2005/2006 - SANParks

2005South African National ParksAPPENDICES TO THE ANNUAL FINANCIAL STATEMENTSfor the year ended 31 March 20061 Facilities rental on retail and restaurant operations(Refer Note 2.1)The concession contracts for retail and restaurant operations entailallowing private operators to operate South African National Parks’existing facilities on the basis of a medium-term operating agreement.Investors manage and upgrade existing retail and restaurant facilities.The agreements enable the operators to use a defi ned area over a9 ½ year term in return for payment of concession fees. Against theright of occupation and commercial use of facilities, there are setobligations on the part of the concessionaire regarding fi nancial terms,environmental management, social objectives, empowerment and otherfactors. Infringement of these requirements carries specifi ed penalties,including termination of the contract with the assets reverting to SouthAfrican National Parks.During this Financial Year the contract with the KNP restaurant operator,Natures Group, was terminated as a direct result of poor servicedelivery. Uninterrupted service delivery to clients and tourists wasensured through an interim solution (1-year contract) that was awardedto Compass Group. This entails a management agreement wherebyCompass Group manages the restaurants on SANParks’ behalf withprofi ts/losses reverting to SANParks. Compass Group was awarded themanagement agreement based on their technical expertise. SANParkswill initiate a solicited public tender process in June/July 2006 for theprocurement of an replacement operator for the next term of 9 to 11years.In order to maximise profi ts for SANParks during the interim managementagreement period, a revenue generation strategy was compiled inpartnership with Compass Group. This strategy entails matchingthe restaurants product offering to the SANParks clients/touristsrequirements. In line with the fi ndings, offerings will be focused on themarket and might therefore differ by camp and by season. Part of thisstrategy is a marketing drive that will be initiated and co-funded by theCompass Group in a quest to derive optimal value from the restaurantsto SANParks.The monthly rental payable for the facilities by the contractor to SouthAfrican National Parks for any given month shall be the higher of thefi xed monthly rental as defi ned by the agreements, escalating on anannual basis; or the rental based on actual gross revenue realised,expressed as a percentage of gross revenue.The operators have provided South African National Parks withPerformance Bonds equivalent to three months fi xed rental in the formof Performance Guarantees that secure the operators performanceunder the Operating Agreement on the basis set out in the FacilitiesRental Agreement. The Performance Bonds do not apply to Picnic Siteconcessions.The following schedule summarises the potential income receivable from the various operators for the various sites:Operator Commissioning Date Termination Date Minimum rental% of GrossRevenueR %Tigers Eye 15 Oct 2000 31 Mar 2010 1,575,000 6 - 12%Natures Group 15 Oct 2000 31 Mar 2010 N/A N/AEJ Viljoen and Associates 15 Oct 2000 31 Mar 2010 189,600 7%Salt and Pepper Restaurants 1 Dec 2003 31 Mar 2010 12,000 Fixed Rental2 Lodge concession fees (Refer Note 2.1)The lodge concession contracts entail allowing private operators tobuild and operate tourism facilities within national parks on the basisof long-term concession contracts. Investors either take over andupgrade identifi ed existing lodge facilities or build and operate newlodges. The contracts enable the concessionaires to use defi ned areasof land including any buildings that may already exist on that land overa 15 to 20 year term in return for payment of concessionfees. Against the right of occupation and commercial use of facilities thereare set obligations on the part of the concessionaire regarding fi nancialterms, environmental management, social objectives, empowermentand other factors. Infringement of these requirements carries specifi edpenalties, including termination of the contract, with the assets revertingto South African National Parks.136