Environmental Engineering Reference
In-Depth Information
Over optimistic demand
For a competitive bidding system to be effective, it does require that the demand
for sites exceed supply. In a situation where there are a number of opportunities
but there is an unsophisticated market, a different approach should be adopted.
SANParks experienced a unique situation with the concessioning process (in
2000) where National Park land was offered to private lodge developers for the
first time. With the limited supply of concession areas, high demand and an
overestimated expectation of the anticipated performance of the lodges, unrealis-
tic financial bids were offered to SANParks. As this was the first time such
opportunities had been made available, operators did not have similar operations
to benchmark their forecasts against. Bidding processes are also by nature
competitive, and these two factors can encourage a situation where higher bids
secure the awarding of a contract and overinflated demand translates into a higher
percentage of turnovers being committed.
In 2004 SANParks were forced to re-evaluate the financial obligations of the
concessionaires to avoid overall failure and its associated negative impacts. The
optimal bids made it difficult for the Lodge PPPs to operate. After contracts were
awarded, there were changes in market conditions: the South African currency
appreciated against major international currencies, and the increase in global
terror in 2001 reduced international travel to a significant extent. Collectively, the
private sector lodge operators approached SANParks to renegotiate the terms of
the contracts. SANParks engaged in intensive analysis and found a solution where
the financial model could be adjusted and private sector lodge operators could be
more flexible on pricing. SANParks could thus ensure the sustainability of the
lodges without making material changes to the contracts.
The need for centralized effective contract management
It is clear that ongoing 'balanced' and efficient contract management is essential to
the continued success of the process. Sound communications are not only essen-
tial for the commercial objectives of the partnership, ongoing monitoring, review
and communication are also vital to ensuring continuing progress and commit-
ment to the attainment of agreed BBBEE and SMME development programmes,
as well as in support of long-term environmental management. This will provide
some confidence to investors, who see opportunities in some places but are
deterred by government and its ability to manage the process during its life cycle.
Functionary level institutional capacity and buy-in
The competency of functionary staff in terms of tourism and/or commercial
developments should be strengthened. Furthermore, the attitude of functionary
level staff in the parks often appears to be in conflict with the Commercialization
Strategy and this, in turn, will impact on investor confidence and interest as it
translates into an increased business risk. In dealing with such strategically impor-
tant assets, the need to attract and secure the best investors is just as critical for
long-term sustainability. As such their investment and development process
should be treated as a priority whereby they are able to interact with the most
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