Building local business linkages is a way to demonstrateyour commitment to the local economy, and at thesame time develop your business. Companies thatdevelop local products, procurement, and partnershipscan benefit in many ways. They win local recognition,social licence to operate, enhanced staff morale,greater customer satisfaction, stronger branding andpoints on the Tourism Scorecard.

There are myriad ways tourism businesses can create mutuallybeneficial linkages with local communities or entrepreneurs.The common principles is to go beyond making donations,and invest in doing business differently for mutual benefit.

Doing business differently means adjusting your operatingpractice so that commercial goals are achieved, but at thesame time more local impact is delivered. For example, guestsare served tomatoes, but local farmers earn the income; a newlodge is built, but co-investors are communities; the productoffering is expanded to include traditional refreshments and

cultural events, and local entrepreneurs gaincustom and marketability. The company and thelocal economy thrive together.

In collaboration with:Tourism Business Council of South AfricaThe Department of Trade and IndustryThe Department of Environmental Affairs and TourismFunded by: International Finance CorporationSupported by: Spier Leisure and Wilderness Safaris

Written by Caroline Ashley, Clive Poultney, Gareth Haysom, Douglas McNab and Adrienne Harris.Photographs courtesy of: Caroline Ashley, Clive Poultney, Fair Trade in Tourism South Africa, Umngazi River Bungalows and Jan Harmsgat Country House.

Produced by:Overseas Development Institute

Business Linkages in Tourism

How to…?Tips and tools for South Africantourism companies on local procurement, products and partnerships.

ExecutivesummarySeptember 2005

Department:Trade and IndustryREPUBLIC OF SOUTH AFRICA

the dti

Department ofEnvironmental Affairs

and Tourism

Investing in local linkages -a win-win

Fresh local vegetables at Umngazi River Bungalows

Sangoma Safaris in Maputaland

What this brief provides This brief outlines ways in which tourism companiescan increase their contribution to the localeconomy and, at the same time, enhance theirbusinesses. It is a summary of four “How To…?”briefs. These provide more detailed information,not only on what companies can do, and why, buthow they can do it.

Although many tourism companies makesubstantial charitable donations to local causesfrom their pre-tax profit, these are entirelyseparate from day to day business and are not self-sustaining. On the other hand, the local linkagesoutlined here harness the core competencies ofbusinesses to create and maintain sustainabler e l a t i o n s h i p s w i t h l o c a lcommunities.

Perhaps your company has apolicy statement relating toloca l benef i t f rom thei renterprise, but has not yetprioritised what mechanism touse. Perhaps priorities havebeen set, but implementationis proving to be a challenge.Many industry leaders realisethe need to deliver more, butneed help to realise their goals– to figure out what works andwhat doesn’t. The “How To…?”series can help.

The four briefs in the series are:

1. Boosting procurementfrom local businesses

2. Stimulating local culturaland heritage products

3. Building local partnerships

4. Setting corporate priorities and managing internal change.

Copies are available, free of charge, from Business Linkages in Tourism.Contact Adrienne Harris, bizlink@tbcsa.org.za.

Three core principles forcompanies investing inlinkages

• Innovate. Be prepared tothink, and do business,differently

• Protect the core business.Find linkages that makelong-term business sense

• Work inside and out.Support localentrepreneurs, butcarefully manageinternal change in theway business is done.

Growing lettuces for Sun City

The Business Operation

Local cultural and heritageproducts, tourism SMMEs

Local restaurants, bars,crafts, retail outlets

Local partnerships andoperational agreements• equity partners• residents• SMMEs

Local entrepreneursSupply of goods and services

Training, recruitment andpromotion of local staff

Accommodation

Staff

SupplyChain

Excursions andactivities

Tourist shoppingand eating

To

ur

is

t

Tour OperatorsGround HandlersThe channel

Local Linkage

SMMEs: small, medium and micro enterprises

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Different types of local linkagesProcurement from local enterprise

Procurement is often a missed opportunity tostimulate the local economy, as most tourismcompanies tend to deal with large, possibly distant,well-established suppliers. Procuring goods andservices, instead, from businesses that are small,black and local can transform the local economy.

Many potential local suppliers are ‘survivalist’ –operating under such constraints that theentrepreneurs do not earn a decent living fromthem. But if they can secure new contracts, upgradeproduction, and invest in expansion, the businessescan thrive, which in turns creates further locallinkages and growth. The potential for job creationis considerable.

While changing procurement practices is neitherquick nor easy, in the right circumstances it can be

an effective way tog a i n l o c a l s o c i a llicence, diversify theproduct , inc reasecustomer satisfaction,decrease operatingcosts, and/or performbetter on the TourismB l a c k E c o n o m i cE m p o w e r m e n tScorecard.

Local staffing and wages

As a rule, the greatest cash flow into a localcommunity from a tourism business is in the form ofwages of local staff, but the sector is known forpaying low wages. In many operations, the biggestsingle increase in community cash flow could beachieved by ensuring all employees receive a livingwage.

