NMBM ECO-TOURISM – NATURE RESERVE RFP

THE ESTABLISHMENT OF COMMERCIAL CRITERIA TO ASSIST IN THE EVALUATION OF BROAD BASED ECONOMIC EMPOWERMENT FOR ECOTOURISM PROJECTS IN THE NMBM

______

Prepared For:

NELSON MANDELA BAY MUNICIPALITY: DIRECTORATE PUBLIC HEALTH______

MAY 2011

Prepared by:


TABLE OF CONTENTS

1OVERVIEW OF THE requirement

1.1Background

1.2The Terms of Reference and Methodology Adopted

2The Minimum Requirements for Financing - DBSA

2.1Environmental Guidelines for the DBSA

2.2Enterprise Development and the DBSA

2.3Tourism and Local Economic Development (LED)

2.4Sustainable Development and the DBSA

2.5Conclusion – DBSA Requirements

3the request for proposals (rfp)

3.1Purpose and Background

3.2The Scope Of Work

3.2.1The Eco-Tourism Operator

3.2.2The Community Partner to the Operator

3.2.3The Eco-tourism Operating Model and Project Viability

3.3The Minimum Criteria For The Proposal Document

3.3.1Executive Summary

3.3.2Architectural Requirements

3.3.3The DBSA Funding Criteria

3.3.4The Financial Offer to the NMBM

3.4Evaluation and Adjudication Process

3.4.1Functionality Criteria Score Sheet

3.4.2Additional Documents Required

3.4.3Sworn Statements

3.4.4Black Economic Empowerment (BEE) Status

3.5The Timeframes for the Process

4appendix

4.1Budgeted Income Statement

4.2Functionality Criteria Score Sheet

4.3Affidavit – Historically Disadvantaged Individuals – HDI Status

4.4Affidavit and Tax Clearance Certificate Recordal

LIST OF TABLES

Table 1: DBSA Environmental Project Report Structure

Table 2: NMBM Rental Proposal Form

1OVERVIEW OF THE requirement

1.1Background

The Public Health Directorate of the Nelson Mandela Bay Metropolitan Municipality (the NMBMM) intends to request proposals from broad based economic empowerment (BBEE) groupings from pre-designated previously disadvantaged communities to partner with private developers as minority shareholders (PROBABLY ON A 75/25 basis) to develop eight (8) nature reserves in the Metro, namely Maitland, Settlers Park, Dodd’s Farm, Victoria Park and St Georges Park, Van Stadens, Springs and Van Der Kemp’s Kloof.

The Nelson Mandela Bay Metropolitan Municipality comprises 195,412 hectare (1,954 km²), of which approximately 8,500 hectare is formally protected, representing many of the rare and threatened habitats within the area. A large percentage of this area is currently being managed by the Nelson Mandela Bay Municipality (NMBM) by means of these nature reserves. Essentially these are to be placed under the control of the private sector.

Surrounding several of these reserves are rural communities living in poverty. The Public Health Directorate has identified an opportunity for using this biodiversity economy to create potential avenues for economic development in these communities.

Plans for upgrading and developing a number of reserves, specifically Settlers Park (including Dodds Farm, Victoria Park and St Georges Park), Maitlands, Van Stadens, Van der Kemps Kloof and Springs Nature Reserves, are currently underway by means of partnerships with private developers. A call for proposals from private developers will also be advertised in parallel with this process. If successful, these upgrades and developments will play an important role in creating employment opportunities as well as a sense of community custodianship for these areas. With the right development, these reserves have the potential to attract increased tourism to the Metro.

The above mentioned Nature Reserves will be developed through a collaborative venture comprising of the Municipality, Private Developers (with experience in the Ecotourism Sector), the community and South African Development Agencies including DBSA, IDC and ECDC.

The Municipality will be requesting proposals from Community Trusts, Cooperatives or Joint Ventures (JV’s) between Community Trusts and Cooperatives, Cooperatives and black owned companies or Community Trusts and black owned companies. These BBEE entities need to satisfy a set of minimum requirements in order to satisfy the NMBM BBEE policy.

