Hotels and gambling group Sun International seems to be well placed to tackle the tourism transformation charter, which is set to become law in the near future.
Sun International, which owns some of the most prestigious jewels in SA's tourism industry, emerged as the most empowered group within the travel and leisure sector of the JSE. That is according to figures produced in the 2009 Top Empowerment Companies (TEC) survey.
Led by CEO David Coutts-Trotter, Sun International reported a revenue base of R7,6bn and operating profit of R2,1bn in the year ended June 2008. These indicators - revenue and operating profit - were quoted at R3,7bn and R500m respectively in 2002, which shows the group has grown phenomenally over the past seven years. The asset base features casino operations such as the GrandWest in Cape Town, Carnival City in Gauteng and Isibaya in KwaZulu Natal. It also has Sun City and has boosted its international footprint in the past few years with operations in Botswana, Zambia and Nigeria.
In the six months ended December last year Sun International reported a 6% improvement in revenue to R4bn. Earnings, however, were curtailed by a variety of factors including deteriorating trading conditions and funding requirements for new and prospective operations. These include an offshore exposure called Monticello Grand Casino & Entertainment World located in Chile, South America, to which the group has committed US$236m. This operation is already trading in temporary facilities while construction is under way.
The group says were it not for losses at the Monticello operation, earnings would have remained in line with the prior period. There were other funding requirements, including the licence applications for the Wild Coast Sun and Boardwalk. It cited all these cash guzzling factors in its decision not to declare an interim dividend.
Sun International produced a total BEE score of 69%. That was enough to place the group in pole position in a sector that features names such as Phumelela, Gold Reef Resorts, City Lodge, Comair, Tourvest and Cullinan.
Sun International claims the BEE trophy in this sector by default. High BEE performer The Don Group was not captured in the 2009 TEC survey. When it comes to the BEE game, Sun International is no match for The Don, which is led by prominent black businessman Thabiso Tlelai. The Don's BEE score normally runs close to the 80% mark.
Nevertheless, Sun International makes the grade as its score places it above level 4 BEE status under the generic BEE scorecard. This level yields 100% recognition on the affirmative procurement scale. And it seems the group will pass the test of the forthcoming tourism charter.
The tourism charter is one of the few charters that are likely to be enacted and earn status equivalent to the BEE codes of good practice. When it is enacted, the BEE initiatives of players like Sun International will be judged largely against the charter's tailor-made scorecard and not the codes.
Sun International's BEE credentials are mainly viewed against the 2005 transaction that transferred about 7% of the group's shares to the Dinokana Consortium. The consortium is led by Lereko Holdings, a BEE group formed by former ANC heavyweights Popo Molefe and Valli Moosa. Sun International has since transferred about 11% of its shares to staff, the majority of which are black. In a separate initiative the group transferred about 0,9% to its senior black managers.
The latter transactions tell only half of Sun International's BEE ownership story. A significant portion of the group's black ownership points are derived from initiatives located at different operating levels. This comes partly as a result of the gambling industry's regulatory requirements. Gambling licences in different parts of the country are issued with localised BEE conditions. Examples include Sun West, which is 29% owned by a broad-based Western Cape-located BEE group. The same structure applies to Emfuleni in the Eastern Cape and Meropa in Polokwane.
When consolidated, all these BEE ownership initiatives leave Sun International with a total ownership score of 21,7 in the TEC survey. Black voting rights are quoted at 32%, while black economic interest is 27,7%.
The localised BEE structures also speak to the group's philosophy captured by Coutts-Trotter, who wrote in the latest annual report: "Sun International places a high priority on contributing to the wellbeing of communities in areas in which we operate. We recognise the need to share opportunities and wealth, which our business creates. Our approach to BEE is born of this philosophy as is our extensive corporate social investment programme (CSI), which is implemented at both corporate and unit level."
He says the group commits 2% of profit after tax to CSI and intends increasing this to 4% over the next five years. Like most companies on the JSE, Sun International claims all the five points available in the CSI element of the broad-based BEE scorecard. The group also claims all 15 points in enterprise development. There is still work to be done on management, where the group managed only 2,4 points out of a possible 10. In employment equity it scored 5,8 out of 10, while it claimed 7,8 out of 15 for skills development and 11,2 out of 20 for procurement.
Sun International is followed by Phumelela with a total BEE score of 66% in the TEC leisure sector rankings. Gold Reef is placed in third position with 51%.
