Municipality defaults

GRANT: TOURISM AGENCY SHUTS ITS DOORS OVER NONPAYMENT OF R1.4M

Last time Makana council paid the entity was in June 2023.

Makana Tourism, an agency promoting tourism for the city of Makhanda in the Eastern Cape’s Makana local municipality, has been forced to shut its doors due to bankruptcy after the ANC-run municipality failed to pay statutory quarterly tourism grants.

The municipality owes the entity R1.4 million after defaulting on six quarterly payments – a situation which forced it to use all its reserves to pay staff and service providers, in addition to other operating costs like maintaining the building.

After three months of being unable to pay its workers, the agency finally retrenched its director, information officer and a general worker on 1 December and also let go of an intern.

The landlord is owed 15 months’ rent and had been threatening to lock out the workers of the agency.

Makana municipality was given weeks to respond to questions, but failed to do so.

Makana Tourism chair Aldy Meyer said the agency largely relied on the grant paid to it for carrying out marketing services for the municipality as per a service level agreement (SLA) signed between Makana Tourism and Makana municipality.

“This fund has supported Makana Tourism’s operational functions, including building expenses, utilities, paying service providers, and covering employee salaries. Makana municipality reaffirmed their support of this SLA in a council meeting in May 2023,” said Meyer.

He said the last time Makana paid the entity was in June 2023 in an effort to keep the doors of the agency open just for National Arts Festival visitors.

Thousands of people from across the globe converge on Makhanda for 11 days between June and July every year to enjoy the festival and many rely on the agency for information about which shows to watch, tourism attractions to visit, as well as for directions to show venues.

Visitors are now in limbo for this year’s festival, which celebrates 50 years of existence.

An economic impact study conducted by Rhodes University previously estimated the festival’s economic spin-offs pump around R200 million into the economy of the Eastern Cape.

Prior to the last payment from Makana, Meyer disclosed that the municipality made a single payment on 1 April, 2022, for the previous quarter.

The agency, which is an independent entity, promotes Makhanda and nearby towns such as Alicedale and Riebeek East and the quaint villages of Fort Brown, Salem, Seven Fountains and Sidbury. Within the framework of the SLA, the municipality had pledged to provide financial support for the growth of regional tourism, Meyer added. Private businesses, especially those in the hospitality industry, also pay membership fees to the tourism agency which it uses to operate.

But due to a decline in revenue in the tourism sector on the back of the Covid pandemic, many businesses shut their doors while others cancelled their membership.

“Makana Tourism had to use its reserves, which were primarily comprised of member payments throughout the years and other savings in order to cover the outstanding municipal tranches,” Meyer said.

“Due to the ongoing failure to pay municipal tranches over the course of six quarters, Makana municipality now owes Makana Tourism a total R1 485 090.

“Makana Tourism’s reserves have now been exhausted, which forced it to start a retrenchment process after going three months without paying its employees.” –

Visitors are now in limbo for this year’s festival