that Inanda could provide options to address gaps in the existing tourism market. The research and analysis concluded that the product opportunities around the Dam are numerous and that the area has the potential to attract a wide spectrum of markets. The 5

6 results did motivate for a focus on low volume high yield concepts in order to raise the profile of Inanda Dam and establish it in the market as a tourism destination. Key LED projects identified by Inanda Dam Feasibility Study Project Location Description 3 Star lodge Adjacent to Family orientated experience Mahlabatini Resort targeting domestic market 4-5 Star lodge On the eastern shore of Dam. 4 Exclusive boutique type lodges. Set at the water edge possible sites or in the water. identified. House boat/ Mobile Floating lodge, restaurant or floating pleasure cruiser. Preferably restaurant linked to lodges. Wildlife Centre Mahlabatini Reserve Facilitate visitor interaction with wildlife Recreational areas Various Picnic, boating facilities, entertainment etc Arts and Craft Centre Mahlabatini, KwaNgcolosi Large manufacture and retail centre in the park. Arts and Crafts Stalls Various Smaller craft stalls in strategic areas. The project involved extensive consultation with all role players and stakeholders. Because of the number of different role players having either jurisdictional or land management responsibilities in the destination, a co-ordinating structure based on the membership of the project steering committee was promoted. The report concluded that although the Inanda Dam destination held significant potential, there were a number of challenges to address before tourism development could gain momentum. These challenges included the emerging status of the destination, uncertainty around land ownership and development rights, complex institutional arrangements, risks to the long-term integrity to the surrounding landscape, safety and security and lack of infrastructure. The report strongly recommended that the land/legal and associated institutional issues needed to be resolved as a critical first step in the process of developing the destination and suggested that without their resolution no project could be initiated and private sector participants were unlikely to make any commitment. The report impressed that the relevant decision making authorities needed to initiate a programme to clarify the approvals process and authority associated with the land and water resources including inter-departmental and operational issues. 3.3 KwaZulu-Natal Product Development Strategy Relevant to this project, the strategy indicated that attention needed to be given to adding significant secondary attraction and visitor facilities within the Heritage and Culture and Wildlife sectors. The nature of the majority of Durban's tourists, usually for reasons of time and/or cost, means that they cannot travel northwards to enjoy the Game Reserves and Zululand areas. The opportunity therefore exists to provide such facilities within closer proximity to the Durban Beachfront. In this regard, support is recommended for certain product development areas that include the Inanda Community 6

7 Tourism destination and Heritage Route. The strategy recommends public sector funding for, inter alia, Valley of 1000 Hills and the Inanda Tourism Route. The dual objectives of these focused interventions are to grow tourist numbers and their length of stay, and most importantly to develop tourism into the previously disadvantaged areas around the periphery of Durban. One of the aims of this business plan is to align the product concepts with the KZN Product Development Strategy. Product concepts are explored within the context of identifying secondary attractions in outer Durban and strengthening route development in rural areas (such as the Inanda Heritage Route and the 1000 Hills Experience Route). 3.4 Land and legal context A preliminary analysis of the development applications and authorizations that may be required by the project follows below: The Ingonyama Trust owns the land under the dam water as well as the terrestrial surrounds. According the Ngonyama Trust Act (Act 3 of 1994 as amended), written approval from the relevant traditional authority is required before it can pledge, lease or encumber land or rights to land. At present, the Board favours granting development and tenure rights through the conclusion of long term, common law leases of 40 years, although PTOs have often been issued in the past. A lease agreement is usually concluded between the Ingonyama Trust and lessee, but with the written consent of the affected traditional authority. It is also advised that a resolution supporting development is also obtained from the community in terms of the Informal Protection of Land Rights Act. The Department of Water Affairs and Forestry has been granted permission by the Ingonyama Trust to store water on the land covered by the dam. DWAF hold the dam under the requirements of the National Water Act and Umgeni Water has the water utility mandate. Msinsi Holdings has been contracted by Umgeni Water to manage all its estates including the Inanda Dam. Msinsi thus administers and controls the surface of the water as well as the terrestrial area below the dam s purchase line. Although it appears that Umgeni Water and Msinsi do not have the right to grant or refuse development rights around the dam, it would still be necessary to have their support for the project and an agreement that deals with issues such as access, use rights, zoning and co-operative management of shared areas. Further permissions may be required from DWAF in terms of the National Water Act. 3.5 Environmental authorisations The most significant legislation for environmental authorisation requirements is the Environment Conservation Act. Regulations 1182 and 1183 were promulgated in terms of Sections 21, 22 and 26 of the Act and subsequently revised in Government Notices R 1355 of 17 October 1997, R 448. According to the regulations, an Environmental Impact Assessment (EIA) process is a legal requirement for certain scheduled activities, which could have a substantial detrimental effect on the environment. With reference to the further development of the preferred options, Regulation 1182 lists amongst others the development of public and private resorts and associated infrastructure as a scheduled activity. Thus, the envisaged project would require authorisation from KZN s Department of Environmental Affairs and Agriculture (DAEA) via the EIA process outlined in Regulation The EIA process consists of the following: The completion and submission of an Application Form. On reviewing this the authority may indicate that the proponent should apply for exemption from the 7

