AN INTRODUCTION TO TOURISM CONCESSIONING: 14 CHARACTERISTICS OF SUCCESSFUL PROGRAMS page 1 AN INTRODUCTION TO TOURISM CONCESSIONING: 14 CHARACTERISTICS OF SUCCESSFUL PROGRAMS ©2016 The World Bank Group 1818 H Street NW Washington, DC 20433 Telephone: 202-473-1000 Internet: www.worldbank.org All rights reserved. This volume is a product of the staff of the World Bank Group. The World Bank Group refers to the member institutions of the World Bank Group: The World Bank (International Bank for Reconstruction and Development); International Finance Corporation (IFC); and Multilateral Investment Guarantee Agency (MIGA), which are separate and distinct legal entities each organized under its respective Articles of Agreement. We encourage use for educational and non-commercial purposes. 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For permission to photocopy or reprint any part of this work, please send a request with complete information to the Copyright Clearance Center Inc., 222 Rosewood Drive, Danvers, MA 01923, USA; telephone: 978-750-8400; fax: 978-750-4470; Internet: www.copyright.com All other queries on rights and licenses, including subsidiary rights, should be addressed to the Office of the Publisher, The World Bank Group, 1818 H Street NW, Washington, DC 20433, USA; fax: 202-522-2422 email: pubrights@worldbank.org Acknowledgements Cover photo: Andrea Borgarello for World Bank/TerraAfrica Inside photos: Andrea Borgarello for World Bank/TerraAfrica, other photo credits as detailed on relevant pages. Document: This document has been written by Anna Spenceley, Hermione Nevill, Carla Faustino Coelho, Michelle Souto, with extensive input from John Perrottet, Jason Hopps, Ross Hughes, Magda Lovei, Banu Setlur, Wim Douw, Beril Benli, Marjanne Sevenant and Tania Priscilla Gomez. Governments and protected area Authorities are under increasing pressure to preserve the beauty and biodiversity of their beaches, parks, and pristine natural sites, while also growing tourism activity. Is it possible to do both? Tourism concessioning is one solution. The private sector can be an important partner in helping protected area authorities achieve their twin goals of conservation and attracting visitors. Delivering successful tourism concessioning programs, however, is challenging and depends on the right mix of characteristics, technical expertise, and institutional experience. The World Bank Group presents 14 key characteristics displayed in most successful tourism concessioning programs. Isalo National Park, Madagascar. Photo: © Hermione Nevill This short guide is designed for protected area managers, tourism authorities and their advisors in the international development and non-governmental organization (NGO) community. It has been jointly produced as an introduction to concessioning practices by the World Bank Group’s Trade and Competitiveness Global Practice and the IFC’s Advisory Team on Public Private Partnerships. It has been written for those who are new to concessioning, new to the tourism sector or new to protected areas. The guide intends to provide a brief overview of the key messages to consider when starting work in this area. There are a minimum of 14 key characteristics displayed by most successful concessions programs. page 4 SUCCESSFUL CONCESSIONS 01 02 PROGRAMS TYPICALLY... ...put conservation first, ...recognize the value of and accept that some tourism. areas are not suitable for tourism. 03 04 05 06 ...strive to make tourism ...value local community ...establish market ...develop stakeholder sustainable. participation. viability early on. awareness and strong engagement. 07 08 09 10 ...ensure concessioning ...rely on robust ...select the appropriate ...employ transparent is supported by a sound management plans. concession model. and clear procurement concessions framework. procedures. 11 12 13 14 ...have equitable ...manage effectively ...manage risk. ...continually evaluate contracts. beyond the deal. progress and adapt. page 5 PUT CONSERVATION FIRST, AND ACCEPT THAT 01 SOME AREAS ARE NOT SUITABLE FOR TOURISM Why is this Important? The primary function of a protected area is to protect nature and biodiversity. In some cases, protected areas will also safeguard valuable and threatened cultural and/or historic assets. Covering nearly 12 percent of the Earth’s surface, protected areas are also becoming key components in climate change mitigation strategies. Not all Protected Areas Of the seven IUCN categories, it is inappropriate to will be suitable for tourism develop tourism in category 1a: ‘Strict Nature Reserve’. As a management objective, tourism has varied suitability The International Union for the Conservation of Nature across the other categories. (IUCN) categorization suggests that tourism should be avoided in some protected areas which are considered too environmentally or culturally sensitive. Figure 1: Management objectives of different types of protected area1 Ia STRICT NATURE RESERVE Ib WILDERNESS AREA II NATIONAL PARK Tourism prohibited Tourism is secondary Tourism is primary objective objective III national monument IV HABITat/species management area Tourism is primary objective Tourism is potentially applicable V protected landscape/seascape VI managed resource protected area Tourism is primary objective Tourism is potentially applicable PROTECTED AREA DEFINITION: A clearly defined geographical space, recognized, dedicated and managed, through legal or other effective means, to achieve the long- term conservation of nature with associated ecosystem services and cultural values. - IUCN, 2008 1 Table adapted from IUCN (1994) Guidelines for protected area management categories, IUCN, Gland, Switzerland and Cambridge, UK, and; Eagles, P. J, McCool, S. and Haynes, C. D. (2002) Sustainable tourism in protected areas: guidelines for planning and management, World Commission on Protected areas, Best Practice Protected Areas Guidelines Series No. 8, IUCN: Gland, Switzerland and Cambridge UK. page 6 Protected Areas may additionally not be Protected Area Authorities often want suitably attractive for Tourism different things from tourism There are four broad types of governance for protected Assuming the protected area does allow tourism (under areas, depending on the key actors responsible for the IUCN), it does not mean that tourism will be a viable management decisions (see box below). Although activity. The most common reasons for this include: conservation will be the primary objective of each type, • Attractiveness: Insufficiently attractive natural or those managing protected areas may have different cultural features to develop a commercially viable priorities and expectations for tourism development. The tourism product that is marketable and sufficiently more successful concessioning programs identify these competitive. priorities early on. • Accessibility and infrastructure: Difficult location There are alternative (non-tourism) means and connectivity, taking into account costs and of Protected Area financing time needed to travel to and within the area, as well as proximity of established tourist circuits/routes. Where tourism is not a viable proposition for a protected The availability and cost of water, power and other area, the IUCN Best Practice Guidelines on Sustainable utilities is also relevant. Financing of Protected Areas2 provide a tool to explore alternative options. Effective protected area authorities • Governance and management: Insufficient local always respect an area’s limitations in terms of tourism. authority capacity or willingness to support the process, including maintenance or management of the asset (protected area). This may be further complicated by lack of transparency or experience. Governance Types • Stability and social dynamics: Issues of safety, • Governance by government: Federal or national ministry, sub-national ministry or agency in security and stability around the protected area, charge, government-delegated management. including the openness and support of the local population. • Shared governance: Trans-boundary governance, collaborative or joint governance. • Private governance: Conserved areas established and run by individual landowners. non-profit organizations, or for-profit organizations. • Governance by indigenous people and local communities: indigenous or community conserved territories established and run by themselves. 2 Emerton, L, Bishop, J., and Thomas, L. (2006) Sustainable financing of protected areas: A global review of challenges and options, IUCN Best Practice Protected Area Guidelines, Series No. 13. IUCN Gland, http://cmsdata.iucn.org/downloads/emerton_et_al_2006.pdf page 7 02 RECOGNIZE THE VALUE OF TOURISM Why is this Important? Tourism operations located in protected areas succeed when they thoughtfully leverage the available natural or Effective protected area authorities value and maximize cultural resources, such as landscapes, wildlife, plant life, the wider benefits of tourism. Successful protected area indigenous cultures and historical sites. Such attractions managers understand that tourism can help them achieve inspire investors to develop tourism products and services, their goals of conserving the environment for future including accommodation, catering, retail outlets and a generations, as well as bringing other benefits to the area. myriad of tourist activities (such as birdwatching and sports) that help grow a country’s economy through job creation and local revenue generation. Figure 2: Examples of natural and human made attractions in protected areas Type of attractions in protected Landscape areas Waterfalls like Niagara Falls in the USA and Canada; desert features in Namibia’s Skeleton Coast; mountain ranges such as the Himalayas. Wildlife Big 5 of elephant, rhino, buffalo, lion and leopard in Africa; coral reefs in marine protected areas. VEGETATION Brazil’s Amazon forests; wetland plants of the Everglades in the USA. Historical sites Buildings and monuments and sites of religious significance, like Machu Picchu in Peru, or the Pyramids of Giza in Egypt. Indigenous