From philanthropy to a different way of doing business: strategies and challenges in integrating pro-poor approaches into tourism business

Abstract

Pro-poor tourism means managing a tourism business so that it makes business sense for the operator and at the same time benefits the poor. Based on the Pro-Poor Tourism Pilot Programme conducted in southern Africa, this article argues that ‘mainstream’ commercial tourism can do much to embrace pro-poor approaches. In particular, the tourism sector needs to go further in shifting from philanthropic approaches to pro-poor approaches that entail doing business differently, with more committed changes to strategy and business structures. The pilot programme case studies reveal a range of potential business benefits companies can achieve through pro-poor approaches, such as enhanced social licence to operate and increased brand recognition. They also show that implementing a pro-poor approach depends on the company's context and circumstances. Such a shift entails a number of challenges and companies need to commit to making the necessary effort.

1. Introduction

This article explores some ways to optimise the tourism sector's impact on local development and poverty reduction. It is not an overview of all aspects of ‘pro-poor tourism’ (PPT), but focuses on strategies that tourism companies can adopt. It draws on reflections from practical engagement with companies in southern Africa, supplemented by secondary research. It has three main aims: first to show that there is much that ‘mainstream’ commercial tourism can do to embrace pro-poor approaches and to argue that the tourism sector needs to shift further from philanthropic approaches towards pro-poor approaches that entail doing business differently; secondly, to give reasons why tourism companies should do business differently; and thirdly, to go beyond generalisations about what companies should do to consider the ‘nitty-gritty’ of how they can do it.

The article first situates PPT in the context of other concepts relating to growth and tourism and corporate behaviour. It then outlines a distinction between making philanthropic donations and making business practice pro-poor. The remainder of the article explores this distinction with reference to South African companies that are attempting to change their business practice and initiatives, and assesses the business benefits and lessons for others.

Some would question the very premise – engagement with companies to promote pro-poor change. Tourism companies, after all, are profit-seekers, whose business is commercial tourism, not development. But the assumption underpinning the work presented here is that ‘we’ (as society) should seek to optimise the impact of tourism business. The argument goes thus: poverty is widespread and conventional social investment approaches to poverty reduction (in education, health and targeted income support) are not up to the challenge (see Rogerson, 2002; Maxwell, 2003), while macro-economic growth does not always deliver benefits to the majority (Cord et al., 2003). Thus ‘pro-poor growth’ is also needed, i.e. growth which includes the poor and provides them with net benefits (Ravallion, 1997, 2004; Dollar & Kray, 2001; Cord et al., 2003; DFID, 2005; Osmani, 2005). Tourism is a major economic sector worldwide, with particularly rapid relative growth in poor countries (Roe et al., 2004), thus is potentially very important for pro-poor growth.

Evidence, although admittedly limited at present, shows that tourism can be developed in ways that increase net benefits for the poor (Ashley & Roe, 2002). One way is for companies to conduct business differently, and experience so far indicates that conducting business in pro-poor ways can make commercial sense (Ashley, 2005) and should therefore be promoted.

Tourism will, of course, remain a business, not a development profession. But conducting business differently requires change at the margin in how that business is performed. Marginal change across companies in a massive sector can be significant for development.

The article argues there is a ‘business case’ for change, which provides incentives for tourism companies to contribute more to society. Without a business case, recommending pro-poor change to commercial companies would be futile. As outlined below, experience indicates that this business case for PPT has many dimensions. Although it may be argued that PPT is not a term most business operators find attractive, the argument in this article is that there is a business case for conducting business in a manner that takes account of opportunities for poor people and focuses on expanding them, regardless of whether companies are labelled ‘pro-poor’, ‘responsible’ or ‘fair’, and so on. The authors have chosen to use the term ‘PPT’ because it helps situate the approach in the context of a range of other tourism-based initiatives, and in the international context of a wider body of work on PPT and pro-poor growth.

2. Background: PPT and Corporate Social Responsibility (CSR)

PPT is an approach to tourism that increases net benefits to the poor. It means conducting business differently, whether the business is a large beach resort or a luxury wilderness lodge. It is not just about community tourism and small, medium and micro enterprises (SMMEs), though these are a useful part of PPT, nor is it just about tourism in poor areas, nor is it a niche product which is sold as ‘interaction with local people’, although such initiatives may contribute to PPT.