8 requirements of the Act, which would entail the submission of a brief motivation for exemption or indicate that there is insufficient information with which to make an informed decision. The Scoping Stage, which entails the identification of appropriate alternatives, the identification / assessment of potential environmental impacts and appropriate opportunity for public input. On submission of the Final Scoping Report (FSR) DAEA may: o Refuse the activity; o o Authorise the proposed activity with specific conditions; Indicate that there is insufficient information with which to make an informed decision and request that the proponent proceed to the EIA Stage. The EIA Stage, which entails the investigation of specific aspects (as directed by DAEA) in more detail and the compilation of an Environmental Impact Report (EIR).On review of the report DEAA may: o Refuse the activity; o Authorise the proposed activity with specific conditions. At all stages during this process, where a Record of Decision is issued by DEAA, there is a 30 day period during which appeal can be made to the Minister of Environmental Affairs. Section 24(1) of the National Environmental Management Act provides that all activities that may significantly affect the environment and require authorisation bylaw, must be assessed prior to approval. Accordingly, the proponent has the responsibility to ensure that the proposed development as well as the EIA process conforms to the principles of the National Environmental Management Act. Accordingly, the EIA process should be designed in accordance with the principles of the National Environmental Management Act. The EIA process outlined in this overview is based on the Regulations promulgated under the Environment Conservation Act. The new EIA Regulations, which are to be promulgated under the National Environmental Management Act, are currently being finalised. Should this occur, the environmental process outlined would need to be tailored in terms of these new legal requirements. Under the new EIA regulations under section 24(5) of NEMA, category 1 activities require an initial environmental screening 1 before a decision is made on whether further studies are required. Category 1 activities include: The construction of new tourism or hospitality facilities where - more than 20 guests can be accommodated overnight; there are more than 10 guest units; the facility will cover an area in excess of 1 hectare; or there is no connection to a municipal sewerage system. According to the environmental law reviewed above, the change in land use from rural settlement to tourism and/or retail is a listed activity and will require approval from the provincial DEAA. It is recommended that once a decision is made to proceed with the project, that DEAA be invited to site and a formal project application be submitted to the department. It is likely that the Department will request an independent scoping study 1 Screening has been defined by the Regulations as the assessment contemplated in regulation 9 to determine whether there is a likelihood of significant impacts that require further investigation or whether a decision can be made, based on the information provided as a result of the screening process. 8