culture Traditional dress, food, music dance, stories and craft; such as Aborigines in Australia, and the Maasai in Kenya. page 8 Tourism concessions bring value to a Protected Area in several ways What is a ‘concession’? A concession is a lease, license, easement or permit for an operation undertaken by any party other than A concession can, where appropriate, bring much- the protected area agency.5 A concession may be needed protected area revenue as well as various awarded via a number of processes, including auction, wider economic, social and environmental benefits. tender, direct award to an affected community, or in Recognizing and maximizing this potential, as well as response to an unsolicited application. Best practice, managing it effectively, is a characteristic of successful however, suggests a concession should be awarded concessions programs. in a competitive and transparent manner. Tourism concessions alone generated the equivalent of US$58 million between 2002 and 2012 for South African National Parks (SANParks).3 Economic, social and environmental benefits: The various ways of maximizing local benefits include: Leveraging the Private Sector • Job creation: Tourism is a labor intensive industry, can help Protected Areas and concessions in protected areas offer the opportunity for local employment6 and training. Properly managing protected areas is expensive. • Supply chain linkages: Concessionaires can be Increasingly, protected area authorities recognize that encouraged to buy goods and services from local the costs can be alleviated with help from other partners businesses and producers, occasionally using the and through tourism concessioning. Nature-based or bid evaluation process as an incentive mechanism. cultural tourism operations can be introduced to help • Local expenditure: The amount of money retained the protected area fulfil its primary mandate and finance in the local economy depends on the degree of conservation and its existence. Concessions are much ownership, capacity and involvement of local more than a ‘convenient’ way of operating a site: they entrepreneurs in the value chain. often produce greater development impact compared to • Revenue sharing: A percentage of concession derived sites and tourism operations managed by the State since revenue may be retained to support conservation this is not normally part of the public sector attributions. management of the protected area and/or allocated to a fund for local development. The private sector can produce better results because:4 • Commercial tourism operations are its core business. Income from tourism can give local populations a • It can more easily adapt to changing markets needs reason to value and preserve their natural resources. and conditions. In Rwanda, for example, poachers have become tour • It understands how to match product design with guides, in the Virunga Volcanos region. market demand. • It understands how to promote products and services to tourists. • It can be more effective and efficient in generating revenue from tourism. • It can more easily raise capital and other funds, which diversifies funding sources from reliance on government sources. • It can more easily manage the risks and responsibilities for commercial tourism. • It has more freedom in setting price levels. • It is (often) not constrained by as much bureaucracy as within government. 3 SANParks (2012) Annual report, http://www.sanparks.org/assets/docs/general/annual-report-2012.pdf: pp29-30; Exchange rate of 1 June 2012 used of 0.11714, www.oanda.com 4 Adapted from Eagles, et al, (2009) Op. cit. pp12, Buckley, R. (2010). Conservation Tourism. CAB International. page xvi. 5 Adapted from UNDP (2014), Tourism Concessions in Protected Natural Areas: Guidelines for Managers Copyright. 6 Adapted from Wyman, M., Barborak, J. R., Inamdar, N., and Stein, T. (2011) Best practices for tourism concessions in protected areas: A review of the field, Forests, 2, 913-928. Park ranger on cellphone, Ghana. Photo: © Arne Hoel/The World Bank page 9 Project Example: Tanzania7 Almost half (47%) of the average US$1,376 a tourist spends on a mountain climbing holiday to Mount Kilimanjaro in Tanzania goes towards park fees. A further 18% is spent on wages and tips for porters and guides, and 4% on local cultural goods and services8 (see the figure below). Increasing the proportion of expenditure that reaches the local economy is typically a primary aim of national governments. Figure 3: Distribution of financial benefits from tourism on Mount Kilimanjaro9 47% 18% 16% 6% 6% 4% 3% park fees food and beverages tour operator margins wages and tips accomodation cultural goodS and services TRansport Project Example: Botswana10 Okavango Wilderness Safaris has a concession for Mombo Camp in Moremi Game Reserve, in the heart of the Okavango Delta World Heritage Site. The lodge is highly profitable, achieving an average The NGO Children in the Wilderness (CITW) linked to occupancy of 70% between 2009 and 2013, with a rack Wilderness Safaris has provided short environmental rate of US$2,413 per person, per night in the high season. education courses at their Botswanan camps for over During this period, the lease fees and taxes paid generated 1000 children since 2001, and also wildlife guiding US$6 million to government, and over US$3.7 million was courses for children who show the greatest potential. spent on staff costs (of whom 75% are local Batswana). 7 Spenceley, A. and Snyman, S. (2016) Can a wildlife tourism company influence conservation and the development of tourism in a specific destination? Tourism and Hospitality Research, 0 (0), 1-16, DOI: 10.1177/1467358416634158. 8 Mitchell, J., Keane, J., and Laidlaw, J. (2009) Making success work for the poor: Package tourism in Northern Tanzania, Final Report, Overseas Development Institute, London. Accessible at http://www.odi.org.uk/sites/odi.org.uk/files/odi-assets/publications-opinion-files/4203.pdf 9 Mitchell, J., Keane, J., and Laidlaw, J. (2009) op. cit. 10 Spenceley, A. and Snyman, S. (in press) Can an individual safari camp and company influence conservation and development of tourism in a specific destination? Submitted to the Journal of Sustainable Tourism. page 10 03 STRIVE TO MAKE TOURISM SUSTAINABLE Why is this Important? It is equally important for both the Protected Area Authority and the concessionaire to protect the natural resources on which the tourism operation is based (for example, thriving wildlife populations). If the natural or cultural asset quality becomes degraded through pollution, deforestation or over- exploitation, visitor demand and pricing are likely to decrease, hurting the businesses’ bottom line and the local economy. Bird-watchers at the Cixi wetlands, China. Photo: © You Ji/World Bank Photo Collection Sustainable tourism is on the rise Sustainability in tourism means Savvy consumers, many sharing opinions on social media, are increasingly making a positive, long-term demanding strong sustainability credentials from the products and services impact on the local environment, they purchase around the world. For nature-based tourism operators, there is communities and society, and therefore an additional and growing market imperative to operate sustainably, economy. as well as a purely practical one. There are several ways to enhance • The International Organization for Standardization sustainability in tourism (ISO).12 ISO18065:2015 is a voluntary standard establishing requirements for tourism services in protected areas while bearing in mind the area’s Some of these are driven by governments and authorities, conservation objectives.13 and some driven by the industry or consumers. Governments can set standards and mandatory • United Nations World Tourism Organization requirements through legislation. Regulating and (UNWTO) Indicators for sustainable development in enforcing sustainable behaviour through construction tourism destinations describe the process to develop permits, licensing, environmental impact assessments, destination-specific indicators and includes example as well as the concessioning framework or contracts applications in ecotourism destinations.14 themselves is now commonplace. Voluntary mechanisms driven by the industry to enhance sustainability tend to work in parallel - such as award schemes, sustainability Project Examples: certification, and codes of conduct, as well as consumer- Botswana/Kenya feedback platforms and ratings. There are several internationally recognized sets of Tourism for Tomorrow Award, 2014 – Finalist, Environment criteria, standards and indicators for sustainable tourism. Great Plains Conservation is a company that secures Key principles are often incorporated into both national African landscapes that are deemed to be ‘under threat’ legislation and voluntary schemes. (such as migratory routes) and acquires the rights to • The Global Sustainable Tourism Council (GSTC) has convert that land to protected areas. The company leases two sets of criteria, one for hotels and tour operators, and operates low-impact safari camps on half a million and the other for destinations (including protected acres and hopes to expand to 5 million in ten years.15 areas). Accounting for numerous guidelines and standards available globally, they address socio- economic, cultural, and environmental impacts,11 as well as sustainable management. 11 http://www.gstcouncil.org/gstc-criteria/sustainable-tourism-gstc-criteria.html 12 http://www.iso.org/iso/catalogue_detail.htm?csnumber=61250 13 Lopez, C. M. (2014). The international standardization process: Tourist service provided by NPA. In World Parks Congress, Sydney 2014. 