The common tendency is to categorise PPT as a specific and minor product (such as a community tour), or simply a donation to the community. This indicates a resistance to thinking in terms of core business operations and how they can be adapted. The general trend is still to see a pro-poor approach as a sideline or add-on to the tourism business's mainstream activities, hence the need to emphasise what it means to adapt business practice in pro-poor ways.

The findings presented in this article draw on an action research programme called ‘PPT Pilots: Piloting PPT with the private sector in southern Africa’ (www.pptpilot.org.za), initiated following research conducted by Roe, Goodwin & Ashley from 2000 to 2001 on six international case studies (Ashley & Roe, 2002). PPT Pilots assisted companies to implement pro-poor approaches at five pilot sites: Sun City (the largest resort in South Africa, owned by Sun International), the Sandton Complex of Southern Sun (the largest hotel group in southern Africa), Rocktail Bay Lodge (one of the 44 luxury lodges owned by Wilderness Safaris in southern Africa), Spier Leisure (a hotel on a wine enterprise in the Cape Winelands) and Ker and Downey Safaris Tanzania (the largest photographic and hunting safari company in Tanzania). Through engagement with these Pilot Partners, the programme's aim was to develop good practice in pro-poor approaches and identify lessons learnt for wider dissemination. The three-year project was a joint project of the Overseas Development Institute and Mboza Tourism Project, funded by the Business Linkages Challenge Fund of the Department for International Development, and was completed in May 2005.

PPT is one core – and often under-represented – element of responsible tourism and sustainable tourism. One reason that PPT was initiated was that the ‘social’ elements tended to be relegated to the periphery in responsible and sustainable tourism discussions, which often emphasised environmental elements. PPT is also described as an ‘ethical cousin’ (Seif, 2004) of Fair Trade in Tourism (FTTSA). In substance, they share a similar focus on benefits to local people. In application, PPT has been developed as an approach for tourism implementers to adopt, while FTTSA is being applied as a standard for certification and thus as a guarantee for consumers.

PPT can be aligned with Black Economic Empowerment (BEE), because broad-based BEE emphasises the need for a wider group of black people to benefit. Key PPT approaches are now essential elements of the recently launched Tourism Broad-based Black Economic Empowerment Charter and Scorecard (see www.tbcsa.org.za). These approaches include preferential procurement, enterprise development and certain industry-specific aspects of the Scorecard, such as social development. The Tourism Scorecard and its 2009 and 2014 targets will encourage businesses to move beyond their current paradigms and engage with the pro-poor issues.

The increasing emphasis on BEE in South Africa is part of the debate about the first and second economies and the challenge of integrating these two very different economic systems in South Africa (Manuel, 2004). Their business approaches, skills, commercial networks and markets and returns are very different. PPT provides approaches which create opportunities for those who are used to living in the second economy (local and informal markets) to engage in the first economy (supplying, working in or partnering established hotels and tourism operators).

PPT is part of the wider debate about CSR, Corporate Citizenship and the role of the private sector in meeting the Millennium Development Goals (MDGs). In these debates, which cut across sectors, tourism plays a minor role. However, the focus of PPT on changing business behaviour has parallels in CSR and MDG debates, where the emphasis has shifted from short-term ‘doing good’ to finding win–win situations in which companies can profit by ‘doing good’.

Among the array of CSR approaches, Locke presents a useful typology of four categories: minimalist, philanthropic, encompassing and social activist (Locke, 2003: 2), as shown in Table 1. PPT approaches would ideally see companies shift from ‘philanthropic’ to ‘encompassing’ CSR approaches. More of the recent literature produced by, or in partnership with, the private sector explicitly highlights the need to adapt business practice, and is highly relevant (although not specific) to the tourism sector (Albaladejo & Schmitz, 2000; Warner, 2002; Nelson & Prescott, 2003; Deloitte, 2004; te Velde, 2004).

Table 1: Four approaches to Corporate Social Responsibility

Minimalist	Philanthropic	Encompassing	Social activist
Basic stakeholder support Addressing aspects that are generally HR (Human Resource) oriented Tokenistic	Project-specific Related to specific issues relevant to the particular organisation Donations and gifts Seeks to change	Looks beyond the immediate business stakeholder group to the broader community Embedded in company values and management style Seeks to lead change	Approach is the foundation of the business Business is a catalyst for change Seeks to effect change in others
Source: Table adapted from text in Locke, 2003.