9 which will have to assess significant issues such as sanitation, waste management, water quality and economic sustainability. As the site already has a garage and shop adjacent to it, it appears unlikely that there will be any serious concerns from an ecological perspective, unless the proponents attempt to develop the steep bushy slopes above the water. 3.7 Development approval The KwaZulu-Natal Planning and Development Act and the Development Facilitation Act provide the framework for guiding development applications. The two Acts overlap and complement each other in several ways i.e. in the establishment of both the KwaZulu- Natal Planning and Development Commission and the Appeals Tribunal. Although the Planning and Development Act and the Development Facilitation Act are designed to dovetail with one another, there are certain classes, or types, of development applications which will be subject to the provisions of the DFA rather than the Planning and Development Act, and vice versa. In recent years RDP projects and residential estate projects have occasionally been pursued through the DFA in rural areas outside of cities and towns. Table 2: Summary of authorisations required Department/ Authority Ngonyama Trust KZN Planning & Development Commission Traditional Authority Department of Agriculture & Environmental Affairs Community ethekwini Municipal Authority Inanda Dam Management Forum DWAF Msinsi Approval/ Authorisation Lease or PTO Development Permit Recommendation for PTO/ lease PTO Environmental Record of Decision Community Resolution Registration of business Political endorsement User Licence (land below purchase line) Agreement (boat launch site) 4. Tourism Market Analysis 4.3 Tourism Market demand Over 85% of KZN s foreign air arrivals market visits Durban, which is seen as the gateway to the province. Although overseas visitor numbers are relatively small in comparison to the domestic market in South Africa, the contribution to the total tourism spend is significantly larger (at an estimated R54 billion). The total spend estimated for the domestic market amounts to R47 billion with an average spend per trip of R1,400. Gauteng and KwaZulu Natal are traditionally the main destinations for domestic tourism trips (approximately 28% of all trips were to KZN in 2002). Interestingly, by far the majority of tourists for any given province originate within the province itself. The average length of stay for domestic holiday trips in KZN is 6 days. TKZN studies looking at domestic accommodation usage illustrate that the preference for self-catering accommodation and camping and caravanning continues to distinguish the domestic holidaymaker from the foreign overseas traveller, who has a strong preference for catered accommodation. The KZN Product Development Strategy informs that the main draw-card for domestic and foreign visitors to the province is the beach. However, there was also strong demand measured for heritage and culture and wildlife experiences. The report recommended that 9

10 development of these products closer to Durban could attract many Durban tourists who were for various reasons unable to travel to Game Reserves and cultural facilities in the Zululand area. It recommended that the Durban tourism experience be augmented by secondary attractions and visitor facilities in rural areas with high potential. According to the market research for the Inanda Dam Feasibility Report, there was high latent demand for the Inanda Dam destination. It stated that there was an international trend to diversify beach holiday products to include wildlife, cultural and adventure experiences. The report suggested focusing on both the domestic and foreign market sectors. For the foreign market, the scenery of the Valley of a Thousand Hills was described as primary attraction for the market. Culture, nature-based tourism, adventure activities and sport were regarded as important secondary attractions. In terms of local demand for recreational facilities, reports indicate that the Mahlabatini Msinsi Resort receives approximately visitors per annum, the large majority of them being day visitors. The Resort is popular with the Durban water-sport and fishing market segments. In December 2006, there were approximately 5,500 day-visitors and 1,600 overnight stays. 5. Tourism site analysis 5.1 Tourism development potential of site The project site is located on the Inanda Dam road leading to Msinsi s Mahlabatini Resort. It is approximately a 20-minute drive to Hillcrest and a further 40-minute drive to Durban. The Inanda Dam road is part of the 1000 Hills tourism route. The project site is not yet clearly demarcated making a fully informed evaluation difficult. The site consists of 3 homestead plots on a ridge high above the dam. Each plot is about 0.75 hectares in area, excluding the sloping land down to the water. The fenced property of a trading store with a fuel pump is located between two of the properties. Figure: Concept diagram of the project area Inanda Dam Steep slope Mrs Ngcobo site Shop and petrol pump Mr Nzuza site Mr Shezi site Road The views of Inanda Mountain and across the dam and indeed across much of the 1000 Hills Valley are spectacular. The view is made all the more dramatic by the steep and thickly vegetated slopes that drop of sharply into the dam waters over 100 metres below. This physical aspect is probably unique to this small riparian edge of the dam. Also because of the steepness, access to the forest resources has been difficult and the pocket forest below is 10

11 probably one of the most intact and healthy systems around the entire dam. At the base of the slope is picturesque and sheltered cove that seems only accessible by water. Figure 3 showing the view from the project site and Figure 4 showing the shop in the foreground and Mrs Ngcobo s site in the background. The photograph is taken from Mr Nzuza s site. T h e f o l l o w i n g Figure 3: View over the dam from the project site Figure 4: Shop and petrol station in foreground with Mrs Ncobo s home in the background 11

