/ 11 October 1996

On the road to privatisation

Travel and leisure company Aventura looks set to be the first model for restructuring, writes Eddie Koch

AVENTURA, the state-owned travel and leisure company, is being primed for privatisation, the culmination of three years of transformation from a loss-maker to a streamlined commercial enterprise.

The Department of State Enterprises is planning to complete a draft tender document by the end of this month and potential investors should have their bids in by the end of November.

Top of the list of potential bidders is the Congress of South African Trade Unions (Cosatu), although a Dutch airline with an associated hotel chain has also expressed interest, as has a local mining house in association with black partners.

With tourism set to become the next big business in South Africa, the timing could not be better. The boom in the hospitality industry is being hampered by a lack of beds on offer to local and foreign tourists from the major hotel chains.

Aventura also occupies a crucial niche in the travel industry because it offers affordable accommodation to local tourists – including the emerging black middle class with new amounts of leisure time and cash to spend on holidays – when the cost of staying in the leading hotels and game lodges is spiralling beyond the reach of most South African holiday-makers.

Research shows that although most hotel and lodge chains target the lucrative foreign tourist market, more than 60% of the demand for leisure accommodation is generated from inside the country – and is likely to escalate as the leisure classes expand.

With the pressure on the Ministry of State Enterprises to come up with a standard tendering procedure for the “restructuring” of state companies, it is likely that Aventura, which is not a profit-making or strategic corporation, will provide the first model for privatisation.

Aventura is likely to be followed by the sale of Sun Air, the South African Forestry Company (Safcol) and the state’s diamond cutting industry.

The South African Commercial Catering and Allied Workers Union (Saccawu), a Cosatu affiliate which organises at a number of Aventura resorts, has recently come out against the privatisation of the corporation.

This will add an interesting dynamic to the tender process as – regardless of whether this consortium is awarded the tender – it will indicate whether organised labour will drop its principled stance against privatisation in return for the opportunity to gain some control over state-owned enterprises by investing members’ provident funds in them.

As part of its restructuring programme, Aventura is discussing a share-ownership scheme with its staff of 1 500. On the table are proposals that 2% of the shares be allocated across the board according to a formula that emphasises length of service. Another 23% of shares will be held in reserve for staff to acquire through purchases or other finance schemes – leading to an eventual 25% ownership of the corporation by employees.

Created in 1993 out of the former government’s Overvaal Resorts, Aventura adopted a new name and a new image. Under a new board of directors, led by Alan Louw, Aventura has been undergoing a steady transformation. State subsidies have been replaced by bank loans, although the debt burden is still heavy at R34-million.

Cuts have been made to staffing levels, but privatisation will not mean further retrenchments, says an insider; indeed, the company is looking to expand its operations.

The turnaround has been dramatic: from an operating loss of R15-million in 1993 Aventura is now breaking even; turnover and revenue have risen substantially. And with occupation rates growing at 10%, it can look forward to greater increases. Its14 resorts, traditionally venues for middle- to lower- income white holiday-makers, but fast becoming popular among other racial groups moving into these income categories, generate a turnover of about R110-million a year.

Aventura provides hotel accommodation at its two main resorts, Warmbaths and Badplaas, but its operations are primarily aimed at self-catering and caravan and camping facilities.

Aventura has not relied on the buoyant tourism market alone to boost its income; facilities have been upgraded and refurbished, with new product ranges, such as the holiday clubs, akin to timeshare schemes, helping to attract clients.

In line with its bid to appeal primarily to South African tourists who want a “quality holiday experience or breakaway experience at realistic cost”, Aventura is promoting resorts that are either located near prime wildlife areas or at mineral springs. Its Warmbaths and Badplaas resorts are being billed as places where people can spend healthy leisure time with extensive recreation facilities.

Five other resorts – Eland, Swadini, Blyde Canyon, Loskop Dam and Plettenberg – are taking advantage of the current vogue for nature travel and are being aggressively marketed as eco-tourism destinations.

Nor has the community been forgotten: Aventura plans to involve rural communities in various aspects of its business by offering cultural groups from villages or townships near its resorts the opportunity to make money from their performances for tourists.