CSR is acutely relevant to the tourism industry, because the nature of tourism means that security in the producing economy and corporate reputation are both important to the customer. However, according to the World Bank and others, the tourism sector has lagged behind in CSR (World Bank Group, 2003). Attention to issues of business practice have, perhaps, also lagged behind, because Corporate Social Investment (CSI) supporting community projects have been the norm. This is partly because the tourism sector is so well suited to a donations approach: as Meyer argues, hotels have to replenish basic operating equipment and can easily donate used items to communities. This practice of donations extends beyond product to other aspects as well. In addition, tourists like to contribute to what they see, particularly when visiting areas in need. Donations can be an instant win–win for business, visitors and local communities (Meyer, 2006). An example of the focus on donations comes from the World Travel and Tourism Council illustrations of leadership in CSR in travel and tourism (WTTC, 2002). The report lists 17 examples of CSR actions by its members, of which only three are clearly adapting business practice rather than supporting local social projects. Of course, there are other tourism initiatives and publications that embrace or call for adapted business practice (IBLF, 2004; Goodwin, 2005; UNEP, 2005a,b), but the point remains that there is a debate and a shift needs to be made.

While emphasising the need for adapting business practice, this article does not dismiss the value or advantages of the philanthropic approach (see Meyer, 2006). The pros and cons of both approaches need to be assessed, and their appropriateness will depend on the context. The key difference is not in the degree of benefit to the company: there are arguments in CSR debates that philanthropy is often strategic, and the core commercial benefits are clear if indirect (Lantos, 2001, 2002). Conversely, changing business practice is not necessarily of great commercial benefit. Therefore, it is useful to distinguish philanthropic donation from adapted business practice by considering the nature of the action and how it is done, rather than why – whether the action is integrated into business practice or is a stand-alone activity. PPT involves internal change, whereas CSR is usually external action. This is not to discount the importance of why it is done, but questioning how it is done makes the distinction between philanthropy and integrated business clear.

Donations from pre-tax profits can be on a considerable scale – for example, in 2003 the Sun International Group allocated R7 982 000 to CSI (Sun International, 2003). Spenceley (2001) compared the community project/CSI approach of Conservation Corporation Africa at Ngala Lodge, and the shared community equity approach of Wilderness Safaris at Rocktail Bay and found that both generated moderate impact in terms of funds to the community (with average income per person per annum amounting to R13,57 at Ngala and R19,21 at Rocktail, i.e. these are broadly the same order of magnitude given that population differences have a substantial impact on such calculations).

Adopting a ‘donations approach’ offers the tourism company several advantages: donations can be relatively easy to administer without interfering with day-to-day operations. They can be highly visible, meet local priority needs and spawn further partnerships. The main advantage to a local community benefiting from such investment is a large injection of funds, including for those who have least chance of participating in the economic opportunities generated by tourism.

The advantages of the alternative approach, adapting business operations, lie in the potential scale and durability of local impact. Given the volume of inputs and volume of tourists that companies are dealing with, a small change that brings in poor workers or entrepreneurs can have a significant local economic impact. Some initial estimates of how benefits from business linkages at PPT Pilots sites may multiply over time (Ashley, 2005) suggest that the net increase in local income can quickly outweigh philanthropic spend, if the linkages succeed and the local economy is capable of supporting several linkages, as at Spier.

Table 2 summarises the advantages and disadvantages of the two approaches, some of which accrue specifically to the company or community. It suggests that adapting business practice offers greater long-term potential impacts, but getting there is difficult. Evidence confirming the hypothesis that changing business practice is preferable for all stakeholders in the long term because of its potentially greater potential, impact and dynamism would need to be collected over a significantly longer time-frame.

Table 2: Advantages and disadvantages of the two approaches

	Philanthropic donations	Adapting business practice
Potential advantages	Development: Can meet priority needs (e.g. education) and span the community Large cash value in a poor community Commercial: Does not interfere with business operation High PR (Public Relations) value Can be outsourced, e.g. CCA (Conservation Corporation Africa) A foundation for more substantive partnerships Tourists also like to participate in donating or volunteering	Development: Long-term impact on community and company can be enormous. Multipliers and spin-offs Commercial: Enhanced tourism product, complementary product Development of brand0 Cost-saving Feeds into enhanced corporate governance Greater recognition from others, and hence impact on social licence, market appeal, government relations, finance, etc.
Disadvantages	Development: Projects that fail or are not sustained – unused computers/classrooms Creates dependency, embodies paternalism Commercial: Budget constraints on volume Community development is not a core competence of tourism business Commercial: Uses up cash – a scarce resource for most tourism companies	Development: Impacts take time to show, and are unevenly distributed Commercial: More binding on the company – less flexible if need to restructure It is difficult, requiring time, inputs, leadership, corporate change, etc.