12 The following observations can be made on the inherent potential of the site: The land on the top of the ridge whilst relatively narrow and confined, is reasonably flat and is suitable for development. It is estimated to be 2 3 hectares in size. However, there are homesteads that exist on some of the prime estate and a small service station that breaks up the contiguity of the plots. These attributes may or may not be limiting factors depending how the product is conceptualised. The views and dramatic vista off the edge of the escarpment is the unique attraction of the site and if packaged correctly could be developed into a visitor attraction. The developable portion of the site is not on the waters edge, which reduces product options. The site is adjacent to the main road to the Msinsi Resort which currently attracts visitors per annum. The site is therefore well located on an established tourism route. The steep slope down to the water s edge is a challenge for the project. The slope and the water s edge below are certainly not suitable for any physical land based development in the form of roads, built structures or other conventional infrastructure. However, innovative, temporary and environmentally sensitive structures may be feasible depending on the product configuration. Subject to an engineering study an access road from the borrow pit on the road immediately to the west of the development site down to the waters edge may prove feasible. This would enable embarkation to and disembarkation from houseboats to occur on-site rather than at the Msinsi resort, greatly enhancing the commercial potential of the KwaNgcolosi site. The following more general observations can be made about the project area: Although a popular recreational destination, Inanda Dam remains an emerging tourism destination with very few visitor facilities and attractions. Although there are no registered land claims, there appear to be unresolved land-legal issues around the dam. The project team is highly motivated, organised and pro-active. There is limited financial and business management capacity in the project team and as yet no access to financial capital. The project site has a big advantage in that it is relatively close to a successful and well established commercial resort (Mahlabatini), which has strong management capacity and offers opportunities for business linkages. There are mixed perceptions of safety and security in the area. Although hundreds of recreational visitors from upmarket suburbs visit the dam every weekend, 1000 Hills Tourism Association does not send foreign guests into the Valley during the week for fear of an incident. There is no shared development plan and spatial development framework for the broader destination, which makes it difficult for decision-makers to prioritise and spatially organise the planning of projects. 12

13 6. Tourism Product Development 6.1 Tourism product concept development The original KIDTP business proposal identifies a number or tourism product development opportunities. This business plan looks at reviewing, refining and prioritising these ideas in a systematic manner. The starting point of the analysis was the review of market demand and the review of the inherent project potential. The next step is to try and match potential products to market demand. This exercise is illustrated in the table below. 6.2 Matching product to market Table 3: Tourism resources and product development potential Inherent Potential Situated high on ridge overlooking Inanda Dam and sheltered cove. Adjacent to the main road to Inanda Dam and on the 1000 Hills Tourism Route Set in a traditional rural and cultural environment Proximity to Hillcrest and Durban (30km) Related Market Demand - Foreign and domestic demand for outstanding scenery - Water-based recreational opportunities - Cultural experiences - Foreign and domestic demand for outstanding scenery - Shopping - Cultural interaction and experiences. Cultural events. - Heritage interpretation - Captured market demand for secondary attractions to beach and shopping. - Culture, scenery and entertainment. Existing/ potential markets -Domestic day visitors Hills Route Market (including Foreign independent travellers and Foreign tour groups) -Mahlabatini Resort market (recreational/ domestic campers) -Conference market Hills Route Market -Mahlabatini Resort Market (recreational/domestic campers) - Corporate market Hills Route Market -Educational groups -All tourism and leisure markets in the Durban area. Product Opportunity -Restaurant or tea garden -Self-catered accommodation - Visitor access to water s edge - Boat mooring -Restaurant or tea garden -Boutique shop -Self-catered accommodation -Craft Market -Cruise boat for water tours and events -Supply store for tourists -Cultural facility -Cultural tours All of the above 13

14 Feasibility considerations Each of the product development opportunities is taken through a filter of feasibility considerations below to identify what opportunities are viable and desirable. Product opportunity Tea garden and conference facility Boutique shop (selling art, hand-made clothing, delicacies etc) Self-catered accommodation Cultural facility Access to dam Craft Market Feasibility considerations Reasonable passing traffic volumes only on weekends/ holidays Hills route tourism flows still low to dam surrounds. Relatively sophisticated market demanding high standards. Potential to use the spectacular scenery to good effect with the design of the facilities. A restaurant (serving food) is much more complex than a tea garden (serving drinks & snacks) and is not favoured in this context. The tea garden could be designed to be used as a conference/ meeting centre during the week when patronage is low. Reasonable passing traffic volumes only on weekends/ holidays Hills route tourism flows still low to dam surrounds. Sophisticated market will demand unique products and high standards. Very challenging to draw retail consumers from Hillcrest and Durban unless the shopping experience is bundled with a number of other attractions (which do not yet exist). Will need to be run by private sector. New tourism destination with no existing market share save for campers at Mahlabatini Resort. Only unique selling points are outstanding views, location in 1000 Hills and proximity to dam. Probably requires outstanding facilities to attract demand. High marketing effort required. Requires strong hospitality management capacity. Would benefit from other larger tourism facilities boosting the profile of the destination. Difficult to attract visitors unless on major tourism route. A few strong competitors in the 1000 Hills area (Phezulu, isithumba). High marketing effort and management capacity required. Revenue yields and profitability marginal unless linked to accommodation and good restaurant facilities Site may be too small and disointed for the project. In all likelihood a road or track down to the water will not be feasible due to the very steep slopes. Furthermore, such a proposal is likely to be rejected by environmental authorities due to the integrity of the forest and the potential for erosion. A walkway on raised platforms could be constructed through the forest but this could prove to be expensive and do little to increase tourism spend in the project area. Identified by Inanda Dam Feasibility Study as a priority development opportunity. Flows of dam clientele intermittent and 1000 Hills route flows still low. Location next to road with glide off provides high potential. Positioning inside Mahlabatini Resort may prove to be more successful. Procurement of steady supply of suitable stock from remote sources is very challenging. A production skills 14