The successful tenderer will be required to conclude an agreement with the majority shareholder, the private developer. The type of agreement and legal entity to be formed for the agreement is still to be determined.

The proposal submitted by tender respondents needs to be Broad Based Economic Empowerment (BBEE) compliant as well as be based upon sound commercial principles for eco-tourism orientated projects. The selected respondents should ideally be deemed to be appropriate as a JV partner by the Private Developers and funding agencies who could be participating in the projects.

It is the purpose of this report to propose a methodology to ensure that the BBEE responses to the Call For Proposals are compliant with the NMBM procurement process and that the commercial requirements of the private sector partners and financiers are complied with.

1.2The Terms of Reference and Methodology Adopted

The brief for Rand International Capital is to assist in the preparation of a sound framework for the evaluation of the tender responses from the community organisations and entities which are expected to respond to the ecotourism opportunities.

No formal terms of reference has been prepared by the client and a series of meetings have been held with the client and their various service providers in order to gain a proper understanding of the project requirements. More specifically, meetings have been held with Mr. Joram Mkosana, Mrs. Hedwig Crooijmans, Mr. Ed Murray and telephonic discussions held with Mr. Louis Lombard of the DBSA. From these discussions and the perusal of various documents supplied and sourced, a realistic overview of the project requirements has been formulated.

From the above, we have interpreted the requirement to be threefold, with the three processes being sequential. The steps which we have followed have been to:

a.Determine the project objectives and the envisaged outcomes for the client, the NMBM, the nature of the relationships which are anticipated to be formed for the execution of the various projects and the process required to achieve this;

b.Establish the technical and financial feasibility of the proposed ecotourism development framework and determine the critical success factors and the financial and commercial elements which would be deemed to be a minimum requirement for the successful implementation of the projects;

c.Develop the relevant section and criteria of any Request For Proposals (RFP) which would be issued to the public in order to solicit responses from the targeted communities. This would include a weighting or evaluation scoresheet for the adjudication of the responses received from the respondents.

A range of issues have needed to be investigated in order to formulate the commercial basis required for the selection process. A broad overview of the steps to be undertaken in order to complete the brief is as follows:-

  1. Evaluate the existing situation and work completed for the proposal;
  2. Prepare ‘Minimum Requirements for Proposal Document’;
  3. Establish the DBSA Funding Criteria and Minimum Requirements, and
  4. Prepare the relevant sections for inclusion in the RFP documents.

With the absence of constructive cooperation from the DBSA, we have evaluated a number of their policy documents and created a set of project criteria based upon our interpretation of these documents. The DBSA still need to be consulted with in order to verify this interpretation.

2The Minimum Requirements for Financing - DBSA

The financing requirements of the Development Bank of South Africa (DBSA) have been evaluated in order to establish the extent to which specific compliance is required by the applicants to this RFP in order to be eligible for the financial assistance in the form of both debt and equity that the DBSA has indicated it is willing to provide for the NMBM nature reserve projects. The DBSA has indicated its willingness to support these developments with their development finance programmes, conditional upon their policy and financing criteria being met.

The Development Bank of Southern Africa (DBSA) is a development finance institution (DFI) that finances the creation of infrastructure in South Africa and the southern African region. Although wholly owned by the government of South Africa, the DBSA serves all of the member countries of the Southern African Development Community (SADC).

The DBSA is a responsible corporate entity and applies internationally accepted project screening and business appraisal criteria in the evaluation of all potential projects for funding purposes. Standard credit risk measures are applied to all projects which are funded, although a preference is for projects which promote economic development within the region and lead to improved standards of living for SADC citizens.

The Development Bank of Southern Africa Act, No. 13 of 1997, defines the primary purpose of the Bank as promoting economic development and growth, human resource development and institutional capacity building by mobilising financial and other resources from the national and international private and public sectors for sustainable developmental programmes and projects. This requires it, among other objectives, to do the following:

  • Appraise, plan and monitor the implementation of development programmes and projects.
  • Fund or mobilise funding, in line with the regulations to the Act, for initiatives aimed at minimising or mitigating the environmental impact of development programmes or projects.