3. The business cases for change

The experience of the PPT Pilots and others suggests that there is no single ‘business case’ for a PPT approach to business, but there are several business cases, the relevance of which will vary depending on the context. Nine benefits to business have been noted by South African PPT pilot partners and these were reinforced by other innovative business leaders who were interviewed from January to May 2005 (Ashley et al., 2005). These are as follows:

• ‘Social licence to operate’: it is not only the legal or official licences that matter; acceptance of a company's legitimacy among local institutions also matters, particularly in post-apartheid South Africa. Spier's social licence can be seen in the way it has been able to form partnerships with local organisations, is used as a case study by government, has access to decision makers to present Spier's view of local developments, and in the way new initiatives proposed by Spier have found an audience, and often subsequent acceptance.

• Enhanced corporate governance and staff morale: companies that have gone through the process of applying for FTTSA accreditation report that one of the main benefits is the enhanced corporate governance which the process catalyses (Seif, 2004). Addressing fair trade issues requires internal processes and changes that have wider benefit. Staff morale can also be enhanced through pro-poor action. Local staff, in particular, are acutely aware of how the tourism operation interacts with the locality, and are the first to see if words exceed actions. If staff see they are part of a business with a wider goal, and particularly if they are treated as stakeholders in achieving that goal, this can have a direct effect on staff motivation which goes beyond the effect of traditional human resource management.

• Customer satisfaction and market appeal: while few in the tourism trade expect tourists to base their choice solely or primarily on ethical criteria, a number of establishments are boosting their market appeal and attracting ethical tourists through the added value of their responsible behaviour. Shiluvari Lodge, whose approach to building business with local enterprises has gained it the Fair Trade trademark and Imvelo Awards, is one such example. The lodge is included in the Limpopo Collection and readily sold by tour operators side by side with five-star lodges. It is sold by a number of prestigious specialist tour operators who would ordinarily select lodges with greater prestige, because they know that the distinctive experience on offer will satisfy their clients.

• Government procurement, preferred partner, recognition: the government normally procures goods and services from BEE companies, which usually means those with black ownership. In the tourism sector, a number of smaller, family owned, operations are reluctant to ‘give away’ equity of their business, or cannot do so because of debt structuring. An alternative approach is active investment in PPT and Responsible Tourism, which spreads the benefits of their company more widely while gaining recognition from government. Such broad-based empowerment enables properties to continue to gain government business. Besides this, with regard to accessible government financing, all government development finance institutions have criteria for responsible financing. These are aligned to the BBBEE (Broad-based Black Economic Empowerment) imperative.

• Enhancement of brand and unique selling point: some of the properties which have embedded pro-poor principles in their core business have gained accreditation in initiatives such as FTTSA. Winning awards also enhances the brand. Wilderness Safaris has won several tourism awards nationally and internationally – in 2005 one of their camps won a Tourism for Tomorrow award. Awards and accreditation give companies an entirely different level and type of exposure and verification. Some purposely integrate pro-poor approaches into their brand. For example, in 2005 the Wilderness Safaris' brand was redeveloped, with a more explicit emphasis on partnership. Others find that a local or pro-poor emphasis emerges as part of their unique selling point (USP). For example, at the Arabella Sheraton on the Cape Town foreshore, local craft artists and a rural women's project provided a large number of items for the property such as pillows, murals, art pieces and operating equipment. Although this was not done to define the brand it has certainly become one of the defining aspects of the property.

• Access to responsible financing: several financing organisations, both international and domestic, have provisions to support investments with strong social investment. The International Finance Corporation (the commercial arm of the World Bank) is investing in one of the PPT pilot partners, Spier. The Development Bank of Southern Africa (DBSA) has, as its mandate, to contribute to the delivery of basic services and promote economic growth through infrastructure funding, to build institutional, financial, technical and knowledge capacity for development. By adopting a broader pro-poor-oriented approach, a number of tourism businesses seeking assistance from the DBSA have found the bank more receptive to their development plans (personal communication, L Sacco, December 2004).