15 development initiative and organisation of craftsman is almost certainly required. Strong management capacity required to oversee procurement of stock, transact with producers and supervise the market. Ongoing marketing effort required. Project would benefit from other larger tourism facilities boosting the profile of the destination. Cruise boat/ house boat Supply store Identified as a priority by the ethekwini Feasibility Study. Requires large capital investment. Latent demand estimated as high, although product relatively new to potential markets. Opportunities for BEE exist. Could raise the profile of the destination as a whole. Customer base probably too low at this stage to attain a viable return. Competition in the form of the trading store next door. Dam visitors may prefer to visit a store at their destination (Mahlabatini). Based on the above product development opportunities and feasibilities consideration, a few product development concepts can be short-listed for further elaboration and financial analysis. These concepts are: 1000 Hills Tea Garden and conference facility: Designed around the spectacular vistas and viewing points, this facility would initially target both recreational visitors to the dam and visitors to the 1000 Hills Tourism Route. The facilities would be also designed for hire out to the corporate and government market segments during the week for meetings, conferences and events. The facility should have high quality specs to create visitor interest and pleasure. Unique African themed structures will make this a must-stop facility for passing traffic. Large outdoor lounging and bar areas will be located on wooden platforms perched over the steep slopes dropping down to the water. A swimming pool would enhance the sun and leisure ambience. In contrast to the upmarket facility, the products and services offered will be relatively simple, focusing on: Providing a bar service including teas and coffees Light snacks and traditional food Indoor/ outdoor Lounge and viewing area Kiddies playground Ablutions Secure parking Nature trail to the dam Basic conference facilities. Pleasure cruiser (house boat) Due to the dramatic topography and bushy landscape surrounding Inanda Dam, it is seen as one of the most scenically attractive Dams in South Africa. There are currently no facilities on the water to enable tourists to experience this attraction. The Inanda Dam Tourism Feasibility Study listed a houseboat or pleasure cruiser as a priority tourism development project. It is estimated that there is high latent demand for such a facility and very little competition (the closest boat operation is located on the Jozini Dam). The KIDTP committee have also seen the potential and are pursuing the potential. It is envisaged that the boat will be designed to initially target the corporate and leisure markets by offering a unique facility for functions, parties and special events. Breakfast, lunches, dinners and bar facilities will be offered. The modular design of the vessel could allow for the creation of some overnight suites, if demand dictates that over time. The boat should cater comfortably for 50 guests. 15

16 Looking at the main player in the market, the Shayamanzi Houseboat on Jozini Dam sleeps up to 16 pax in 7 cabins and can be hired out for between R7,000 and R11,000 per night, excluding board. Day cruises are charged at approximately R375 per person including a buffet lunch (minimum R5,500). A prospectus from Horizon Houseboats (Pty) Ltd provides the following specifications for a high quality pleasure cruiser. Twin steel pontoons (18m long) Modularised 1 st and 2 nd floors Twin engine compartments Closed waste management system Figures: Shayamanzi Houseboat at Jozini Dam The cruiser should have business linkages with the 1000 Hills Tour Garden, either as an embarkation point if this proves feasible or as a mooring point in the cove below the Garden. A jetty and floating recreation deck could add value to the pleasure cruiser experience. It is likely that a partnership would have to be secured with Msinsi to secure 16