14 http://sdt.unwto.org/en/content/indicators-sustainability-tourism-destinations 15 http://www.wttc.org/tourismfortomorrow/winners-finalists/2014-winners-finalists/great-plains-conservation/ page 11 04 VALUE LOCAL COMMUNITY PARTICIPATION Why is this Important? alternative land uses, or experiencing direct conflict with wildlife. They are frequently among the poorest in society Because local people are key stakeholders in most and are often a high government priority in terms of protected areas, they stand both to gain and lose from tourism development. Experience shows that communities receiving economic opportunities and greater inclusion. who are engaged in tourism activities are more likely to Tourism can also introduce negative impacts in relation add value than those that aren’t. to local livelihoods, policy priorities, and capital assets.16 Local people may be living within a protected area, using Communities themselves should weigh the potential and relying on its natural resources, or have sites of positive and negative impacts from tourism and then cultural and social significance within it. There is growing make informed decisions. Where the benefits from tourism recognition that such communities can suffer various costs outweigh the costs, people are generally more supportive from living inside or close to protected areas, including of conservation measures and often contribute directly to the opportunity cost of not expanding agriculture or policing and preservation. Figure 4: Types of Community participation Communities that receive consistent, tangible benefits by increasing skill, risk and empowerment from tourism tend to be more welcoming towards tourists, which can dramatically enhance the quality of experience for guests. The most effective type of community participation depends on the community Individual local There are many different degrees of community enterprise participation. At a bare minimum, effective protected area authorities consult widely with locals, share information, listen to concerns, and design the concessions process Independent with these issues in mind. Beyond this, communities can community also participate more actively through the tourism value enterprise chain or by becoming concessionaires. The different types of involvement17 (shown on the right) require increasing levels of skill, risk and empowerment. They correspondingly Community private- tend to contribute to higher local development impacts. sector joint Effective concessions programs assess suitability of types of venture participation on a case-by-case basis. Determining the most appropriate form of participation Supplier of goods/ typically involves detailed analysis, in-depth consultation, services and third-party support and training (often from NGOs) ahead of time.18 Direct For participation that requires moderate or high levels employment of skill (e.g. community enterprises or joint-ventures), communities may require considerable and long-term technical and capacity building support in order to engage effectively. Land rent or delegation An example of the types of improvements that can be of user rights generated through a concession are illustrated in the table to the right, for the Etendeka concession in the Palmwag conservancy of Namibia.19 In this case, concessioning Receipt of generated benefits from capital investment, more local protected people were employed, a higher income was achieved for area revenues the state, and income was directed to the conservancies. 16 Adapted from Ashley, Roe and Goodwin (2000:4) Pro-Poor Tourism: Putting Poverty at the Heart of the Tourism Agenda. http://www.odi.org.uk/sites/odi.org.uk/files/odi-assets/publications-opinion-files/2861.pdf 17 Adapted from Strasdas, W. (2001). Ecotourism in practice: The implementation of the socioeconomic and conservation-related goals of an ambitious tourism concept in developing countries. Cited in Strasdas, W., Corcoran, B., & Petermann, T. The Ecotourism Training Manual for Protected Area Managers.Zschortau, Germany: German Foundation for International Development (DSE), Centre for Food, and Rural Development and the Environment (ZEL). 18 International Finance Corporation (2012) Facilitating tourism investment in the Maputo Elephant Reserve: The tourism investment generation approach, Investment Climate Advisory Services, World Bank Group. 19 Thompson, A. (2008) Concessions in Namibia’s protected areas, Presentation to the African Safari Lodges Program, The Grace Hotel, Rosebank, South Africa, 19-21 May 2008. Accessible from www.asl-foundation.org/news.php?id=241&catid=. Note: Original values in Namibian Dollar, converted using exchange rate for 1 June 2008 of 0.13054. page 12 PROJECT EXAMPLE: Comparative benefits of community participation in joint venture lodge: Etendeka, Palmwag conservancy, Namibia20 Table 1: Community benefits before and after joint venture participation in Etendeka, Namibia Etendeka before Community Joint Etendeka after Community Joint Venture Venture Existing tented camp operating for 12 years 20 year concession issued to conservancies Capital raised for community ownership of: A redeveloped tented camp A fixed lodge Concession held by private tourism operator Partnership between conservancy & new investor to manage the facilities 6 staff employed 35 local staff employed US$5,220 income per annum for the State US$39,160 income per annum for the State (N$300,000 per annum) (N$40,000 per annum) No direct income for communities US$78325 per annum paid to conservancies (N$600,000) + ownership of the assets with an expectation of dividend earnings In some cases, technical support agencies (e.g. NGOs) will have to engage with a community for several years before the community can make informed decisions to partner with the private sector in a joint-venture or as a community-based tourism initiative (i.e. where ownership is by a collective of community members). Expectations need to be managed for a significant period after the concession is awarded and the facility is being built and actually starts to generate income. A protected area authority must factor these elements into the overall concession planning timeframe. In some instances, authorities may invite NGOs to ready communities for concessioning a year or two in advance of a concession tender process (e.g. Maputo Special Reserve, Mozambique).21 Etendeka Mountain Camp Big Sky Lodges. Photo © Etendeka Mountain Camp Etendeka Mountain Camp Concessions Area. Photo © Etendeka Mountain Camp 20 Thompson, A. (2008) Concessions in Namibia’s protected areas, Presentation to the African Safari Lodges Program, The Grace Hotel, Rosebank, South Africa, 19-21 May 2008. Accessible from www.asl-foundation.org/news.php?id=241&catid=. Note: Original values in Namibian Dollar, converted using exchange rate for 1 June 2008 of 0.13054. 21 International Finance Corporation (2012) Facilitating tourism investment in the Maputo Elephant Reserve: The tourism investment generation approach, Investment Climate Advisory Services, World Bank Group. page 13 Tourists visit Maputo Special Reserve, Mozambique. Photo © Hermione Nevill Project Example: Project Example: Mozambique Community Joint Venture South Africa SANParks Chemucane; an innovative partnership for Weighting concessions procurement to the establishment of Anvil Bay Lodge in Ponta encourage community involvement23 Chemucane (Maputo Special Reserve) 22 This nature-based tourism lodge is a joint venture between In the concessions process developed by South African a private sector investor, the Bell Foundation, and a local National Parks, bids included ‘empowerment plans’ community association, Ahi Zameni Chemucane (AZC). which received 20% of the weighting during the proposal Mozambique’s government initiated the process, and reviews. Elements included were: scoped, planned and procured the investment via a 1. Shareholding by historically disadvantaged competitive tender facilitated by IFC. The communities individuals or groups. within the Chemucane were helped by an NGO to create a community legal structure that allowed them to enter 2. Training and affirmative action in employment. into a joint venture partnership with the Bell Foundation. 3. Business and economic opportunities for local The lodge is forecast to generate up to US$3.5 million communities. in annual turnover, yielding approximately US$550,000 Contracts signed by successful bidders required that they net income each year to the Chemucane community and provide SANParks with an annual report to quantifiably an expected US$550,000 in annual wages from jobs account for their empowerment activities and created. The community’s 40 percent share in the project achievements, in relation to their bid objectives. In this is funded by a zero-interest US$500,000 loan from the regard, SANParks reserved the right to impose penalties African Safari Lodge Foundation (sponsored by the Ford if concessionaires failed to meet their empowerment Foundation) and a US$500,000 grant from the Ministry obligations. Proposals received for accommodation of Tourism’s Community Equity Fund (sponsored by the concessions in Kruger National Park ranged from 7.5% World Bank). to 68% shareholding from historically disadvantaged It was the first time Mozambique had given a long-term individuals. By 2014 these concessions had achieved concession right to a community for a prime tourist site nearly 500 permanent and temporary jobs. within one of the country’s major nature reserves. The lodge was built by local communities who also operate it. The project has already created about 30 full time jobs, and helped spur growth in an area with otherwise few opportunities for formal employment. 22 International Finance Corporation (2012) Facilitating tourism investment in the Maputo Elephant Reserve: The tourism investment generation approach, Investment Climate Advisory Services, World Bank Group. 