• Minimisation of risk: of the various risks that tourism companies face, three in particular can be mitigated by their implementation of pro-poor approaches. These are the risks of local opposition, damage to the local product (such as wildlife, tranquillity) on which they depend and global criticism. The issue is well captured by Patrick Shorten, managing director of Sabi Sabi, which has sought to actively involve communities in a variety of projects: ‘Our philosophy is driven by the belief that a wildlife sanctuary will only survive economic and social pressures by creating employment, earning foreign currency, paying tax and promoting sustainable tourism’ (Groenewald, 2004: 84). Where local communities are supportive, they can actively help companies to reduce risk. This has happened at Rocktail Bay, where the local community has worked with Wilderness to deal quickly with any instances of local violence and insecurity.

• Keeping regulation at bay: although the BEE agenda in general, and the tourism industry charter in particular, are currently voluntary charters, there is a sense that the industry has to show that it is delivering or be forced to deliver. Leading businesspeople in the tourism sector talk about the need for action in order to ‘keep regulation at bay’ (Ashley et al., 2005). Companies argue that legislation has many limits: it is less flexible and innovative than private action, it must cater to the lowest common denominator, and once legislative targets are reached there is no incentive for further change. Furthermore, legislation and even industry-oriented regulation, whether legislated or voluntary, hits the smallest companies hardest, as in the financial services sector where several small companies were eliminated when companies needed larger-scale empowerment deals to meet their industry charter and BEE scorecards (personal communication, D Irvine, September 2004). There are, of course, counter-arguments if change from self-regulation is too slow. But from the companies' point of view the issue is clear: invariably they would rather find their own way forward than have more legislation. Thus one motive for demonstrating that they can, through their own efforts, transform the local impact of tourism, is to demonstrate the efficacy of self-regulation.

• Saving costs: it should also be noted that pro-poor approaches sometimes save costs, as in the Spier laundry example outlined below. Sometimes a drive to cut costs will lead companies to rethink the status quo and hence discover local suppliers; but sometimes higher costs (at least short term and at least in management time) may be involved. This should therefore not be seen as a major business motivation, although synergy with efficiency objectives may be achievable in some instances.

Not surprisingly, these business benefits reflect other findings on the benefits of CSR implementation or SMME support in tourism (Rogerson, 2000; Deloitte, 2004; IBLF, 2004) but it appears that in the South African post-apartheid situation of PPT Pilot partners, there is relatively greater emphasis on gaining social licence from the local community, and gaining recognition or procurement from government.

4. Adapting business practice for PPT – putting it into practice

While there is a great deal of talk about what tourism companies should do, and several guidelines outlining useful actions, there has been little analysis to date of corporate experience of implementing pro-poor approaches. This section therefore provides some detail on how Pilot partners put PPT into practice.

4.1 Spier

Spier Leisure has always valued its role in relation to society and the natural environment of the region. From its opening, Spier has had ambitious goals for local recruitment, community development, environmental integrity and broad sustainability objectives. Its support for sustainability initiatives and community investment has increased over time, reaching approximately R10 million over a five-year period. The vast array of activities has ranged from support for the arts to waste recycling to eco-village development (PPT Pilots, 2003).

For the owners and top management, the triple bottom line matters – the business has to make environmental and social sense as well as commercial sense. However, the values rested with the ownership group and until recently their implementation was purely philanthropic, without involving staff. Operational staff on the ground had played a very small role in anything other than delivering the financial bottom line. The management team were managed and assessed on financial aspects, since no measurable assessment criteria existed for non-financial items.

This meant that, in effect, the vast range of activities in the social and environmental arena were conducted in isolation from the driving financial aspects and at no time were synergistic linkages or adaptations to normal business operations sought. The triple bottom line essentially meant three distinct silos all standing on their own foundations and with very little crossover.

From mid-2003 to early 2004, Spier underwent a transformation. The new managerial team sought tools to help transform the business on both the action and the philosophical levels. Spier sought out partnerships with organisations such as PPT and FTTSA. The overarching management approach was reviewed and a ‘step change’ is taking place where a focus on set measurable criteria is being adopted. PPT-oriented principles are now included in the indicators that are used to evaluate and assess the management group's performance. A change to the criteria by which all management staff are evaluated for incentives and performance appraisals is currently being put into place at the operational management level and above. It is envisaged that this will be taken down to all staff at a later stage.