17 approvals to use the water body and to moor the boat on its shores in the Mahlabatini Resort if embarkation at KwaNgcolosi proves not feasible. Self-catering accommodation It is recommended that a project to provide accomodation be pursued in a second phase at least two years after opening of the tea garden and conference facility. The success of this initiative is seen as being directly linked to the 1000 Hills Tea Garden. As demand for and patronage of the tea garden and conference facility grows, it is forecast that a portion of the market will seek overnight facilities in the area. The establishment of Inanda Dam as a tourism destination with a basket of attraction over the next few years is also seen as a prerequisite for the commencement of this project. The design concept should be aligned with the tea Garden design and will probably be traditional rondavel type structures. 7. Financial analysis 7.1 Headline figures The establishment of the tea garden and conference facility and the pleasure cruiser operation have been appraised financially (see annexure 1). It should be noted that these figures are indicative estimates only as the projects remain at a conceptual stage. Once support for these projects are obtained, then it is suggested that more detailed feasibility and business planning takes place. The tea garden and conference centre provides good evidence of viability. Net revenue doubles from approximately R250,000 in year one to over R500,000 in year 5. Although there is a net loss forecast in year 1 of R91 000, the business becomes profitable in year 4 and is forecast to earn profits of just under R100, 000 per annum from there on. A low to middle road approach was taken to forecasting patronage and visitor spend. The establishment of the pleasure cruiser operation has very good profit generating potential. Although a loss of approximately R100,000 was forecast for year 1, the operation turns profitable in the next year. A profit of R257, 000 was forecast for year 3 and a profit of R721, 000 forecast in year 7. The capital expenditure of the tea garden and conference facility is estimated at R1, and a quotation for the pleasure cruiser was R1, Six direct jobs are forecast for the tea garden and conference facility and ten direct jobs for the pleasure cruiser. 8. Institutional Arrangements 6.1 Main roles and responsibilities It is important to understand the role players involved in the project area as well as their mandates and obligations before attempting to design potential institutional arrangements for this business venture. The main role players are listed below: 17

18 Inanda Dam Management Forum Under the leadership of the Municipality, a co-ordinating and facilitating structure known as the Inanda Dam Management Forum has been established. The role of the forum does not extend to matters affecting the autonomy of the relevant Tribal Authorities. It is envisaged that final decisions affecting each tribal authority would be left to the authority concerned. It has been proposed that the forum should be consulted with development proposals within 1km, and should provide an approval in terms of development within 500 metres from the dam. It is not clear on what legal basis the forum could assume this responsibility. Any EIA requires a consultative process anyway, and the Forum would likely be registered as a party with significant interest in any application around the dam. Proposed representatives of the forum include those from the Qadi Trust, Ncolosi Trust, Mphephethwa Trust and the Amakosi from these tribal authorities, ethekwini Municipality, Msinsi, DWAF and councillors from the relevant wards. Ngonyama Trust The Ngonyama Trust owns the communal land in the Inanda Dam environs and the Ngonyama Trust Board administers this land in accordance with the Ngonyama Trust Act (1994 as amended). The Board appears to favour granting development and tenure rights through the conclusion of long term, common law leases of 40 years. The lease is usually concluded between the Ingonyama Trust and lessee, but with the written consent of the affected traditional authority, in terms of section 2(5) of Act 3 of Ngcolosi Tribal Authority Trust The project site is located in the Ngcolosi Tribal Authority. The Inanda Feasibility Plan and the Forum propose that Trusts are established to represent each of the three Tribal Authorities around Inanda Dam. The Trust would be a legal entity representing the authority that could enter into lease agreements and other commercial transactions and carry out necessary functions to foster sustainable development. These functions could include: Securing land for development and preventing land invasions Entering into lease agreements and sub-leases with the relevant authorities, community enterprises and the private sector Community facilitation and organisation to participate in projects Political championing and support of development projects Monitoring of site development, business development and operations Management of funds received from land rentals and re-investment in the community The interests of the local community should be represented by the Ngcolosi Tribal Authority Trust. A sub-committee could be formed to monitor the project and co-ordinate some of the Trusts responsibilities described above. KIDTP Committee The KwaNgcolosi Inanda Dam Tourism Project (KIDTP) was conceptualised by the members and a committee established to pursue it. The land on which most of the project proposals relate to belong to three of the members, namely Mrs Ngcobo, Mr Nzuza and Mr Shezi. Mr Shange has played a project management role to date. It is envisaged that membership of the project will grow as the project demonstrates success. It is recommended that the committee formalise its membership and mandate and establish a legal entity to represent the group in legal transactions and economic development. It is also suggested that the committee become more representative of the broader community if it wishes to attract public sector funds for project development. It is envisaged that a Trust or a Section 21 may be suitable vehicles depending on the business arrangements that are finalised. ethekwini Municipality and other government departments 18

