Makana Tourism agency shuts doors after municipality failed to pay it R1.4m

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 485 090 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. It also let go of an intern.  

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Rent in arrears

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

Chairperson of Makana Tourism Aldy Meyer said the agency largely relied on the grant paid to it for carrying out marketing services for the municipality. This is detailed in the 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 visitors of the National Arts Festival.

Thousands of people from across the globe converge in Makhanda for 11 days between June and July every year to enjoy the arts 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.

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Impact on National Arts Festival

Visitors to this year’s festival – which is celebrating 50 years – are now in limbo.

An economic impact study conducted by Rhodes University previously estimated the National Arts Festival pumps around R200 million into the economy of the Eastern Cape.

Thousands also get seasonal jobs.

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

The agency, which is an independent entity, promotes Makhanda and nearby towns such as Alicedale and Riebeek East as well as the quaint villages of Fort Brown, Salem, Seven Fountains and Sidbury.

Within the framework of this SLA, the municipality had pledged to provide financial support for the growth of regional tourism, Meyer added.

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Covid-19 crisis

Private businesses, especially those in the hospitality industry, also pay membership fees to the tourism agency.

But due to a decline in revenue in the tourism sector on the back of the punishing Covid-19 pandemic, many businesses shut doors while others cancelled the membership which is a lifeline to Makana Tourism.

Explaining the events that led to the closure, Meyer said: “Makana Tourism had to use its reserves, which were primarily comprised of member payments throughout the years and other savings that were banked monthly thanks to the cautious use of funds, in order to cover the outstanding municipal tranches. 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.”

DA councillor and caucus leader in the Makana municipality Luvuyo Sizani said his party had raised its concerns in council and in the relevant committee over the municipality’s failure to pay the grant.

“As the DA we will take this up with the mayoral committee that deals with tourism and if we are not satisfied with their actions, we will take this matter to the council,” Sizani said.

Makana Municipality was given more than a week to respond to questions but failed. Its response will be added once received.

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