An area of focus for implementing change has been in procurement of goods and services. The existing policy and practice of procurement were both reviewed and fundamental changes made to how the business was conducted. All existing suppliers were surveyed via a questionnaire, to gain information about the existing degree of local, black and sustainable sourcing. A staggered programme was put into place for sourcing supplies locally. By the end of August 2005, a new local laundry enterprise to service Spier had been established and was expanding, liquid petroleum gas was being purchased from the local township suppliers, clearance of invasive alien vegetation by a local operator was under way and greetings and guest welcome cards and other local products were in the pipeline, including crafts and organic produce. This process involved changes in the core staff's attitudes and approaches.

Spier Leisure's total procurement in 2003 was R44,2 million. Its management are well aware that if they are able to shift ten per cent of that procurement to local small and medium suppliers, the annual spend into the local economy of over R4 million will – simply in cash flow terms – far outweigh their philanthropic spend on a wide array of initiatives.

Although some of these initiatives, such as the laundry, have been set up with capital assistance from Spier, this has already paid for itself in the savings that have been achieved because of the way the project was structured. To date, all the PPT projects are costing no more than any other product and the benefits of the project are clear. Although Spier have invested heavily in a philanthropic manner in the past, the new approach has allowed it to establish a set of staff values and achieve greater buy-in from the communities, staff and local authorities.

4.2 Sun City – procurement from two new small enterprises

When Sun City opened in 1979 it initiated support for a few community-based projects, in a purely philanthropic manner. This has continued and expanded over time. Sun City has a CSR department that manages a budget of 1,5 per cent of pre-tax profits, used to address a variety of community, cultural and environmental issues. However, the business and managers at Sun City have remained entirely focused upon the financial aspect of the business, which is run entirely according to cost efficiency, while the philanthropic support is operated separately.

Under the PPT Pilot project, Sun City began to support the establishment of two micro enterprises which could act as suppliers to Sun City, and to liaise with operational staff on how they could adapt their procurement and practice to support these emerging enterprises. One enterprise is producing glasses from used bottles, with facilities for engraving designs and personalising the glasses. The other is producing greetings cards for Sun City hotel managers to use as ‘welcome cards’ for in-house guests.

Sun City has assisted with local business development in the past, including the existing small-scale bottle recycling plant and a hydroponics initiative on the same site. Previously, however, there has not necessarily been a business link between Sun City and the enterprises that benefit from its support. The two new enterprises have been chosen specifically because of their potential to supply Sun City. Unlike the previous support initiatives, the new arrangements involve links between the CSR department and operational staff to arrange how the purchases are to be made, delivered, used and developed. Furthermore, there is discussion of developing a local ‘brand’ that can be applied to a range of goods and services that come from the local economy and which would act as marketing support for new products in future.

The scale of these enterprises is tiny compared to Sun City's budget, and would never amount to more than a mere fragment of the procurement budget. If the card-making enterprise can supply Sun City's need for approximately 1 000 cards per month, its gross revenue will be around R168 000 per year – significant for an enterprise of four staff, but still dwarfed by a CSR budget in the millions. However, the greatest development potential lies in demonstrating a different approach which can then be adopted across a substantial share of Sun City's procurement.

Sun City has recently commissioned an external consultant to conduct a thorough scoping exercise of the procurement potential to Sun City of emerging and black businesses within the North West Province. This represents a significant shift in the approach and one that holds vast opportunities for enterprise development and economic input into the region.

4.3 Wilderness Safaris – local staffing and local tourism product

At Rocktail Bay, the local Mqobela community is an equity holder in both the lodge-owning and the lodge-operating company. Thus the business model already combines business operations with community benefit. Community benefits from business operations fall into three broad types:

• revenue that goes into a bank account of the community trust due to its equity in the lodge-owning company;

• wages of local staff, with approximately 30 local staff employed due to a strong preference for recruiting local staff; and

• earnings of other local enterprises, such as the taxi driver and security patrols.

During the PPT Pilot with Rocktail Bay, efforts were made to strengthen all three of these business linkages. In terms of the equity share, the PPT facilitator worked with the Mqobela community on organisational development to help the community make more effective use of its income, while simultaneously helping Wilderness Safaris set up a new partnership with the neighbouring Mpukane community, in whose area a second site is being developed. The principle of local staff recruitment was also being extended to the new site.

