Fish River resort a costly venture
Despite this, state takes it over as a commercial project
FINANCIAL advice to avoid haemorrhaging R34-million a year in a tourism deal was ignored by Land Minister Gugile Nkwinti, whose department went ahead. Saturday Dispatch can reveal that:
The Fish River Sun seaside resort with its hotel, apartments and golf course was bought from Sun International for R75-million.
The first public act of the new owners, the Department of Rural Development and Land Reform (DRDLR), was to close the resort this week.
The iconic hospitality gem in the Sunshine Coast tourism sector is now the responsibility of the DRDLR to operate as a profitable commercial tourism venture.
However, the resort is at the centre of a massive 85-farm 43 700-hectare land claim by a number of communities in the Peddie area. The case started more than 15 years ago.
In a complex, messy legal battle, three Peddie area communities, the Amazizi, Prudo and Tharfield, have been joined by Nkwinti in the Port Alfred Magistrate’s Court to sort out how the land should be divvied up.
The advice to stay away from the deal is contained in a document, seen by Saturday Dispatch, titled: “An analysis of options for short-term management arrangements and proposed way forward”.
Author Geoff de Beer, a development planner, transaction adviser and principal of MD Consulting, advised Nkwinti’s department that the price and terms of the purchase from Sun International was destined to cost the state R33.9-million in operating losses annually.
He wrote that Sun International South Africa (Sisa), as per a draft court order that was reviewed, had indicated that for a fee of R3.5- million per month, they would enter into an interim management contract for the next 12 months. Sisa would also be paid a management fee equal to 10% of ‘revenue’. The department would take over all employees; and would be liable for all obligations, debt liabilities, payroll and other costs from December 1 this year.
He reported the DRDLR would carry “the financial risks. Sisa carries no financial risk other than the ‘quantu of the 10% of revenue. Even the ‘revenue’-based payment is relatively secure since it does not take into consideration the impact of the projected costs”.
The report also revealed that for the 2018-19 financial year, the projected implications of the Sisa proposal will be a R34-million operating loss.
“In this regard, the costs of operating the ‘business’ will be four times as high as the projected income.”
DRDLR national spokesman, Mthobeli Mxotwa would not discuss the report but confirmed the property was being bought by the state.
“The state is buying Fish River as a company and once the court process is finished, as we are waiting for the judgment, then further decisions will be taken about what is the next step. In the main, [the aim] is to protect the jobs of those people who are working there, and that iconic golf course,” said Mxotwa.
The hotel, which once boasted a casino, was opened 28 years ago.
This week, more than 120 permanent staff had their last party at the hotel’s premises.
Guests, including the Saturday Dispatch team, who were booked in at the hotel, were turned away by security guards who said the hotel was “already closed” for guests. Staff were not allowed to speak to the media. — bonganif@dispatch.co.za