In terms of these provisions, the DBSA is committed to promoting sustainable development and building the institutional capacity of its borrowers. It recognises that the integrated and sustainable management of the environment, now and in the future, is the basis for sustainable development in all areas of human activity. In terms of this commitment, the DBSA developed a policy framework for environmental appraisal, which comprises the environmental policy of the DBSA Group and the procedural framework outlined hereafter.

2.1Environmental Guidelines for the DBSA

The DBSA follows a lifecycle approach to projects by assisting borrowers in designing an appropriate system for environmental management and helping to build their capacity to fulfil their environmental obligations. The DBSA does not, however, manage the environmental concerns associated with any project on behalf of the borrower. The borrower remains completely responsible for managing these and, in its ongoing interaction with borrowers, the DBSA avoids creating any dependency by the borrower in this regard.

In the appraisal process, the DBSA aims to achieve the following:

  • Identify opportunities to maximise the developmental and environmental benefits of projects and promote sustainable development.
  • Assist management in deciding whether to support a project, based on its environmental risks.
  • Minimise the environmental risks and liabilities of both the project and the DBSA.
  • Assist the borrower in obtaining any legislated environmental authorisations that may be necessary.
  • Assist borrowers in building their environmental capacity.
  • Identify ways to prevent, minimise, mitigate or compensate for the environmental risks and/or impact associated with projects.
  • Assist in the development of conditions to be included in the loan agreement with borrowers.[1]

The guiding principle of the appraisal process is to ensure that DBSA supported interventions are economically, socially and environmentally sustainable, in accordance with the principles of sustainable development outlined in the National Environmental Management Act (NEMA) and any of its successors in title. Integral to these principles, particularly the precautionary principle, is the requirement that the environmental risk of a proposed project must be properly assessed and managed. Four sources of environmental risk must be considered in environmental appraisals. These are:

  • Environmental impact: Risks emerging from the nature and impact of the project could include, for example, the potential of a waste disposal site to pollute groundwater, or of road fill contaminated with heavy metals to lead to toxic runoff.
  • Legal requirements: Non-compliance with the legislative regime is a significant source of risk. Legal risks can include siting requirements such as planning authorisation and EIA approvals, operating requirements such as water permits, and environmental liability regimes that link the proponents of a project to any existing or future contamination.
  • Institutional capacity:Any limitations of the capacity of an institution to fulfil environmental requirements during the implementation, operation and maintenance of a project can present a significant risk.
  • Public and political concerns:Environmental issues have a high potential for reputationalrisk and even conflict owing to public and political concerns.

Environmental assessments are not limited to risks; the DBSA also appraises the environmental benefits of projects. In line with the DBSAs policy and the sustainability principles, the appraisal process actively considers ways to improve environmental benefits, for instance by exploring alternatives that may have a larger positive impact on the environment.

Appraisals of projects within South Africa are based on the NEMA principles. Appraisals of private sector projects outside of South Africa, especially those with a high environmental risk, must use international good practice on social and environmental assessment, particularly the Performance standards on social and environmental sustainability of the International Finance Corporation (2006).

All projects being considered for support are subject to an environmental appraisal; this must be submitted to the DBSA project manager, in writing, according to the format outlined in the DBSA document.The appraisal must be conducted by an environmental analyst, and such an analyst must therefore be on every DBSA project team that does appraisals. The required table of contents for environmental project reports is given below, with a brief description of the requirements in each section:

