The big guns are out, but this time they are profiting from protecting the wildlife. Eddie Koch reports on the phenomenal growth of the Conservation Corporation
WHEN Dave Varty opened his company’s newest lodge on the banks of the Zambezi River last month, he identified a phenomenon that is helping to fuel exponential growth in Africa’s game-lodge industry. ”What made this possible is that a lot of wealthy banks and finance institutions have realised that it makes economic sense to invest their money in projects that protect the dwindling wildlife of Africa,” he says.
That mechanism is, in essence, the lever that has converted Conservation Corporation Africa (CCA) in just six years from a family-owned set of Lowveld lodges into a multinational corporation operating 20 of the most luxurious lodges south of the Sahara. It employs about 2 500 people and manages 350 000ha of the continent’s most valuable wildlife real estate.
The company – valued at US$65-million (about R300-million) and probably the only corporation of its type in the world – sees itself as being so successful that it plans to expand into the wilderness of South, and possibly even North, America.
It is also planning a stock exchange listing next year in London or the United States. According to one director, CCA is becoming ”the world’s Microsoft of ecotourism”.
But sceptics in South Africa’s conservation industry say this kind of phenomenal growth is unrealistic. Since 1990, when the corporation was formed to take over the Phinda Private Game Reserve in northern KwaZulu-Natal, it has acquired six lodges and a hotel in East Africa, two lodges on the Zambezi in Zimbabwe – and a small island off the coast of Zanzibar.
In the middle of this year, CCA acquired all three of Southern Sun’s game lodges and began operating a lodge at Tswalu in the Kalahari, South Africa’s largest private game reserve.
Talks are now under way with Wilderness Safaris to take over at least another two lodges in KwaZulu-Natal’s wilderness areas, and the company is spearheading a drive with the Natal Parks Board to make the long- awaited Greater St Lucia National Park become a reality in that province.
”That kind of growth is just impossible to sustain. With so many beds opening up in new lodges, each of CCA’s operations simply won’t be able to run at the kind of occupancy rates that are required to make them profitable. It seems it is relying on soft money in the form of investment by noble financiers who are willing to take risks and less return on their money in order to be able to say they did something good for Africa’s wildlife,” says a wildlife and tourism consultant who asked not to be named.
That perception is not borne out, however, by company statistics. An official release notes that total available bed nights sold have grown from 23 627 in 1992 to 94 000 in 1996.
Average occupancies have escalated from about 60% in 1992, the kind of figure that causes some commentators to question the profitability of some lodges, to well over 80% in 1996 – all at an average rate of a whopping US$225 (more than R1 000) a night, which is expected to generate a turnover of US$33,5-million (about R155-million) in 1997.
CCA’s deputy chairman, Alan Bernstein, says the criticisms are a ”subjective view”, which ”fail to take account of years of research by investment analysts into CCA’s revenue earning potential”. He adds it is not short-term operational profits that account for the company’s skyrocketing performance.
”The international investment scene is showing an appetite for investment in the natural resources of the southern hemisphere. Ecotourism is increasingly interesting from a number of perspectives, including the ability to generate medium- term returns but also to create a viable and long-term industry.”
The real success of CCA, says Bernstein, lies in its growing ability to behave and perform in a way that attracts equity investment from international capital markets. This long-term endeavour, rather than immediate pressures to boost the occupancy rates of its new lodges, is where the company’s strategic accent lies.
”We believe there is an appetite for people of the northern hemisphere to participate in the lifestyle and natural-resource based products and services that people of the underdeveloped world can offer. CCA is essentially about setting up partnerships between the holders of capital internationally and the holders of natural resources in Africa, with ecotourism creating the best opportunity for structuring those partnerships.”
In exchange, investors can expect to earn a return on their equity in the high 20% bracket over the medium term, possibly escalating to the high 30s. But a new surge of international investment into other sectors of the game-lodge industry could also create competition problems for CCA.
Last month the Dubai-based Dolphin Group announced it was preparing to spend between R300 and R400-million on more than 25 new game lodges in Mpumalanga -indicating that there could soon be too many beds to fill in South Africa’s game parks.
”We are not concerned about the proliferation of lodges,” says Bernstein. ”The Kruger National Park, which is the size of Switzerland, has a total of 4 000 beds in its lodges. That is the capacity of four or five big Swiss hotels. I believe we haven’t even scratched the surface in terms of the tourism potential for Africa’s wildlife. Tourism to the entire African continent amounts to just 4% of global tourism, which is growing rapidly.”