NSSA courts tenants for US$50 million Beitbridge Hotel building

Source: NSSA courts tenants for US$50 million Beitbridge Hotel building | The Financial Gazette July 13, 2016

NATIONAL Social Security Authority (NSSA) is scouting for a tenant for its Beitbridge Hotel following the exit of Rainbow Tourism Group (RTG) from the property in May.

The closure of the hotel highlighted the crisis in the tourism industry that has seen room occupancy plummeting to unsustainably low levels over the years.

RTG’s exit from Beitbridge came hard on the heels of an announcement by another ZSE listed stock, African Sun Limited, which closed its Holiday Inn Beitbridge Express Hotel in February citing prolonged losses by the facility.

Citing a market characterised by depressed occupancies, low margins as well as high operating costs as the major reasons for exiting Beitbridge, RTG said, in a statement last month, that the decision to close the hotel on May 31 was reached following wide consultations.

“Operational costs of the hotel were no longer sustainable. Since opening in January 2014, the hotel has incurred losses amounting to more than US$2 million,” said RTG in the statement.

Constructed at a cost of US$50 million, the occupation of the136-roomed hotel, whose original cost went up by a staggering 16,3 times from an initial budget of US$3 million in 2007 to US$49 million at completion in 2014, could take long considering the general unstable national economic environment.

A hotel venture might not be viable bearing in mind that there are cheaper hotels across the border in Mussina and that occupancy levels in Zimbabwe are currently unsustainably low.

The hotel according to NSSA is located just a few metres from the A6 main road and close to the border post.

The property’s details include a site area of +/-15 000 square metres, 144 rooms, casino, conference room, gym, resident banking hall and swimming pool.

An audit by Deloitte Advisory Services into the operations of the under-fire NSSA exposed shocking evidence of potential sleaze on the construction of the hotel. Elementary estimates indicate that the cost of each room at the hotel ended up at a shocking US$360 000 after total expenses rose to US$49 million.

In February 2007, NSSA and RTG entered a strategic partnership to construct the four-star hotel and a commercial centre in the border town, but the costs suddenly started rising, first to US$17 million,

then to US$33,4 million and US$44 million before finally hitting US$49 million in 2014.

NSSA controls 40 percent shareholding in RTG.

In the audit report, Deloitte said NSSA had pushed for the implementation of the project regardless of its lack of viability.

The auditor said some figures on the Beitbridge project were not adding up, although the auditors did not examine why the costs rose at a terrific pace at a time when the country had entered a period of

sustained deflation.

The auditors noted that the NSSA board had in October 2014 said it was aware of the exorbitant overheads after the main contractor, CZL, had failed to pay workers and subcontractors, forcing the authority to intervene by directly paying the workers and the subcontractors.

There was no evidence of any punitive action by NSSA on CZL, which failed to honour commitments to subcontractors.

Analysts said the payments made directly to workers and subcontractors could have been easily recouped from CZL.

The property also took seven years to complete, which is abnormal for such a small property. Government has failed to get to the bottom of what transpired, and appears to have taken a back seat amid indications of potential abuse of public funds.

The report said a feasibility study conducted before the project was initiated had clearly spelt out “that the hotel would be loss-making”.

This view had forced RTG executives to refuse to manage the hotel, resulting in a fallout with the NSSA executives who were fired by the current board in 2014.