23 Spenceley, A. (2003) Tourism, local livelihoods and the private sector in South Africa: case studies on the growing role of the private sector in natural resources management. Sustainable Livelihoods in Southern Africa Research Paper 8, Institute of Development Studies, Brighton, accessible from http://www.anna.spenceley.co.uk/files/TourismLivelihoods&PrivateSectorSpenceley.pdf , pp51, and Pers Com. I Dokrat, SANParks, 2014. page 14 05 ESTABLISH MARKET VIABILITY EARLY ON Why is this Important? and moved forward, knowing that their product is competitive and meets market needs. Market viability is essential for sustainable and profitable operations. Through analysis and research, all successful A number of factors may dissuade tourists from visiting concessions programs establish market viability in the even the most pristine attraction, and a poorly performing earliest stages of development. Profitable and sustainable tourism concession won’t deliver the types of benefits or operators will have assessed supply and demand factors ‘value’ that the protected area seeks. Experienced investors evaluate a number of factors to determine viability. Before making a commitment to invest, prospective opportunities are typically scored. The most viable projects tend to do well in the following areas: Political stability Competitive business environment Uncertainty and conflict can place investments at risk, Sensible, clear taxation and labour regulations and threaten the image and saleability of a destination, and in repatriation policies encourage foreign investment, as well extreme cases threaten the security of staff and customers. as strong sector policies, clear concessions frameworks, Nearby developments and changing geographic/climactic functioning courts, as well as easiness and low administrative conditions will also be considered. costs of compliance with business regulations. Suitable attractions Protected Area Management The location must be sufficiently attractive, with a Management of the main attractions or assets is important. competitive asset base (natural beauty, wildlife populations, Successful concessions rely on regular infrastructure etc.) that meets market demand. maintenance, provision of public facilities, efficient conservation management – as well as sound financial management by the protected area authorities. Market Demand Market Supply The most idyllic concession will not be profitable if there is Many tourism operations prefer to be within a tourism insufficient demand for its attractions. Demand projections cluster or circuit to aid access, packaging, promotion, and are always calculated ahead of time. economies of scale. However, oversupply or saturation of similar products in a given area can be damaging to the environment as well as the viability of the concession. Access Infrastructure Access, both to the protected area, and to the concession Good infrastructure lowers operating costs as well as the type itself is important for both the management of the of communications available in the area (phone and internet operations, and for visitors. The more difficult or expensive coverage). Solar power and boreholes, rainwater capture, or the access, the higher the cost to the business. desalination plants might be considered for remote areas. Availability and environmentally sustainable options for garbage and sewage treatment should also be considered. An established/developing tourism industry Reasonable operating costs Most investors prefer destinations with a positive brand or This includes costs for inputs such as labour, fuel, food, image, where authorities have experience working with the utilities, and training, and standard expenditures such as private sector. This might also help lower marketing and fees, rents, and taxes. promotion costs. page 15 Project Example: Mozambique Anchor Program - Maputo Elephant Reserve24 As part of the initial Industry Demand • Tested and stimulated interest in the Elephant Analysis activity at the outset of the Reserve. program, the World Bank Group embarked • Started building a long-list of interested investors on a process of direct consultation with the and operators. tourism investment community. The Elephant Reserve concession sites were introduced Attending and presenting at international and regional tourism investment conferences provided the opportunity to the three groups identified in the Reserve’s investment to network with hundreds of potential and existing tourism strategy: international investors, regional investors, and investors in Mozambique. To complement this informal majority national investors. The team actively built and information-gathering, the team also conducted a series managed relationships with these investors, continually of formal interviews with more serious investors. updating an annotated short-list of interested parties. In addition, a quarterly newsletter was launched and The team: distributed to over 600 international investors, which • Gained a preliminary understanding of private-sector generated numerous queries and requests for further perceptions regarding business in Mozambique. information. • Increased overall awareness of Mozambique as an investment destination. 24 International Finance Corporation (2012) Facilitating tourism investment in the Maputo Elephant Reserve: The tourism investment generation approach, Investment Climate Advisory Services, World Bank Group. page 16 DEVELOP STAKEHOLDER AWARENESS 06 AND STRONG ENGAGEMENT Why is this Important? A successful and sustainable concession process identifies and engages with stakeholders early on to understand their various concerns and expectations, and works with them to ensure a project’s success. Dialogue over environmental, social, political, economic, or other concerns can help avoid problems and delays later on. Because protected areas are valuable to different groups and individuals for different reasons, effective concessions are built on shared trust and understanding among many stakeholders. A sound stakeholder engagement process is continuous It often begins before the start of a project and continues even after the project ends, and includes the following activities: • Identifying the main stakeholders. • Informing and communicating all relevant information to each stakeholder. • Consulting with stakeholders and involving them in planning discussions. • Negotiating with stakeholders over sensitive issues in complex projects. • Involving stakeholders and reporting to them to keep them abreast of developments. ‘Local community at Chemucane, Maputo Special Reserve, Mozambique Photo © Hermione Nevill page 17 Figure 5: Key elements of stakeholder engagement25 Stakeholder Information Identification and Disclosure Analysis Communicate information Invest time in identifying to Stakeholders early and prioritizing in the decision-making stakeholders and assessing process, in ways that their interests and are meaningful and concerns. accessible, and continue this communication throughout the project life. Management Functions Stakeholder Build and maintain sufficient Consultation capacity within the company Plan out each consultation to manage processes of process, consult inclusively, stakeholder engagement, document the process and track commitments and communicate follow-up. report on progress. good stakeholder engagement Reporting to Negotiation and stakeholders Partnerships Report back to stakeholders For controversial and complex on environmental, social and issues, enter into good faith economic performance, both negotiations that satisfy the those consulted and those with interests of all parties. Add value more general interests in the to impact mitigation or project project and parent companies. benefits by forming strategic partnerships. Stakeholder Involvement in Grievance Project Monitoring Management Involve directly affected Establish accessible and stakeholders in monitoring responsive means for project impacts, stakeholders to raise mitigation and benefits, concerns and grievances and involve external about the project monitors where they can throughout its life. enhance transparency and credibility. TABLE 2: The seven main types of concession stakeholder and their roles26 Type of Stakeholder Role in the Concession Process National or local government/politicians To ensure that the proposed concession satisfies all local and national legal requirements and meets the needs of their constituents. To initiate and guide the legal process of concessioning. Protected area authorities To ensure that the concession does not undermine conservation of the natural and/or cultural asset, and that it contributes financially to the management costs. Private sector (including tourism and other Will seek to benefit from the concession (directly or indirectly) and ensure that the concession does sectors) not harm their interests. Local communities, individuals, action groups, To ensure the concession improves the livelihoods for present and future generations, and does not leaders, landowners, etc. harm their environment or way of life. Civil society organizations and groups with To represent the views of groups with less of a voice (marginalized communities) or no voice special interests (wildlife, environmental issues). Academic community To provide advice on regional studies or of concessions in other locations. Development community (including donor To provide funding and technical support, which may include advising on poverty reduction and development agencies) initiatives, sustainability, and environmental protection. 