Kruger Park’s Mdluli Safari Lodge offers one-of-a-kind 12J investment opportunity

JOHANNESBURG — In what is described as the first fully-fledged private lodge in the Kruger National Park, the Mdluli Safari Lodge is looking to onboard investors in an interesting 12J opportunity. The project is further unique insofar as it involves a partnership with the Mdluli community, who were kicked off their land during Apartheid but who now have control of it again. The lodge targets empowering that community once again, and it is a perfect illustration of how a clever business initiative can help with the hot topic of redress in South Africa. Here is an interview with Malcolm Segal, a Director of Mdluli Safari Lodge Limited, who explains more about how the project will work. – Gareth van Zyl

This special podcast is brought to you by Mdluli Safari Lodge Limited.

I’m Malcolm Segal, Non-executive Chairman of the Grovest Group of Companies and Director of Mdluli Safari Lodge Limited.

Malcolm, thank you very much for chatting to us today. You’re involved with the Mdluli Safari Lodge Project: it’s a joint venture with the Mdluli community. Can you tell us more?

Yes, so it really has a fascinating background indeed. The Mdluli community lived on this land – it was their ancestral land – and in the late to mid-fifties the then government decided to forcefully remove them from the land, relocate them to the west of where they were living. The reason being that they wanted to expand the borders of the Kruger National Park. With the advent of democracy and the change in legislation, there was then the opportunity for the Mdluli community to reclaim their land. The vision of the then Chief, the late M Z Mdluli was to establish a lodge, the benefits of which would be for the upliftment of the Mdluli community.

Mdluli Safari Lodge.
Mdluli Safari Lodge

Land reclamation in South Africa is quite a complex matter but, in any event, this community with our help and support were successful in reclaiming ownership of their land, to which they now have a freehold title. That land is located within the borders of the Kruger National Park and the Mdluli Community Trust holds freehold title to that land. But it’s seamlessly within the borders of the Kruger National Park and anybody either driving through, on or past that land would not be aware that the 850 hectares, that the freehold thereof, is with the Mdluli community.

Because it’s now within the Kruger Park, the community together with yourselves have partnered up and decided to launch a private lodge there. Can you tell us how that came about?

South African National Parks

Yes, so there’s been a very extensive process of interacting with the various authorities, obviously importantly the Kruger National Park and South African National Parks (SANParks). There were also a whole host of regulatory and environmental matters that needed to be attended to. At the end of these various processes, the approval is to build a total 200 bed units on this land. This specific project that we’re talking about is the development phase of the first 100 beds, which will be in the form of a luxury ensuite, tented lodge.

Now you’re also adopting the form of a 12-J investment to get this project up and going. Can you tell us more about why you’ve decided to go that route?

A Section 12J’s purpose really is to raise capital for these entrepreneurial ventures, so it actually fits perfectly within the framework and the intentions of the 12J legislation. This is a hospitality project, it’s a tourism venture, and that fits fairly and squarely within the objectives Section 12J. So, it may make sense to set up a 12J and to structure the various phases of the project through a 12J and raise capital.

How much capital are you looking to raise?

The capital to be raised in phase one is R45m which will be for the construction of the first 50 luxury ensuite tents, so that’s 100 beds in total, 50 luxury tents. Then, there’s obviously the central facility which comprises a reception, bars, lounges, bomas, swimming pools, a small business centre, a small conference centre and a spa.

For anybody who wants to invest in this, what are the costs and what are the benefits they can expect to receive during this investment period?

We’ve come forward with a very innovative structure. There are two packages on offer. The first is the R1m package. The cash-on-cash return to the investor in the Section 12J based on conservative operational feasibilities for this lodge, over a ten-year period is an IRR of 16%plus. As I say, this is quite conservatively calculated, so it will hopefully be somewhat more than that. In addition to that, we are offering the investor 25 free bed nights per annum for each of the ten years —250 bed nights in total— a bed night including dinner, bed, breakfast and one game drive activity.

That’s a game drive with a qualified gameranger on an open safari vehicle and the value of that (if you extrapolated it at the current rates for accommodation of that standard for a lodge in or around Kruger) is slightly over R1m as well. So, not only does the investor get the cash IRR of 16% plus, but there is an effective doubling up of the return through the value of the bed night. So, that’s the R1m package.

Then, with the R500 000 package, the principles are substantially the same, 16% plus IRR on the cash portion. However, on the R500 000 investment, it’s ten bed nights per annum for ten years. That also doubles up the effective return to well over 30% IRR.

What are the timelines for the developments of this site, when do you expect to be fully up and running?

We expect to commence construction in April. The construction period is six or seven months, so we would expect to start receiving guests in the last quarter of 2018.

The bednight package for the investors in Mdluli Safari Lodge will be operational from January 2019. I just to stress that – for those who want to avail themselves of the bed night – you can go on the website and you book the bed nights. It’s not restricted to a specific week or a specific timeframe. You book well in advance; you get the availability that suits you best. There are no hidden costs, no levies, or other charges at all.

This is one of the few private reserves in the Kruger Park, so just out of curiosity, why is there a limit on the number of private reserves or lodges within the Kruger Park?

It’s not one of the few. In fact, it’s the only one. There are other lodges which are by way of concession from SANParks, but that’s an entirely different structure. As I said earlier, this land is in the ownership of the Mdluli community and this gives an investor the opportunity to invest in the operations, in the running of the lodge as a private investor. There has never been an equivalent opportunity and there will never be another opportunity like this one.

So this is the first of its kind and the only of its kind?

It’s the only of its kind because there’s no other freehold ownership within the borders of the Kruger National Park.

In terms of how investors can participate, can you give people advice on where they can go if they’re interested in signing up to it or to find out more information about it?

Sure, the Mdluli Safari Lodge Limited Section 12J Company, registered with the FSB and with SARS, has issued a prospectus, which has been registered by CIPC, and as an unlisted public company.

Investors subscribe for a fresh issue of shares —if they go to the website; it’s a seamless process to fill in the mandate and application form.

On that website, inter alia, there’s a short video clip, a virtual reality tour of the lodge, very beautifully done with Google Maps. The images are of the actual site itself with its trees and foliage and the chalets are superimposed, so it’s an opportunity to get the real feel of what it will be like to visit and stay at  the lodge.

There is also the full investor presentation and the prospectus. The website is very comprehensive and those interested should also feel free to contact us —all contact details on the website.

Obviously, people have to sign up before the end of February as well?

If they want to avail themselves of the tax deduction for the year-end of 28 February 2018, which we assume most investor  will want to, then yes, they should do that by Wednesday of next week and that would be the most effective way of benefitting from both the financial package as well as  the lifestyle package.

Great, thank you very much for taking the time to chat to me Malcolm.

This special podcast was brought to you by Mdluli Safari Lodge Limited.

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