A STUDY OF SOUTH AFRICAS SMALL, MEDIUM AND MICRO TOURISM ENTERPRISES

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A STUDY OF SOUTH AFRICASSMALL, MEDIUM AND
MICROTOURISM ENTERPRISES

• Based on research and research reports by
  MarkData Associates

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Why research?

• Need to understand the SMME market in tourism for
  2010 but also for beyond the event
• No other quantitative information available about
  the market
• TEP wanted to provide a credible source of
  information for all stakeholders to use
• This is the first time we have released the
  information following extensive analysis and
  understanding
• TEP has used this information to develop some
  strategies for the industry but hope that all
  tourism agencies will use the knowledge to drive
  tourism growth

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How was the research conducted

• Lists were limited and researchers walked the
  streets to find those involved in tourism
• We went to every province around the host
  cities and satellite areas, and GCP regions
• Our objective was to survey 2500 SMME businesses
  with a focus on HDE owned (our sample is 4,547)
• We also interviewed 500 tourism stakeholders and
  held workshops with experts across the country
• All conducted in 2007 perceptions may have
  changed since then

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TEPs Definition of SMMEs

• Middle- and lower-level enterprises formal and
  informal
• Turnovers of less than R25 million a year
• Earn at least 25 of their revenue from tourism
• Emphasis on HDEs
• We found more than 4,500 enterprises meeting this
  criteria
• Confident that this is a very representative
  sample

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WHAT WE FOUND
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• The SMME market can be segmented into three main
  groups
• Operationals viable enterprises ready to provide
  goods and services for 2010 and beyond.
• Potentials viable enterprises not ready to
  provide goods and services for 2010, but with the
  potential to do so.
• Marginals enterprises on the margins of
  viability very little prospect of becoming
  meaningful service providers for 2010 or beyond.

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84 of SMMEs can provide services for 2010but
50 (the Potentials) need help to get there
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Where are they?

• Western Cape and Gauteng have by far the most
  enterprises, followed by KwaZulu-Natal and
  Eastern Cape

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They are in all regions

• Most in urban centres and recognised tourism
  areas
• Significant proportion in townships

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The provincial picture Gauteng

• Broad range of tourists, many in transit
• Mix of markets and enterprises many marginal
  operations
• Lack of natural attractions makes SMME products
  even more important in this province
• Very strong established sector but does not
  crowd out SMMEs

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SMMEs are operating in 3 main sectors

• Opportunity to support and grow
• Travel or tourism agencies
• Transport operations
• Marginals are active in the Arts and Crafts sector

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Variety of product offerings offers a sound
foundation for development
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SMMEs have a Local tourism focus with 20 25
overseas visitors
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Almost all emerging SMMEs have some marketing
effort but admit they need help here
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The profile of Potentials shows almost 70 HDE
ownership
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Figures by gender shows strong female ownership
in tourism SMMEs
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Education shows relatively well qualified people
in this sector again a sound foundation for
further development
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Total direct employment 27 000 average of
just under six each opportunity to grow
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Median monthly turnover shows a large gap
between segments
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The development challenge

• Operationals
• 99 registered
• 13 not VAT-registered
• 7 no audited financial records
• 14 no insurance
• Significant numbers do not have websites, e-mail,
  or functioning vehicles

• Potentials
• 74 registered
• 36 not VAT-registered
• 40 no audited financial records
• 60 no insurance
• Many lack important operating resources

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SMME Sector Insights
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Subsector accommodation

• Most are bed breakfasts very few hotels (these
  tend to be established enterprises)
• Healthy and rising occupancy rates
• Many ungraded major challenge for 2010 and beyond

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Subsector arts crafts

• Vast majority are potentials (80)
• Potentials weighted towards manufacturing
  Operationals towards sales
• Wide range of products quality items in lower
  volumes
• High volume of artefacts imported from other
  African countries is a major problem
• Massive gap in turnovers between Operationals and
  Potentials

Least developed in business terms very
committedadd value to tourism sector
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Subsector tour operators and tourist guides

• Most are tour operators or day trip operators
• Few tourist guides, but more than half accredited
• Potentials specialise in niche areas (history and
  heritage city tours)
• Operationals concentrate on more popular
  attractions (game parks, resorts, adventure
  tours)
• Steady growth in demand, but some static,
  indicating problems with market access

Given need for expensive vehicles,number of tour
operators is encouraging
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Subsector food and beverages

• Most restaurants run by Operationals most
  shebeens or taverns by Potentials
• Average seating capacity 118 for Operationals 59
  for Potentials
• Healthy seat occupancy
• Major gap in training and experience of main
  cooks or chefs

Diversity of SA cuisine presents major opportunity
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Subsector attractions

• Reasonable range of products
• Operationals offer nature-based attractions with
  higher returns
• Potentials offer niche interests such as music,
  history and heritage, arts and culture
• Visitor numbers have increased in recent years

Activities limited, but products very popular
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Opportunities for emerging SMMEs

• Bed and breakfast accommodation in peak periods
  or during events
• Good restaurants in many areas
• Pubs and taverns in some areas
• Musical and artistic performances in all
  provinces
• Good quality night clubs in all provinces

• Quality crafts and curios in all provinces
• Traditional or folk music performances in all
  provinces
• Sidewalk cafes and stalls selling tourism
  products
• Heritage, historical and political sites

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WHERE ARE THE CHALLENGES AND NEEDS?
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Perceived needs of SMMEsSteps needed to take
advantage of opportunities in 2010
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Other Challenges

• Low levels of formality
• Uneven quality of goods and services
• Large gaps between HDEs and non-HDEs
• Poor linkages between emerging SMMEs and
  established tourism networks
• Shortage of skilled mentors, trainers and
  consultants

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Stakeholder perception of challenges
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CONCLUSION RECOMMENDATIONS
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Contribution to tourism in South Africa

• add variety to tourism goods and services
• act as seedbeds for the tourism industry
• play a vital role in creating the South African
  tourism experience!

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BUT

• We all have a role to play
• Support must be tailored to particular
  enterprises
• Development agencies should develop more
  effective selection criteria
• Development agencies should collaborate on
  training trainers, mentors, and consultants
• There is a need to improve operating environments
  and strengthen markets
• Improve linkages with established tourism
  networks
• Establish clusters, street markets, business
  hubs, and resource centres
• Fast-track the development of HDEs the
  potentials without using handouts

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• www.tep.co.za