25 Adapted from IFC (2007) Stakeholder engagement: A Good Practice Handbook for Companies Doing Business in Emerging Markets, International Finance Corporation, Washington DC, pp13, accessible from http://www.ifc.org/wps/wcm/connect/938f1a0048855805beacfe6a6515bb18/IFC_StakeholderEngagement.pdf?MOD=AJPERES 26 IFC (2007) Stakeholder Engagement: A Good Practice Handbook for Companies Doing Business in Emerging Markets, International Finance Corporation, Washington DC, pp 10, accessible from http://www.ifc.org/wps/wcm/connect/938f1a0048855805beacfe6a6515bb18/IFC_StakeholderEngagement.pdf?MOD=AJPERES page 18 ENSURE CONCESSIONING IS SUPPORTED 07 BY A SOUND CONCESSIONS FRAMEWORK Why is this Important? what is a concessions framework? The more robust and transparent the concessions It is the essential underlying architecture that framework, the more successful and sustainable the enables a concession to be awarded and operated. concessions will be. When this framework is weak, changes It includes, but is not limited to, the legal and to national policy or legislation that governs concessions regulatory structure, and may also encompass may be required before beginning a concessions program. the governance and institutional set-up, as well as Making an accurate assessment of the weaknesses, how practical tools and guidelines for implementation. much work needs to be done, and the likely impact of these changes, will help to determine the type of intervention necessary, and the type of advisors that may be needed. Strong Concessions Frameworks are clear, Lawmakers may also consider competition principles. transparent and legally robust Competition law helps promote and maintain fair A supportive concessions framework is always clear and is competition in national markets, protecting consumers and based on sound foundational laws; it is supported by diverse ensuring entrepreneurs can compete freely in the market stakeholders who have also had input; it is implementable economy. Competition principles vary between jurisdictions through well aligned laws, policies and regulations; and and concern state aid, deregulation, and other policies. it is a living framework that is monitored, evaluated and In concessioning, competition issues include exclusive modified, as necessary. Strong legal frameworks for rights of access for a specific area, extension or expansion concessions have three broad dimensions:27 of a concession and incentives for tourism concessionaires International conventions: Such as the World Heritage to behave competitively. Convention, Convention on the International Trade of Endangered Species, and the Convention on Biological Project Examples: USA and South Africa Diversity outline commercial activities permitted at World Heritage Sites. Global conventions and guidelines influence and inform national policy and legislation. USA: The 1998 Concessions Management Improvement Act improves concessions and increases competition. 1. Concessioning Policy framework: Reflects the The National Park Service has since enacted management protected areas’ Strategic Vision, and sets out the and implementing policies that guide its operations objectives, context and conditions for concessioning. concerning private sector concession contracts.28 Sound policies address the public interest and respond to collective needs on particular issues (e.g. poverty South Africa: The Public Finance Management Act reduction, land tenure, income generation, etc.), regulates all public private partnerships, including and provide guidelines and procedures for effective concessions. South Africa has progressively increased implementation. Policies are not legally binding. the number of PPP transactions covering a wide range 2. Concessions Legislation: Laws and regulations of sectors, including transport, office accommodation, provide the legal basis for concessioning. Laws healthcare, eco-tourism, social development and can take the form of a Concessions or PPP law, correctional services. The National Treasury has developed amendments to pre-existing laws (land law, tourism a toolkit for implementing PPPs in state controlled game law, investment law, etc.). The most effective reserves and national parks.29 All agreements require laws provide general principles without being too National Treasury approval and a defined process must explicit. They provide the mandate and framework be followed. Integrated into the process is the Broad- for commercial activities including contract Based Black Economic Empowerment policy, which duration, protection of biodiversity, rights of the concessionaire, etc. Based on this, the government prioritises economic opportunities for the historically or the protected area authority may then develop disadvantaged.30 sets of regulations that explicitly describe the process, procedures and details. 27 Casimiro, R. (2012) Legal frameworks for concessions: Review of legal frameworks globally and in Southern Africa, Presentation made the ‘Concessioning tourism opportunities in conservation areas and maximising rural development; workshop, 19-22 March 2012, Indy Girrasol, Maputo, Mozambique, available at http://www.slideshare.net/AnnaSpenceley/review-of-legal-frameworks-globally-rita-casimiro 28 Wyman, M., Barborak, J. R., Inamdar, N., and Stein, T. (2011) Best practices for tourism concessions in protected areas: A review of the field, Forests, 2, 913-928. 29 www.gtac.gov.za/publications/toolkits 30 National Treasury (2004) Public Private Partnership Manual: National Treasury PPP Practice notes issued in terms of the Public Finance Management Act, National Treasury PPP unit ; Davies, R. (2010) CIA Post completion monitoring, South African National Park (Project ID9907), IFC internal report. page 19 08 RELY ON ROBUST MANAGEMENT PLANS Figure 6: developmental steps Why is this Important? A protected area management plan is a blueprint for the way a protected area will be run, covering both 6. Development day-to-day and long-term operations. Management of options to achieve the vision plans specify the type and degree of resource and objectives, including management needed to assure the ecological zoning 5. 7. integrity of the protected area and the protection of Development Preparation of the its resources. management of a draft vision and management objectives plan Investors value management plans and their consistent and effective implementation 4. 8. Identification Public Robust plans send a message that the management of the of threats, consultation constraints and on the draft destination has been thought through, has stakeholder opportunities buy-in, and that its resources are managed. This all reduces the risks for investors. With a management plan in place, it is less likely that ad-hoc decisions can be taken in response 9. 3. Assessment to external pressure. Successful concessions are generally Evaluation of of comments, information found in protected areas that are well researched and collected revision of the draft plan managed, and strategically planned for tourism. Robust Management Plans often account 10. for tourism activities 2. Approval of Data collection the plan Good management plans typically provide the context for tourism, including concessions, and highlight the specific areas that are zoned or allocated for tourism. 11. 1. 5-10 year Zoning guides the spatial distribution of concession Pre-planning period and scoping implementing sites, providing protection for critical habitats and the plan ecosystems. Zoning also separates conflicting human activities, allows reasonable human uses while protecting natural or cultural qualities, and allows damaged areas to Project Example: recover. Some plans may include descriptions of the type Mozambique and location of tourist facilities. Within management plans, authorities use visitor planning The Quirimbas National park, located in northern tools to determine the scope of tourism activities. Mozambique and stretching for more than 100 Approaches include: limits of acceptable change; visitor kilometers along the country’s coastline, implemented a management plan and a tourism development plan impact management; and defining sustainable tourism in 2009. The tourism plan includes information on indicators for destinations as described in the IUCN Best the status and projections of tourism in the park, and Practice Guidelines on Tourism and Visitor Management also outlines a phased tourism development strategy in Protected Areas.31 for accommodation, attractions, and excursions. This includes maps of the park, potential locations for future tourism concessions, and fees charged for tourism. Plans are produced by the protected area authority The plan also includes an entire volume on guidelines for and are generally updated every five to ten years. tourism development and operations in the park, with considerations for environmental management, transport The process of developing a management plan generally and access, and local economic linkages. The plan provides entails the following steps:32 a solid basis for any future concession planning.33 31 Leung, Y-F., Spenceley, A., Hvenegaard, G., and Buckley, R. (2016) Tourism and visitor management in protected Areas: Guidelines for sustainability, 3rd Edition, IUCN, Gland. 32 Thomas, L. and Middleton, J. (2003) Guidelines for management planning of protected areas, Best practice protected Area Guidelines Series No. 10, Cardiff University and IUCN, pp23-25. 33 National Treasury (2004) Public Private Partnership Manual: National Treasury PPP Practice notes issued in terms of the Public Finance Management Act, National Treasury PPP unit ; Davies, R. (2010) CIA Post completion monitoring, South African National Park (Project ID9907), IFC internal report. page 20 09 SELECT THE APPROPRIATE MODEL Why is this Important? A concession model is the legal and financial structure under Choosing the right concession model will help ensure a successful concessioning which the concession will be process and maximize the socio-economic benefits expected from tourism. owned and operated. While Effective programs understand the implications of each type of concession usually categorised as a form of model (the level of control and responsibility, risk transfer, revenue sharing, Public Private Partnership (PPP), community participation, etc.) and select the most appropriate for the context. there are a number of different The best model will depend on the objectives of the protected area authority, the concession models that can be level of risk they are willing to incur, and the legal framework. applied within this spectrum. Roles and responsibilities vary between the different models Concessions are just one type of public private partnership that can be used to encourage private participation in tourism services. TABLE 3: Three common models used for private sector participation in protected areas Contract Description Duration Functions transferred Payment name to a private operator Mechanism Concession The Authority awards long-term user-rights 10 – 40 years. Design, rehabilitate, extend or Private operator to a third party (private owner or owner/ Concession build, finance, maintain, and