The main enterprise development approach is a community tour, a new product developed for guests at Rocktail Bay. Guests visit a sangoma (traditional healer) and a storyteller, watch the dance troupe perform at the local primary school and eat traditional food at a nearby house. Although the community tour only got under way in August 2004, initial records and feedback from guests indicate that it has made a distinctive addition to the product available. What is notable across these initiatives is a mind-set, at both lodge and head office levels, that approaches new business opportunities with an eye to simultaneously expanding local economic opportunities.

5. What are the issues and challenges?

Conducting business differently and developing local business linkages is not easy. The experience of the PPT Pilots demonstrates nine key challenges, and concomitant tips, for implementation. These are as follows:

• Designation of a champion: a champion and driver of the process is essential, as is top management leadership. Pro-poor approaches will always be just one of many actions on a company's agenda, and unless there is a champion they are likely to remain in ‘the future’. At Rocktail Bay, the partnership approach is tracked and pushed by the Regional Manager, Patrick Boddam-Whetham, and by the CEO, Malcolm McCullough. Across the company a number of like-minded senior executives champion different partnership initiatives. At Spier, the owner Adrian Enthoven provides commitment from the very top, while the Sustainability Director of Spier Holdings, Tanner Methvin, is a champion at a senior management level to drive the process forward. At Sun City, the Corporate Affairs Director, Dan Ntsala, has championed the new pro-poor approaches alongside his existing community investment work.

• Time and transaction inputs: pro-poor approaches may be implemented through a simple change, such as changing a line in a tender or switching to a different supplier of greeting cards. But usually a considerable amount of time input is needed both with partners and inside the company to change operations, so a staff member or facilitator who can do this is also needed. The person who performs the legwork of implementing new procedures may well be a different person to the ‘champion’ or top management leader. Indeed, at Sun City the pressure on the Corporate Affairs Director to carry out the numerous tasks involved in supporting new suppliers, coupled with the lack of implementation staff in his team, has been a constraint. At Spier and Rocktail Bay the process has benefited from geographic presence and more intensive facilitation from PPT Pilots, and as a result much has been achieved that company staff on their own would not have been able to achieve.

• Process requiring staff buy-in: beyond the champion, wider buy-in across staff and management is needed. While the champion can catalyse a process, and will probably need to bring others on board in a gradual process and via demonstration, a champion will have to engage other key operational staff to succeed in changing business practice. For example, chefs, the buyer or guest relations officers are essential to measures that change the supply chain or the complimentary products for guests. Unlike community donations, the PPT approach cannot be compartmentalised into one separate department.

• Learning by doing: management and staff are understandably wary of more discussions of useful ideas. A key tip is to get practical and get going, and adapt from there. Support from others in the company and community is likely to be garnered only once they can see practical results.

• Performance indicators needing to change: stimulating interest or support among staff is a first step, but full implementation may require changes in job functions and key performance indicators for staff. This means moving away from assessing only financial performance. Careful assessment is needed to identify new indicators that reflect and measure the company's commitment to a different business approach, and then everyone who has an impact on any of the indicators will be incentivised on his or her performance according to these non-financial indicators.

• Attitude change inherent in the process: it is not simply a matter of changing company practice but of changing the attitude to communities and local entrepreneurs, particularly where history has led to deeply entrenched paternalistic approaches. International experience (Torres, 2004) shows that the attitudes of chefs, buyers and lodge managers and ill-informed assumptions about lack of product quality or availability are often a key constraint to opening up the supply chain. Once linkages are being developed, it may be a challenge for the company to engage with new suppliers as business partners, and not in the traditional mode of a unidirectional relationship between benevolent donor and grateful recipient, in which the donor can expect to control the process.

• Managing expectations: a slow pace must be accepted, and expectations managed, without dampening the enthusiasm and drive that are still needed. Change is likely to be incremental–one thing leads to another; but this also means not sticking rigidly to a plan and being opportunistic when new options emerge. Wilderness Safaris' regional manager for Maputaland, Patrick Boddam-Whetham, states that managing community expectations has been one of the greatest challenges of their partnership approach in the region (personal communication, September 2004).

• Finding the right partners in the community is key: this is also often a difficult first step. In the Southern Sun Pro-Poor Pilot, the plan was to set up a partnership between Southern Sun and the Alexandra Chamber of Commerce. A few meetings were held by facilitators and further work conducted with partners between meetings, but the stage was never reached where a partnership between the two was developing independently and sustainably.