Table 1: DBSA Environmental Project Report Structure

Report Section / Description Of The Requirement
Project title, project number, borrower and implementing agent / At the beginning of the report.
Clear identification of the project and borrower.
Purpose of the report / A statement that the report documents the results of the environmental appraisal of the project
Project overview / An overview of the project, identifying:
Issues to be considered in the appraisal.
The need for the project.
Any alternatives.
Appraisal methodology / Details of the methodology, including:
Specifics about site visits, key documents and personnel consulted, information and documentation reviewed discussions held, etc.
Any assumptions or limitations.
Details of agency (credit line) requirements.
Environmental assessment process / Details of the environmental assessment process, including:
A statement on its adequacy.
Motivation or discussion of deviations from the guidelines.
An opinion, with supporting argumentation, on the quality and adequacy of information provided, such as the EIA, scoping report and EMP.
Legislative and regulatory issues / Any project-related legislative or regulatory issues and their status, e.g. EIA requirements or water permits.
Institutional capacity for environmental management / An assessment of the institutional capacity of the borrower for environmental management (high, medium or low).
Proposals on the need for technical assistance.
Environmental risk assessment / For each environmental risk identified in the tables appended to the appraisal report (Appendix 1):
An explanation of the assessment of the magnitude of the impact and the probability of the risk, and details of the criteria used.
A description of mitigation measures and their effect on the risk ratings.
The effect of the institution’s capacity for environmental management, in view of the magnitude of the impact and the probability of the risk.
Developmental impact / The environmental benefits, in terms of the environmental sustainabilityof the project (if any).
A recommendation on possible environmental indicators for the project.
Credit lines / For relevant projects:
A statement that the project is allocated to a specific credit line.
The environmental conditionality and how this has been met.
Monitoring requirements / Recommendations on approaches to the monitoring requirements, based on:
The risk assessment.
The point in the project lifecycle where the risks occur e.g. during the construction phase.
Conditions for inclusion in the loan agreement / Suspensive or further terms and conditions.
Conclusion / A summary of the results of the environmental risk assessment.
Key issues that emerge from the appraisal process.
Any environment-related project issues.
References / Any documentation used.
Personal communications referred to in the report.
Appendix 1 / Summary table on environmental risk assessment.
Appendix 2 / Recommended contents for the consolidated appraisal report.

2.2Enterprise Development and the DBSA

The DBSA has formulated an Enterprise Development strategy which they intend to apply to a number of pilot projects in order to establish its ability to meet developmental objectives[2].

Economic growth is fundamental to addressing unemployment, gender equality, health and other povertyrelatedissues worldwide. Enterprise development (ED) is an important tool and essential elementto economic growth. Raizcorp in an article entitled Enterprise Development Made Easy[3], definesenterprise development as investing time, knowledge and capital to help Small and MediumEnterprises establish, expand or improve businesses including empowering modest incomegeneratinginformal activities to grow and contribute to the local economy.

According to the Tourism Empowerment Council of South Africa (TECSA), a company enterprisedevelopment policy should be developed with outcomes in mind such as:

  • steering the economy towards a stable environment that nurtures growth and increases the country’s economic competitiveness,
  • fostering a synergistic relationship between private and public sector to embrace social investment as a common vision, and
  • fostering an entrepreneurship culture amongst previously disadvantaged groups.

Through enterprise development people can earn a living and rise out of poverty. In turn and overtime, they create jobs as well as empower other individuals and the communities in which theylive. Market development, commercial business services and social enterprise are part and parcelof Enterprise Development. Moreover it encompasses finance, entrepreneurship development,investment and growth in Small Medium and Micro Enterprises (SMMEs), including initiativesthat range from enabling the start-up of small businesses to providing business skills development through training, mentoring and coaching.

The DBSA has presented an overall strategy at their various management forums, following a five prongedapproach of financier, partner, advisor, implementer and integrator to build human capital andinstitutional capacity as per the DBSA mandate. The DBSA favours a 10-step strategy startingwith identifying opportunities for Enterprise Development within its project pipeline aligned withthe key focus areas, linked to sectoral value chains and BBBEE transformation charters, opportunityand needs based, identifying criteria and partners, structuring alliances, using tested models ordevelop it where it does not exist, benchmarking, agreeing on an exit strategy and incorporatingmonitoring and evaluation.