Other ways of extending employment benefits tolocal communities include reviewing recruitmentpractices to increase opportunities for localapplicants, and investing more heavily inappropriate training of semi-skilled local staff.

Local cultural and heritage products

Cultural and heritage products make a southernAfrican trip unique and memorable for tourists.They provide the word-of-mouth stories that bringreturn guests, and they can draw an ever- wideningrange of South Africa’s population into the tourismindustry. They are also a key way for companies todiversify their product and stimulate the localeconomy.

There is a vast amount that established tourismbusinesses can do to help local cultural products andbusinesses thrive, such as developing anarchaeological excursion for guests in partnershipwith local residents, supporting a local dancefestival, providing business and marketing advice toa music business, training local guides as specialistsin local history and environment, or integratinglocal crafts into hotel furnishings.

A tourism destination that thrives on local cultural products will open up many opportunitiesfor local people. Of course disadvantaged SouthAfricans must not be pigeon-holed into one corner of the tourism industry but, if the cultural and heritage products are not developed to ful l potential , myriad entrepreneurialopportunities will be closed off to those who couldmost benefit from them.

Building local partnerships

Partnerships at the local level are about tourismcompanies delivering economic and social benefitsfaster, to a higher quality, to a broader number ofpeople or more sustainably, than could be achievedby acting alone or through conventional contractualor consul tat ive re lat ionships . Innovat ivepartnerships between tourism business and localcommunities can link the ‘first’ and ‘second’economies to the benefit of both.

In a partnership or joint venture both parties usuallyhold equity, but there is a range of options that mayinclude elements of business partnership, alongwith other operational agreements.

A defining feature of partnerships is that bothpartners share risks and benefits. In this way it isdifferent to conventional stakeholder consultationor local charity.

A new local laundrybusiness servicingSpier Hotel

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The core reason is to boost the local economy, while also bringing numerous and varied long term benefits to your business.

1. Improved customer satisfaction

C u s t o m e r s a t i s f a c t i o nemerges as the top-rankedbusiness benefit identifiedby owners/managers oftourism operations that arestrongly committed to locallinkages.

2. Enhancement of brand and USP

Competitive advantage isg a i n e d f r o m a m o r ed i s t i n c t i v e p r o d u c t .Companies that invest locallystand out from others.

3. Greater local support and social licence to operate

Local residents will be thefirst to see how a businesscontributes to the economy.This in turns reduces localrisk and crime, opens newopportunit ies for localproduct development, andtranslates into constructiverelations with local municipalities.

4. Staff morale and improved service

When local staff see thecompany delivering for theircommunity, it increases staffmorale, resulting in improvedcustomer service and guest satisfaction.

5. Diversification of product

Local linkages can increasethe range of available guestactivities, for example, visitsto local artists, communitytours, and trips with localguides. These all add to thetourist experience. Qualitylocal products - soaps, cards,decor - can add flair anddistinction.

Ten top reasons to invest in building local linkages

Customers ask about company practice and like to learn about how ruralwomen with little schooling became chefs and administrators at JanHarmsgat Country House, about how the community campsite was set upat Mbotyi River Lodge, how Wilderness Safaris co-owns lodges with the localcommunities, and what FTTSA accreditation means at Shiluvari LakesideLodge, Spier, Stormsriver Adventure and others. Customers enjoy the fruitsof partnerships – quite literally watching the local vegetable sellers bringtheir donkey carts to the back door at Umngazi River Bungalows.

For Stormsriver Adventures, the emphasis on local job creation is a core partof the brand, of customer satisfaction, marketing, and of close relations withthe community.

At Mbotyi River Lodge, substantial support from the widercommunity is seen in the fact that there has been a ‘huge change’ incrime levels. In the past, even a sock on the washing line was liableto be stolen. Since a community partnership was established, therehas been no burglary at the campsite for 2 years, and the lodge had14 months solid without any theft.

At Umngazi River Bungalows, which sources all its fruit and vegetableslocally, and contracts services from over 80 local suppliers, good staffmorale drives high quality service. This results in high customer satisfactionand, consequently, high occupancy rates (averaging over 95% in 2004,with over 80% of guests being returning visitors).

At Shiluvari Lakeside Lodge, where guests are encouraged to visitlocal artists at work, and local culture is profiled, occupancy hasincreased 25% in the last three years. Shiluvari managementbelieves their approach has led to improved staff morale andenhanced visitor experience. Their subsequent Fair Trade in Tourismcertification results in increased recognition from local stakeholdersand the wider industry.

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6. Industry awards and recognition.

Awards bring coverage andadded credibility.

7. Word-of-mouth marketing and media coverage

Contact with local peopleprovides the stories people tell – to friends or readers.

8. Preferential recognition and increased scores on the Tourism BEE Scorecard

Preferential recognition from government and increased scores on the Tourism BEE Scorecard can resultin greater success in acquiringconcessions or licences, and insecuring business from local ornational government forconferences and corporateaccommodation.