• Setting short-term transaction costs against long-term benefits: the above-mentioned activities all come with costs, and the main costs need to be factored into the budget of any initiative. These are usually the transaction inputs in terms of management time. Additional costs could be the salary for the driver of the project; the costs of taking risks at first when using a new product or service provider and perhaps maintaining a twin supply system for a while; or the costs of direct support for equipment, transport or training for local partners. Those companies already engaged in pro-poor approaches find that the long-term and strategic benefits, such as customer satisfaction, outweigh these short-term transaction costs, but for companies considering the approach the initial costs may be a barrier. Spier has found that, in terms of direct costs of a specific product or service, benefits outweigh costs relatively quickly: all projects engaged in to date have resulted in lower costs being achieved if compared over a full-year period of the activity prior to adopting the pro-poor approach. This, however, excludes strategic costs such as the role of the Sustainability Director. The challenge that Spier faces is being able to motivate projects where the savings and returns will be realised only in the longer term. As shorter-term projects deliver results, executives are more inclined to support the envisaged longer-term ones. If other companies are to adopt pro-poor approaches it is important, first, that executives see the medium and long-term benefits against the initial transaction costs and, secondly, that government or other facilitators explore ways to reduce the transaction costs. This can be achieved, for example by brokering linkages, drawing up lists of local SMME suppliers, training community partners or encouraging destination-wide initiatives that reduce the risks for any single company.

Most of these key issues have been recognised elsewhere in the literatures on wider CSR and pro-poor growth. It is noteworthy also that the United Nations Development Programme (UNDP) has not only crystallised the issue of transaction cost and risk hurdles, which leads companies to ‘place opportunities on the “too complicated” pile’, but has also established a whole new programme to reduce them: the ‘Growing Sustainable Business Initiative’, which was developed to address this dilemma by helping to bring risk: reward ratios into a commercially viable balance (Day et al., 2005). However, in the tourism sector, at least in southern Africa, there has been more talk about what should be done than practical discussion about actual implementation (see Ashley et al., 2005); businesses need to appreciate and assess the implementation issues for themselves if they are to embark on PPT strategies with realism and effectiveness.

6. Conclusion

Tourism executives are well aware of the need to reduce reputational risk and build local social licence to operate. Many, therefore, have some kind of community investment programme. However, the tourism sector, particularly in South Africa, has traditionally focused on philanthropic approaches to community development. This approach allocates profits to projects and is generally divorced from daily operations. This article has argued for recognition of an alternative approach to maximising local benefit, by conducting business differently. This approach recognises the commercial driver of corporate behaviour, but requires companies to pursue their business objectives while simultaneously exploring how this can be achieved in ways that open up opportunities for the poor.

This approach can deliver more benefits to companies, by building social licence while simultaneously building customer satisfaction, and developing distinctive brands in a competitive market. In the distinctive South African context, it is also an important contribution towards broad-based BEE and securing government recognition. Initial research suggests that companies applying a pro-poor approach can achieve significant impacts at the local, community and emerging market levels which will help to integrate those who were denied access to the industry in the past. The exponential impact of these approaches can potentially transform the nature of the industry.

Lessons from the PPT Pilots Project and other innovative businesses in South Africa show that there are many different pro-poor approaches, depending on circumstance. They can be applied by a remote rural lodge, as at Rocktail Bay, or a major resort, as at Sun City. Senior executives are clear about the long-term returns that the approaches deliver. However, the lessons from current experience also show that changing business practice is not the easy option. Adapting business practice involves a change in mind-set, the attention of management staff, hands-on facilitation and a willingness to change. Spreading this approach further across the industry will depend on other executives trading-off initial effort against long-term strategic benefit, and finding ways to incorporate pro-poor approaches into their own commercial context. This, in turn, can be helped by government or facilitators making interventions that reduce the initial implementation costs of engaging with local partners, spread information on how and why it can be done, and increase the incentives for adoption by enhancing the benefits, such as marketing and government recognition, that accrue to those who adopt pro-poor approaches. If these approaches can be adopted across the mainstream industry, the potential for improving economic opportunities for the poor is significant.

Additional information

Notes on contributors

Gareth Haysom

Respectively, Research Associate, Overseas Development Institute, London; and PPT Facilitator, PPT Pilots in Southern Africa, Cape Town.