19 Where partnerships are set up on communal land, government agencies usually retain a monitoring and policy implementation function. This includes ensuring environmental legislation is properly implemented and ensuring that other laws concerning local economic development and proper labour conditions are adhered to. Local authorities and municipalities in South Africa are specifically tasked with providing technical support to communities that want to enter into local economic development initiatives. In many cases, various government agencies are expected and willing to bring in the bulk infrastructure roads, water, electricity, sewage and telecommunications that these businesses depend on. However the precise role that government agencies are expected to play and the costs they are expected to bear in this regard also varies from place to place. Private sector 2 It is acknowledged by the tourism industry that the management of tourism and recreational facilities usually requires the capacity and experience of a specialist firm or company. The potential role of the private sector in this business initiative should therefore be considered. In general the private sector is expected to take on the following functions in recent tourism partnerships in southern Africa: To run commercially viable and competitive profit making businesses, To provide efficient and effective marketing strategies for attracting tourists to the businesses concerned, To make a healthy rate of return on the capital invested in such businesses but also to pay market-related rentals to owners of the land on which the enterprises are developed, either government or community, In return for the profits made, to carry much of the risk including operational costs that are associated with the start up and operation of nature tourism businesses of this nature, To adopt procurement policies that outsource many non-core activities of the tourism enterprise such as security, laundry, vegetable gardens, building maintenance, tour guiding and cultural tourism activities to local small businesses, To pay responsible wages and implement basic conditions of employment and other labour legislation that exists in the country concerned, To conduct appropriate skills transfer programmes that allow local people to take up posts at all levels of the enterprise including in middle and senior management and not to simply work as menial labourers in the business, To provide mentoring and support to local entrepreneurs whose small businesses receive contracts for outsourced business activities, To ensure that all environmental policies, guidelines and impact mitigation measures are properly carried out. 8.2 Business Models The section above listed the main role players in the proposed business initiative. The structuring or relationships and agreements can take on a number of different permutations, depending on the specific context for each site. However the are number of fundamental principles or guidelines that can be gleaned from best practice around Southern Africa. These are: The roles of government, community and the private sector should be distinct and defined according to their relative strengths. The interests of multiple stakeholders in a business venture means that it is often most efficient to ring-fence the ownership of land, ownership of assets and management and operations in different legal entities. 2 Sourced from Wild Coast Tourism Development Manual,

20 Mechanisms should be created to transfer as much risk as possible from disadvantaged communities to private sector role players and government. Securing land tenure Although the KIDTP members of the have land rights to parts of the project site, the tenure for land intended for development should be formalised. For significant development projects, the Ngonyama Trust commonly issues long term leases (40 years) to organisations or business entities, once they have approval from the relevant Tribal Authority and community. In other provinces, long-term leases are usually provided to the community group who hold land rights to the project area, who then subsequently sublease the site for a shorter duration to a preferred business entity/ land user (Option A). This reduces risk to the rights holders by not having the land tied up into the business. The Inanda Dam Management Forum has recommended that the Ngcolosi Tribal Authority set up a Trust to administer the land under its jurisdiction. The Trust could be used to represent the Authority and the community as the landowner in transactions. The two options are illustrated below. Figure 3: Options for securing land tenure Option A Option B Ngonyama Trust Ngonyama Trust Ngcolosi TA Trust Long Term lease Qadi TA Trust Net proceeds from lease Long Term lease Medium Term lease Tea Garden Company Tea Garden Company Proposed model for the development and management of the Tea Garden and Conference facility It is recommended that the KIDTP establish a Section 21 or (Pty) Ltd company to develop and manage the Tea garden and Conference Centre. The emerging company will require technical and marketing support in the medium term. This should be forthcoming from both the private sector and the government. Business linkages should be established with tour operators in the area, other 1000 Hills route product owners, corporate event intermediaries and the 1000 Hills Tourism Association (the association provides free advertising exposure to emerging operators). It is further recommended that a marketing and management contract be established with an institution with capacity and track record in the market. Proposed model for the development and management of the Pleasure Cruiser 20