pays a fee to operator, or community group) to build and periods vary operate - typically providing government manage a tourism facility. In some cases the greatly for services to users/tourists. The (could also concessionaire can sub-lease the facility to an different facility is usually transferred include share of operator or management group. countries. back to the concessioner revenue). The concessionaire has responsibility for all (authority) at the end of the investment and is usually accountable for concession period. management of the facility. Lease The Authority creates a lease agreement with Typically more Maintain and operate, Private operator the private concessionaire. Private operator than 5 years. providing services to users. pays a fee to thus leases facility (pays rent) and assumes full government. operating responsibility, with the government typically remaining responsible for capital expenditures on assets. Management Government enters into an agreement with a Typically less Manages a range of specified Government Contract private operator to manage an existing tourism than 5 years. activities. pays the private facility and pays the private operator a fixed operator a fixed management fee based on performance. management fee. For example, management of existing There may also accommodation, restaurant or retail facility. be a performance Can include responsibility for operations and based fee. maintenance of assets (O&M Contract), but typically government remains responsible for all investments. Concessions are by far the most common model in protected areas, with some lease arrangements where existing authority-owned infrastructurealready exists. All models mean sharing risks and rewards to deliver the tourism product. Inexperienced authorities might grant the private sector more responsibility; confident authorities might take on a greater role. Whatever the arrangement, a successful agreement should last long enough for the investor to generate a reasonable return. page 21 There are different types of concessionaires Bodies that enter into concession agreements with protected area authorities are usually private entities, but can also be public or quasi-public, community associations, or combinations of any of these – such as private-community partnerships. Figure 7: examples of different types of tourism concessions Protected Area concessioning authority Authority community concessionaire private sector public entity partnership association private sector operator facility operation or partnership A large number of concessionaires both build and operate the associations or other organizations have taken on the role facility, but in some cases, usually where the private sector is of management, but this is unadvisable given the recorded not the concessionaire, there will be a different entity given low level of sucess. The main purpose for concessioning the responsibility to manage the concession development or should be to bring private sector expertise in operating and existing tourism facilities (under a management contract or marketing to better manage tourism as a revenue generating a lease). There have been cases in the past where community activity for the protected area. Examples of institutional arrangements in South African tourism concessions Photo © Singita Lebombo Lodge. Photo © Wilderness Safaris, Rocktail Beach Camp. Photo © Credit: Buffalo Ridge Safaris. Private Sector owner and Joint Venture owned, Community owned, privately operator privately operated managed Singita holds a concession from the Rocktail Beach Camp is operated by Thakadu Lodge and Buffalo Ridge protected area authority SANParks Wilderness Safaris and leased by a Lodge in Madikwe Game Reserve, in Kruger National Park, and also joint-venture (JV) from iSimangaliso are both owned by communities manages the lodge (Singita Lebombo) Wetland Park. The JV is made up of (Batlokwa and Balete respectively), under their own brand. Wilderness Safaris and a Propriety on land leased from the North West The concessions agreement includes Limited Company (PTY). The PTY Parks and Tourism Board (NWPTB). environmental and socio-economic is made up of Wilderness Safaris The facilities are sub-leased to the requirements, including local and the KwaMpukane Community Madikwe Collection (private operator) procurement and employment. Singita Trust (50 percent each). 8.5 percent who manages and operates the pays a minimum fee or a percentage turnover is paid to the iSimangaliso enterprise.36 of revenue (if higher) to SANParks.34 Wetland Park Authority, with 8% of rent given to community. The Joint-venture also developed iGugulesizwe community centre with various tourism tours and accommodation outside the reserve.35 34 SANParks (2011) Request for qualifications issues by South African National Parks in respect of the proposed public private partnership project for the Nwanetsi concession in the Kruger National Park, Accessed from http://www.sanparks.org/docs/groups_tenders/2011/nwanetsi/rfq-nwanetsi.pdf on 27 March 2015 and Department of Environmental Affairs and Tourism (2007) National Assembly, Question no. 1213, Internal Question paper no. 25 of 2007, Accessed from https://www.environment.gov.za/sites/default/files/parliamentary_updates/question1213.pdf on 27 March 2015 35 Spenceley, A. (2008) Rocktail Beach Camp, Presentation at the African Safari Lodges practitioners workshop, The Grace Hotel, Rosebank, South Africa, 19-21 May 2008. 36 Massyn, P. J. (2008) Madikwe Community Lodges: Thakadu River Camp, Buffalo Ridge Safari Lodge, African Safari Lodges practitioners workshop, The Grace Hotel, Rosebank, South Africa, 19-21 May 2008. page 22 The type of concession model, and the types of concessionaire (investor) in advance, in order preferred concessionaire arrangements are to better target their offer when it comes to taking the decided in advance opportunities to market. When deciding the best strategy to take, successful Legal, financial, social, and environmental protected area authorities use their primary objectives, responsibilities of concessionaires vary the projected viability of concession sites, investor There is a broad range of options for the type and appetite and their Park Management Plans. extent of responsibilities placed on a concessionaire. The These considerations have an impact on the preferred responsibilities relate to the priorities of the particular model and concession arrangements. In the most effective protected area authority, the investor, and the specific concessions programs the authority predetermines the concession. page 23 EMPLOY TRANSPARENT AND CLEAR 10 PROCUREMENT PROCEDURES Why is this Important? Good procurement processes: The most successful concessions regimes employ transparent, well planned, and often competitive processes that result in a balanced deal, a qualified investor, and a viable, sustainable project. These Engage an ‘procurement’ procedures can make or break a Are transparent, experienced fair, and well concession team concessioning process - and the reputation of the governed; with clear roles protected area authority. and responsibilities A well-designed competitive procurement process should Outline clear result in the identification of competent concessionaires selection criteria that can develop a tourism concession in the most for awarding the concession effective and efficient way - both from a technical, and value-for-money perspective.37 A well designed process should result in: • An agreed contract. Are short and Are competitive • A satisfactory deal and solution for both the cost effective protected area authority and investor (relating to the costs, benefits, and opportunity costs). • Strong environmental and socio-economic benefits that are agreed. • A contract period that is sufficient for the investor Authorities make key decisions depending on the needs to make a return on their investment and provides of all parties: security over the term of the agreement for both sides. When designing a competitive procurement strategy, the authority will define key elements of the process:38 There are important best practices in • Pre-qualification: whether to use a pre-qualification developing a sound procurement process process to select a short-list of firms or consortia that will participate in the bidding process. A qualified technical team is essential. To ensure a well- governed procurement process, it is critical that qualified • Bid process: whether to use a single-stage process to and appropriate people are involved in managing the select the preferred bidder, or a multi-stage process, process all the way through. Members of the committees in which proposals and the bidding documents may set up to manage different elements (especially bid be reviewed and iterated. evaluation) should be trustworthy, technically competent, • Negotiation with bidders: to what extent discussions and fair. Establishing appropriate composition of the with bidders may lead to changes in the initial draft group, and an appropriate mix of skills and expertise, is contract: either during the bidding process (with multiple critical in ensuring an effective transaction. bidders), or after final bids have been submitted. • Basis for award: whether to rank proposals and choose the preferred bidder based on a single financial or value-related criterion (after screening for technical merit), or some weighted evaluation of financial and technical criteria. 37 World Bank, Asian Development Bank, and Inter-American Bank (2014) Public-private partnerships Reference guide: version 2.0, International Bank for Reconstruction and Development. 