9. Access to responsible financing

Institutional lenders, such asI n t e r n a t i o n a l F i n a n c eCorporation, DevelopmentBank of Southern Africa and,increasingly, some commercial lenders and individual investors, focus on responsible businesspractice in their deals.

10. Improved corporate governance and organisational development

Working out how to boostlocal linkages has knock-oneffects that improve otheraspects of the business – suchas how procurement works,how staff partic ipate inprocesses, or how new products can be brought on stream.

Damaraland Camp, a partnership between Wilderness Safaris and theTorra Conservancy in northwest Namibia, won a 2005 WTTC (WorldTourism and Travel Council) Tourism for Tomorrow Award. Wilderness’Rocktail Bay Lodge won an award for best community practice at the

WSSD (World Summit on Sustainable Development) in 2002.Jan Harmsgat Country House and Old Gaol Coffee Shop, theirpartner, jointly won the Western Cape Award for Entrepreneurof the Year in 2003, which led to a substantial rise in newbookings. Mbotyi River Lodge has its Imvelo Award sitting in thebar, where it is a frequent topic of conversation.

Spier estimates that their Fair Trade in Tourism certification has ledto over 52 mentions in print between October 2003 and end 2004.The value of this coverage for 2004 was over ZAR300,000.

The new Tourism BEE Scorecard recognises activities that supportlocal enterprise (enterprise development), support communityinitiatives (social development) or increase affirmative procurement.

Both Wilderness Safaris and Spier are clients of IFC (International FinanceCorporation), which emphasises responsible business behaviour in its deals.

“Going through the [FTT] accreditation process was very useful.It made us focus on new issues and debate them.” (PaulMiedema, Calabash Tours, and winner of InternationalResponsible Tourism awards)

An award-winning partnershipat Old Gaol Coffee Shop

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1. Put local linkages on the corporate agenda andmake them a priority. Just starting a discussiongets people thinking – and changing. Oncelinkages are a priority, then resources,opportunities, and finding ways aroundproblems will follow. Think beyond donationsto how business practice can be changed andleveraged for local gain.

2. Match local linkages to corporate drivers ofchange. Appraise the drivers of your business,and work out where local business linkages can– with some lateral thinking – meet your longterm needs. Turn current challenges intoopportunities and energy for change. Ifessential services are getting pricey, don’t justrenegotiate; consider how to restructure andre-tender them to empower local people.

3. Combine innovation with protection of thecore business. While innovation carries risks,don’t undermine the business core. Keep newproducts as an optional add-on until quality isassured. Set clear terms for suppliers,excursions or equity partners.

4. Plan a process of internal change, and resourcea champion. Work out how the company willimplement new approaches, but allow forflexibility in the face of new opportunities andstaff participation. A champion needs to drivethe process – liaising with local partners, andworking it through with staff. The championneeds time, resources, and managementauthority to work across departments.

5. Ensure business linkages are incorporated intodaily operational practice. New linkages maybe catalysed by a champion or facilitator, butthey must then become part of the routine anddaily operation of all affected staff members.

6. Don’t underestimate your offer.Recognise how much value canbe gained from relatively littleinput from you and your staff.Your ‘business DNA’ and expertisecan make a massive difference toloca l entrepreneurs . Andr e m e m b e r t h e To u r i s mScorecard recognises time input,not just cash input, to enterprisedevelopment.

7. Be practical and patient. Investfor the long-term, ensuring all staff members understandthe projected gains but, at thesame time, get going. Learn bydoing, build trust by doing, andwhen the first problems arise,knock them on the head toshow it can work!

8. Be ready to adapt. Although you may need tochange your working style to build trust andeffective collaboration with communities, stickto key business principles. Don’t compromiseon core values, such as legal issues and financialresponsibility.

9. Work with others. Working with competitorscan be hard, but it is often the best way tocreate economies of scale for local businesses,and thus sustained change. Help local partnersdraw on government, business developmentagencies, and non-governmental support.

10. Be prepared. Be prepared to invest time andcommitment into implementing local linkages.And be prepared to be pleasantly surprised atthe momentum that is gained, and rewards youcan reap.

11. Communicate, communicate, communicate.Lack of information breeds suspicion.Communicate internally within the company,and externally with local partners. Dialoguegenerates the best new ideas.

12. Use the “How To…?” series. Take advantage ofthe experiences of others and give your staffthe opportunity to learn from the successes andchallenges of pioneers in the field of locallinkages. Equip your staff with some practicaltools and guidance on how to implement thecompany’s goals. Give the procurement guideto your purchasing officer, F&B manager, andGM. Give the cultural and heritage productsguide to your GM, guest relations officer andconcierge. Give the local partnerships guide toyour GM, your planning team, and your CSImanager. Finally, look through the corporatechange guide, and then hand it on to thechampion you appoint!

A dozen tips for CEOs

Canopy tour with highly-trained local guides, Stormsriver Adventures

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