38 World Bank, Asian Development Bank, and Inter-American Bank (2014) Public-private partnerships Reference guide: version 2.0, International Bank for Reconstruction and Development, pp174. page 24 Direct negotiations and unsolicited proposals Direct negotiation may be preferred in some instances. (For small projects, for example, where there is limited competitive interest, or extensions of existing contracts). Direct negotiation is not necessarily faster than competitive procurement, however, and open tenders can demonstrate an authority’s commitment to transparency, and help to secure the best investor and the best deal for the project. Best practice assumes competitive and transparent procurement. There is research into how unsolicited proposals can be managed to protect transparency in the procurement process, but this is typically a difficult thing to accomplish. Methods and duration of procurement differ among Protected Area authorities The preferred procurement method used by a selection of protected area agencies is outlined below, and includes the typical duration for each process.39 Fano, member of a local guide Association, Andasibe National Park, Madagascar. Photo © Hermione Nevill Table 4: Procurement methods by a selection of protected area agencies Duration of procurement (EFFORT) Protected Area Agency Preferred method Small concession (e.g. Large concession (e.g. business license, guiding) with infrastructure development) Parks and Wildlife Service, Tasmania Unsolicited (small) 3 weeks in parks 6-18 months Tenders (large) Great Barrier Reef Marine Park Authority, Unsolicited (first come, first 8-10 weeks, 4 months for Longer (not specified) Australia serve). Expression of Interest process Parks Canada Tender 3-6 months 60 days Ministry of Environment and Tourism, Direct award to 3-12 months 12-14 months Namibia communities, tender, auction (hunting areas), direct with applicants New South Wales, Australia Tender 4-12 weeks 6-18 months US National Park Service Tender 2 years 2 years Project Example: South Africa South Africa’s Public Private Partnership manual is a It also includes templates for procurement documents, and public document, aligned with the country’s Public proposal evaluation checklists that can be used by protected Finance Management Act.40 The manual outlines the area authorities during concessioning. It gives investors clear approach to small and large capital investment projects. information on the process that will be followed. UNSOLICITED PROPOSAL DEFINITION: An unsolicited proposal is a concessions proposal received by the protected area or Government Authority outside of a formal process or request for proposal DIRECT NEGOTIATION DEFINITION: (RFP). The sponsor may have already identified a site A direct negotiation is the bilateral negotiation process or opportunity, and may be looking for a means to between a sponsor and a concessioning authority over negotiate directly. In some cases, an unsolicited proposal the terms and conditions of the concession. This process may trigger the launch of a competitive process, because requires sound legal counsel and typically takes place in it demonstrates to the authority that there is interest in the absence of a competitive process, or after an award a site, and that other bidders should also be given an has been made. opportunity to submit proposals. 39 Adapted from Thompson, A. (2009) Scan of concessions systems and best practice, The United States, Canada, Australia, Namibia and New Zealand’s fisheries management system, Department of Conservation, New Zealand. 40 www.ppp.gov.za page 25 11 HAVE EQUITABLE CONTRACTS Why is this Important? Effective contracts are comprehensive, clear, and protect the interests of all parties. Without equitable contracts, the partnership between the A concession agreement, or concessionaire and the other parties may be strained or even fail. A good contract, describes the legal rights contract might also be flexible to allow for changes in circumstance. and obligations of all signatories An effective contract achieves the right balance of responsibilities and concerning the concession. accountabilities and addresses issues important for financing (allocation of risks and rewards, transfer and assignment of rights and termination). Equitable Contracting incorporates a • All parties have signed: Sign simultaneously or sign variety of key elements last, so nothing can be changed. • Clear internal procedures and protocols: To ensure The best concession agreements stipulate all aspects related contractual compliance. to design, construction, maintenance, and performance monitoring of the concession. Successful contracting Project Example: processes incorporate the following elements:41 Mozambique • Accurate identification of the parties: The contract should identify the parties as completely as possible. Mozambique’s government added a draft partnership • Clear payment terms: The contract should explicitly agreement to the Requests for Proposals for tourist state the exact payment terms. developments in the Maputo Elephant Reserve. The bidders’ proposals had to include a schedule of proposed • Flexible covenants: Restrictive covenants should be amendments to the partnership agreement in a specified avoided if possible. Such clauses either should not format. Once a preferred bidder was selected, the extend beyond the termination of the contract or partnership agreement was negotiated. These draft should not apply if the contract is terminated for cause. contracts were developed based on best practice and • Be legally valid and comprehensive: Always ensure stipulated all aspects referred to in this section (i.e. a legal review of the contract. concession period, payments, conditions precedent, • An appreciation that there will be problems: Include design, construction and maintenance, and performance an appropriate dispute resolution processes. monitoring). The disclosure of the draft partnership agreement at an early stage of the process helped ensure • Provisions relating to defaults, opportunities to that the tender process was fair, transparent and efficient.42 cure and termination: These provisions promote performance and avoid litigation. Alleged contractual Project Example: breaches must be raised when they arise. SANParks, South Africa • Adequate negotiation: To discuss and ultimately agree upon all terms. World Bank Group best practice tries to avoid any • Clear understanding/deadlines/penalties: All parties post-award negotiation of the concession agreement, should demand explanations and seek answers to to safeguard transparency. In the SANParks process, contract queries. A timeline for project completion is bidders were issued with a draft concession agreement, imperative along with penalties. asked to mark-up the agreement and submit comments • Contract language/s and translations. If there are and invited to a bidders conference where all comments copies in different languages, only one version is a were discussed. Following the bidders conference, binding contract. SANParks issued a final bid package including a final Request for Proposal and a final concession agreement, • Boilerplate provisions. Protect the rights and privileges which was not negotiable. All bidders had to submit of the parties, like Notice Provisions, Assignment, Warranties, Indemnity, Consent to Jurisdiction, Dispute a signed agreement with their bids and the winning Resolution, Modification of Agreement. bidder’s agreement was countersigned.43 41 Grove, A. S. (1996) Only the Paranoid survive, cited in CRISIL (2013) Lesotho Tourism Public Private Partnership Contract Management Consulting, Contract management Manual and resources, Volume 2: Contract management training manual. 42 International Finance Corporation (2012) Facilitating tourism investment in the Maputo Elephant Reserve: The tourism investment generation approach, Investment Climate Advisory Services, World Bank Group. 43 Peter Fearnhead (2003), Commercial Tourism Concessions: a means of generating income for South African National Parks, Vth World Parks Congress: Sustainable Finance Stream September 2003, Durban, South Africa. page 26 12 MANAGE EFFECTIVELY BEYOND THE DEAL Why is this Important? A signed contract marks only the beginning of a partnership. Managing a contract helps ensure that a mutually beneficial, long-term relationship develops between the protected area authority and the concessionaire. Contract management recognizes the unique needs, constraints, and goals of each party, and ensures risks have been adequately transferred. The key to managing effectively beyond the original deal is regular communication. Contract management can be defined as ‘the process of systematically and efficiently managing contract creation, execution, and analysis for the purpose of maximizing financial and operational performance and minimizing risk’. Savanna Lodge. Photo © longtaildog Effective Contract Management has five In the best cases, the protected area authority produces main objectives a document that includes:44 1. A concession management manual: Includes an The duration of a concession agreement may by far exceed overview of the project objectives and concession the tenure of individual staff members in the protected team, governance, communication and meeting area authority or the concessionaire enterprise. Effective plans, issues relating to construction, payment, management during this period is critical to the long- performance, and risk management. lasting and mutual success of the partnership. Relationship 2. A contract management plan: Outlines the contract management and institutional memory are vital. Contract implementation schedule through the development, management over the lifecycle of a concession has five operation and exit phases. It includes the strategic main elements, as outlined below: objectives and key deliverables, transition, relationship, and service management, contract administration, contingency plans, exit strategy and Objectives of Contract Management implementation plan. Engaged and efficient contract managers are key resources to protected area authorities45 To manage the partnerships and They will possess a variety of skills, including those that 1 establish good working relationships. focus on contract and project management, and on legal, analytical, financial, and business issues. They might also display skills in market evaluation, environmental/ To define roles, responsibilities and heritage, and infrastructure and support. Other important 2 protocols. traits for an ideal contract manager include: • Ready to engage specialists on contract management To measure performance and results (including legal expertise). 3 against required objectives. • Institutional training at functionary level for the effective implementation of concession operations. • Understanding of the tourism industry management To enable administrative processes 4 required for effective management. issues and economic realities of concession operations. • Knowledge of the organizational policy of the To react in timely fashion, manage protected area authority. 5 variations and settle disputes. • Ability to interpret and implement national legislation relating to tourism concessions. 44 CRISIL (2013) Lesotho Tourism Public Private Partnership Contract Management Consulting, Contract management Manual and resources, Volume 2: Contract management training manual. 45 Varghese, G. (2012) Concessions processes: Public private partnerships, South African National parks; Pawliczek, M. (2012) Concessions management in Madagascar., and Rodrigues, A., and Booth, V. (2012) Tourism concessions management in Niassa National Reserve: The combined roles of governance, monitoring and research, 2000-2012; All presentations made during the ‘Concessioning tourism opportunities in conservation areas and maximising rural development; workshop, 19-22 March 2012, Indy Girrasol, Maputo, Mozambique, all accessible at http://www.anna.spenceley.co.uk/presentations.htm#.U0aG51xuHwI; Buckley, R. and Sommer, M., (2001) Tourism and protected areas: Partnerships in principle and practice, CRC for sustainable tourism, accessible at http://www.sustainabletourismonline.com/12/natural-protected-area-assets/tourism-and-protected-areas-partnerships-in-principle-and-practice: pp21-31 page 27 Project Example: SANParks, South Africa SANParks Approach to contract management: ‘Not one • Resources are established at inception stages to of us is as good as all of us!’ ensure management in a highly effective, efficient and professional manner. SANParks has high risk projects with large capital investment, and a small, strong contract management • Combination of project management, legal, function with specialist expertise (legal, environmental) analytical, financial, business acumen, market where necessary for contentious issues. Contract evaluation, environment/heritage, infrastructure and support skills. Management issues are given priority in the organization with established mandates, and responsibilities and • An understanding of tourism industry management accountability are fully identified. Their management and tourism industry management and economic framework allows for consistency in their approach to all realities of concession operations. PPP projects. • Knowledge of organizational policy. They have: • Ability to interpret and implement PPP legislation. • A formal and systematic monitoring system: • Negotiation and contract management skills. • Repeated measurement of selected variables The results? to detect changes. The organization has an effective enforcing legal • Comparison of actual performance and mechanism and a good understanding and consideration compliance with agreed levels and standards. of the complexities. Their consistent approach has allowed • Provision of early indications of progress them to be firm but fair-minded and flexible where or lack thereof in the achievement of necessary, and an overall integrity in the process has paid commercialization objectives. off in securing private investors.46 46 ‘Concession Contract Management & Monitoring’ Presentation: Sept 2014, SANParks. page 28 13 MANAGE RISK Why is this Important? Risk management is the forecasting and analysis Risks are associated with all concessions programs. Successful concession regimes of potential financial and practise effective risk management by identifying, mitigating, and monitoring risk through stakeholder engagement, site assessments, regular reporting, adequate non-financial risks, and due diligence, and employing experienced/reputable technical personnel. identifying procedures to mitigate or eliminate their impact. Risks can arise Adequate identification of those risks, and planning responses, can make the at the local, national, or difference between success and failure. Risks can lead to costly delays, work international levels and be stoppages, threats to the operation, negative publicity, and reputational harm. either internal or external to Tourism concessions face a multiplicity of risks, especially those based in regions a tourism project. with weaker legal or political or systems, or in areas vulnerable to extreme or unpredictable weather conditions. A few of the more important risks tourism concessions might face are listed below: Figure 8: Risks faced in tourism concessioning Financial An inability to secure capital for investment, or to make payments to the contracting authority. Currency External fluctuations also pose a risk. National or international financial or security crises, among others. Political Political interference, unrest, or sudden policy changes towards Social concessioning. Local community members are unhappy with the project and pose a Environmental risk to the investment. The prevention or mitigation of risks from construction and/or operation of a tourism site or deriving from other developments in the region incompatible with conservation objectives. Kruger National Park, South Africa. Photo: © Hermione Nevill Applying Risk Management to Tourism Concessions Sound risk mitigation systems establish standards, and identify and monitor changes in those standards throughout the life of a tourism concession. Managing risk might require additional external support from specialists. The IFC’s Sustainability Policy identifies eight broad areas of performance standard monitoring:47 • Standard 1: Environmental and social risks and impacts. • Standard 2: Labour and working conditions. • Standard 3: Resource efficiency and pollution prevention. • Standard 4: Community health, safety, and security. • Standard 5: Land acquisition and involuntary resettlement. • Standard 6: Biodiversity conservation and sustainable management of living natural resources. • Standard 7: Indigenous peoples. • Standard 8: Cultural heritage. 47 IFC (2012:4) Performance Standards on Environmental and Social Sustainability are available from http://www.ifc.org/wps/wcm/connect/c8f524004a73daeca09afdf998895a12/IFC_Performance_Standards.pdf?MOD=AJPERES page 29 Project Example: Managing Environmental risk in South Africa South Africa: Concessionaires in Kruger National Park undertook Environmental Impact Assessments as part of their infrastructure development planning. Environmental Management Plans were also devised for the construction and operational phases of the concession, which provided the basis for monitoring compliance with environmental standards. Monitoring targets were established in relation to the length of new roads developed, the number of beds, water consumption, waste production, and specific game drive guidance (e.g. minimum approach distances for Big Five wildlife). Concessionaires employed environmental control officers to monitor and report on environmental impacts. Stiff penalties were applied for every incidence of non-compliance with the environmental conditions of the concession agreement.48 Tourists explore buffer zone, Isalo National Park, Madagascar. Photo © Hermione Nevill 48 Spenceley, A. (2004) Responsible nature-based tourism planning in South Africa and the commercialisation of Kruger National Park, In Diamantis, D. (ed) Ecotourism, Thomson, pp 267-280. page 30 14 CONTINUALLY EVALUATE PROGRESS AND ADAPT Why is this Important? Monitoring and Evaluation (M&E) is essential to understanding the impact and Monitoring and evaluation performance of a concession. In the long term, M&E “provides government officials, (M&E) involves learning from development managers, and civil society with better means for learning from past experience, adapting to experience, improving service delivery, planning and allocating resources, and changing conditions, updating demonstrating results as part of accountability to key stakeholders”.49 A thorough practices, or implementing new M&E program helps answer the questions: Has concessioning been a success? ones, when necessary. What can be done better next time? Effective concessions are effective because they almost always modify or update their approaches or systems. M&E helps track progress in line with the concession Both the authorities and the private sector have M&E agreement, and identify any discrepancies early on. responsibilities. The findings can later be used to adapt concession The protected area authority is the ultimate entity processes (e.g. where particular issues arise or where the responsible to ensure that the objectives and specifications financial revenues are substantially different to what had of the concession agreement are met. However, been anticipated).50 monitoring is often also the private sector’s role. Reports M&E can assess the: on their performance should be regularly provided to the • Efficiency and cost-effectiveness of the authority as specified in the concession agreement (for concessioning process. example, water use, or community benefits). • Impact of the concession (economically, socially, environmentally, politically). • Performance of the concessionaire to meet its contractual obligations. • Opportunity cost of alternate development options (other than concessionning). • Success of a commercialisation strategy within protected areas. 49 World Bank (2004:5) Monitoring and Evaluation: Some Tools, Methods and Approaches. World Bank: Washington. 50 World Bank (2004:5) Monitoring and Evaluation: Some Tools, Methods and Approaches. World Bank: Washington. page 31 AN INTRODUCTION TO TOURISM CONCESSIONING: 14 CHARACTERISTICS OF SUCCESSFUL PROGRAMS The World Bank Group 1818 H Street, NW Washington, DC 20433 USA Tel: (202) 473-1000 Fax: (202) 477-6391 With support from: