National Department of Tourism: Strategic Objectives & 2010 FIFA World Cup Readiness

Meeting report

Briefing on National Department of Tourism's Strategic Objectives and 2010 FIFA World Cup Readiness
Ms Sindiswa Nhlumayo, Deputy Director General, National Department of Tourism, noted that her presentation would deal with the state of tourism at present, the rationale for the choice of priorities that the Department of Tourism (NDT or the Department) had, its strategic objectives, priorities, key performance areas, and indicators and targets for this financial year. She would then moved to a presentation on the preparations for the 2010 World Cup. The presentation would also focus briefly on the lessons learnt from the Confederations Cup. She would take the Committee through the process being undertaken for the development of a National Tourism Strategy.

Ms Nhlumayo submitted that slide 3 explained the Department's role in Tourism. She explained the Department's focus on transformation, skills development and improvement in service levels, transport, incentives and investments, quality assessments and accommodation, marketing and branding, and tourism enterprise development. There was also a focus on safety, in terms of anti-crime strategies and health precautions for visitors and travellers within the Republic. The Committee was provided with the statistics of tourism growth in South Africa compared to other global and international arrivals. The presentation also gave details of tourism's market share in terms of contribution to Gross Domestic Product. The impact of sporting events hosted in South Africa was highlighted in terms of increasing growth in the second quarter.

Ms Nhlumayo then highlighted some of the challenges faced in transforming the tourism sector. The industry was dominated by Small, Medium and Micro Enterprises (SMMEs) and a multiplicity of legislative frameworks for government procurement. Other challenges were identified in the areas of skills development, accommodation availability, transport and safety, and marketing.


Mr D  van Schalkwyk, Director General, National Department of Tourism, tabled and explained the Department's budget for 2009/10-2012/13. He submitted that as part of the macro-government process it had been agreed how the Environmental and Tourism branches would split from the former Department of Environmental Affairs and Tourism. The split had been realized, based on formulas that had been acquired from the Department of Public Services and National Treasury. 24% had gone to tourism, because this comprised only a small branch with 60 staff and support services.

Mr van Schalkwyk explained slide 53, saying that the administration budget, which included support services, legal services, communications and personnel expenditure, was around R74 million. The whole tourism budget was R754 million. The sector services, which included the expanded public works programme for the sector, and that was split on a 35/65 principle, had a budget of R279 million. This brought the total budget for 2009/10 to about R1.1 billion.

There was also a ruling by the Accountant-General that the NDT must backdate all expenses to 1 April 2009, and this meant that there would be some challenges with the auditing and accountability exercise involved.

Mr van Schalkwyk explained that about R700 million (see slide 56) was related to transfer payments to the entities; namely South African Tourism (Satour), the grading council, and Tourism Enterprises Programme (TEP). There was a very small budget for Tourism operations, only around R50 million. The Department was asking for an addition R438 million in the financial year, mainly for the creation and phasing in of the new Department.

The total personnel being transferred across to the Department comprised around 250 people, and this would rise over the years to about 400, through a phased-in process within the current needs or situation of government, and in consultation with National Treasury. The Department would also need to ask for additional funding for unforeseen and unavoidable expenses, due to the split, to sort out accountability issues around services, IT and other systems.

He finally tabled and set out the Monitoring and Evaluation Mechanism (MEM) in slide 59.

Discussion
Mr A Nyambi (ANC, Mpumalanga) congratulated the Department on its effort. He noted that slide 4 referred to the challenge of the 6 provinces that were not attracting visitors or tourists, and asked whether there were statistics available that gave a reflection by provinces, as had been done in slide 27 on the issue of accommodation availability.

Mr van Schalkwyk responded that the Department would provide the Committee with a table of statistics giving information according to province.

Mr Nyambi asked how Small to Medium Enterprises been empowered in relation to provinces, and if there was information on which SMMEs had been assisted in relation to provinces.

Ms Lisa-Ann Hosking, General Manager: Operations, Tourism Enterprise Programme, responded that the Tourism Enterprise Programme (TEP) was a national SMME support organisation, although it did have a provincial footprint. It had offices in all of the provinces. The way in which its time and money in the provinces was spent related to each province’s tourism contribution to the Gross Domestic Product (GDP). For example, if the Western Cape Tourism's contribution to GDP was 16%, then TEP would spend 16% of its time and budget in that province. The same applied to its targets.

Mr Nyambi asked, on the issue of a second economy establishment, which two provinces were being targeted by the Department for assistance.

Ms E van Lingen (DA, Eastern Cape) commented that visitors may be discouraged from visiting six of the country’s provinces because of the lack of air travel facilities. She suggested that the number of international terminals must be increased. The three most-widely visited cities were Durban, Cape Town and Johannesburg, where the international terminals were situated.

Ms Nhlumayo responded that the two provinces in terms of the second economy were the Eastern Cape and KwaZulu Natal. In the Eastern Cape the Department wanted to showcase its beautiful eco-coastline, whilst in KwaZulu Natal the Department wanted to showcase St Lucia, which was a world heritage site. It was a cause for concern to the Department that there was not equal provincial spread of tourism, nor of growth in the sector. The Department was anxious to work very hard to resolve this issue.

Mr Nyambi asked whether there was any other company, other than MATCH, with whom the NDT had agreements, and which was not contracted to FIFA. He asked whether the Department had any other ways of dealing with companies that were not accredited by FIFA.

The Chairperson was concerned about the fact that MATCH was contracted to FIFA, when tourism was one of the drivers of employment creation.

Ms Nhlumayo responded that MATCH was the only company accredited by FIFA to sell accommodation. However this was only with respect to teams, sponsors and match officials.

Mr B Mnguni (ANC, Free State) asked what the Department was currently anticipating in terms of unforeseen and unavoidable expenditure.

Mr van Schalkwyk responded that this was expenditure involving the splitting of the Department, which would be phased over a period of three years. Initially it would involve allocations for the staff complement of 250, which would grow to 400 over the three-year period.

Mr Mnguni wanted to know what the success rate was with regards to the training of SMMEs.

The Chairperson asked how the Department was assisting small business. It seemed that what was reflected on paper and in the budget was not having measurable effects on the ground.

Ms Hosking responded that the Department focused on existing businesses and aimed to get them sustainable. The Department believed that transformation was not only a top-down, but also a bottom-up approach. Therefore the way to break monopolies was to create strong small businesses at the bottom of the pyramid, and it was for this reason that the Department was focusing on businesses that were already formed and assisting them. TEP also had a limited budget so it needed to decide how they spent its time and how it would allocate money to obtain the most value.

Mr Mnguni asked a follow-up question with regard to the Department's spending on and funding for enterprise development.

Mr van Schalkwyk responded that a lot of the funding for the Tourism Enterprises Programme came from external sources.

Ms Hosking added to the answers. She noted that TEP had moved away from an ad hoc approach to training in full businesses, and a hit and run approach to training small businesses. TEP now had a graduation model. At the start, TEP would identify those small businesses that it could assist, and then put them through a segmentation to identify which business would fit into which training intervention. The second part of the model moved to business skills training, then mentorship, and then a management development programme. TEP did not simply train small enterprises and then abandon them. Although it was inevitable that some businesses might fall out along the way, others would graduate through a focused programme. All in all TEP put about 5 000 small tourism businesses through its programme.

Mr Mnguni asked what the tourism sector was contributing in terms of the 500 000 jobs that the President predicted needed to be created by the end of this year.

Ms Nhlumayo responded that the global average statistics showed that eight tourists created one job. In South Africa the figures currently stood at twelve tourists creating one job. The Department wanted to improve this figure by increasing the number of visitors to South Africa.

Mr M Maine (ANC, North West) asked whether the Department had forged close relations with the Department of Transport, to combat problems that tourists experience when moving from one area to another, such as flight delays, loss of luggage and the lack of airline services in certain regions. He asked what plans the Department itself might have in place to address these issues. He noted that the World Cup would cause inconvenience to South African travelers.

Mr K Sinclair (COPE, Northern Cape) commented that the Department must  bear in mind that this event would leave a legacy and apply its mind to the aftermath of the event, in terms of its impact on internal tourism. He was concerned that the cost of domestic air travel in South Africa sometimes was higher than undertaking flights to international destinations, such as Dubai or Europe.

Mr Mnguni asked what the possibilities were of the other six provinces being developed for niche tourism

Ms Nhlumayo responded that it was of concern to the Department that growth was not shared, and that not much had been done to showcase and package the unique attractions of each and every province in terms of the Tourism Sector Strategy. She reiterated that there were only three provinces in the country with an international airport terminal. Airlines could only service a route if there was a compelling reason to do so.

Mr van Schalkwyk added that South African Airways (SAA) had indicated that it did not fly to certain areas mainly because it was defined by the Department of Public Enterprises as a commercial airline and would therefore only service a route if there was sufficient traffic to justify the establishment of regular flights to that area. Although SAA was South Africa's local carrier airline, it was nonetheless commercially oriented. The main issue was that responsibility sometimes lay with other Departments and strong alliances would have to be forged to cope better with these issues. This was the reality,  and the Department was still trying to find its way in this area.

Mr Maine commented that it appeared, from his experiences, that the FIFA ambassadors were all recruited from one province, as they had not been able to speak to him in his own language, despite the fact that they were in his home province. He asked what criteria were being used to employ ambassadors, why consideration had apparently not been given to recruiting in each province, so that the 2010 event would benefit all South Africans and leave a legacy in terms of rural development.

Ms Nhlumayo responded that ambassadors were recruited from the four host cities, and the focus was for each of them to know their cities. Details of the requirements and process for becoming an ambassador were available on the FIFA website.

Mr Maine expressed concern about the lack of local food and products in stadiums. He commented that he had been told that even the water being sold in the stadiums was not water from South Africa. If this was to be an African event with a positive economic impact, then there had to be African products in the stadiums. He said that there could not be any nationalist hype if the country did not use its own resources to promote the event.

Mr Sinclair commented that FIFA had no right to muscle out the South African government's priorities in terms of development. He submitted that a study conducted in Germany had revealed that the FIFA World Cup had actually been detrimental to tourism in that country, because the high volume of soccer fans traveling to Germany, had discouraged ordinary tourists from choosing Germany as their destination.

Ms van Lingen also submitted that the German experience had shown that the insurance industry had benefited the most from the German World Cup Tournament. The Committee must be aware of this and not simply assume that most benefits would accrue to tourism.

Ms Nhlumayo conceded that South Africa had perhaps given away too much in its eagerness to host the 2010 World Cup, and it was a reality that FIFA was dictating events. The country would need to come up with innovative ways to ensure that African cuisine could be sold at stadiums, without contravening FIFA conditions and contractual obligations. She added that the Department was aware of the potential detriment that could be caused to tourism by the 2010 World Cup. There was a strategy to manage displacement and the Department was currently enforcing the mandatory registration of tourism services.

Mr Sinclair asked whether the Department had considered the potential of tourism to advancing the Provincial Growth and Development Strategy (PGDS).

The Chairperson asked the Department to respond to the issues raised by members about rural development and the promotion of African culture at the 2010 World Cup.

Mr van Schalkwyk responded that the Department agreed with the Committee's comments on the issue of the FIFA contracts. It was, however, unable to do anything on the matter, since everything had been done under the umbrella of the Department of Sport and Recreation, although the NDT had picked up some of these issues and made representations in meetings where it had been involved with the Local Organizing Committee and the Legacy Committee. Many internal discussions were held on issues like the food sold at stadiums. The agreements that had been put into place were quite tight and Government was bound by them, so that many of the questions could not be answered by NDT. The Minister and the Deputy Minister had, however, already met with FIFA around some of these issues. They had also met with South African Airways on issues affecting the flow of tourists.

Mr van Schalkwyk assured members that rural development would be high on the profile of the new NDT, by establishment of a Directorate tasked to drive Rural Development through Tourism in the rural areas, and that was also aligned to the Department's social responsibility programme. This had been debated with the Deputy Minister, to ensure that there was a strategy for dealing with how tourism would be brought to the rural areas.
He also added that the Department wanted to include the less-visited provinces, through initiatives such as the upgrading of national parks in the Northern Cape, to improve accommodation facilities.

Ms Nhlumayo noted that the Department was in the process of appointing a person to develop a strategy on rural development

The Chairperson advised the Department to minimise the use of consultants.

Mr van Schalkwyk responded that the Department had hired a consultant as result of the challenges it had experienced with the filling of posts and it currently had 59 unfilled vacancies.

Mr Maine commented that the appointment of external service providers must cease. He preferred that the Department should rely on its internal capacity.

Mr Maine also commented that although the presentation looked fine on paper, he would like to see a rural development strategy in action rather than on paper.

Ms van Lingen submitted that positive inter-governmental relations were critical in tourism. National tourism, and its future vision, had to be in line with the provinces and local government. She was horrified by the fact that local government was not spending money on tourism. For example Knysna had about R4 million to R6 million in its tourism budget but Coega, which was a small municipality not very far away, had spent R250 000.

Ms S Chen (DA, Gauteng) submitted that there was a need to bring the Department of Home Affairs on board in some of the discussions, so that there was proper oversight over and prevention of corruption, so that there was a positive image of the country promoted at ports of entry.

She also asked whether the issue of reducing the visa turnaround time for Nigeria and China was the responsibility of the Department of International Relations or Home Affairs.

Ms Chen also if the Department had a pre-arrival crime-fighting orientation strategy for visitors so that they could be oriented before entering the country.

The Chairperson commented that the presentation had not made any special reference to people with disabilities, either in relation to access to accommodation or transport, or skills development. South Africa was battling with the issue of disability, and there were international conferences to look at it. South Africa needed to look at what had been done and achieved in other host nations such as Germany and Korea around accommodation for people with disabilities. The issue was in fact broader, and could be extended to those who had health or mobility problems, such as senior citizens and pregnant women.

Ms Nhlumayo responded that there was a conference that would be convened to deliberate on the issue of accessibility during October.

The Chairperson asked the Department to invite the Committee to this conference on the issue of accessibility to gain an insight on that matter.

The Chairperson asked the Department to identify the main players in the tourism sector. They had to be known so that they could transform.

The Chairperson commented on the land market issue, on page 6 of the presentation. He wanted to reconcile this with land restitution. In the Western Cape, for instance, there was a large percentage of foreign-owned land, with many wine farms being German or Scottish-owned. He commented that this could lead to South Africans having no country of their own.

The Chairperson commented that this was the least transformed Department. He gave the example of boating permits that had been issued out in Richards Bay, Durban and St Lucia, but noted that none were issued to black people. The question was how would this be turned around. This was a matter which the Committee should take up with the Minister. He also commented that not many black people were involved in activities such as the whale watching in the Western Cape.

Ms Beulah Mosupye, Chief Executive Officer, Tourism Empowerment Council of South Africa (TECSA) responded that the Council’s studies on transformation had indicated that the majority of the big industry players, such as the largest hotel groups, were transformed, because they had the resources and the capacity to implement transformation, and they did not need much prompting to get them to do what was required by the law. However, there was more of a struggle to get the small and medium sized businesses to transform. Since the Tourism score card had been gazetted, it had been used. There was a need to popularise the Charter and help SMME owners to understand the exact requirements of the score card. Many did not appreciate, for instance, that they would not have to give up ownership or control of their businesses, provided that they focused on other elements. The Tourism sector score card focused on human development elements, addressing the gaps in the industry in relation to skills development, management control and preferential procurement. This would improve professionalism, which would ultimately benefit the industry.

Mr Mnguni asked how the Department was dealing with the problem of small-time contractors who, despite being given funding, would run into financial difficulties within a short space of time, and who were unable to compete with the larger and established businesses.

Ms Mosupye said that there was a conflict between the Preferential Procurement Policy Framework Act (PPPFA) and the Broad Based Black Economic Empowerment Act (BBBEE) in two areas. The portion of the PPPFA that measured BEE was still based on the narrower interpretation of ownership, not on broad based BEE. This acted to the detriment of a company who might have attended to seven elements but not have black ownership, as against one that was black owned but had done no more. Secondly, the  90/10 or 80/20 principle set out, for instance, 90% or 80% functionality and 10% or 20% price considerations respectively. At the end of the day, when tendering, the price would determine who obtained the tender, rather than empowerment issues. In some instances where PPPFA applied. In others, such as issuing of licences, BEE applied. This explained the point raised by the Chairperson around the boating permits, and they would have been issued according to lawful processes and procedures, but the law might not achieve what was desirable.  The Department of Trade and Industry and National Treasury had been in discussion, and there were some interim measures in place, but there remained some areas of disagreement between these two departments. That process needed to be fast tracked, as its lack of proper implementation at the moment was robbing the country of the opportunity to implement BBBEE properly. She appealed that the Committee should highlight this matter when dealing with the Department of Trade and Industry.

The Chairperson commented that it seemed insufficient to have only 100 000 graded rooms, when the number of anticipated visitors was 400 000.

Ms Nhlumayo responded that the 400 000 anticipated visitors would not all be staying in graded rooms, and furthermore would not all be in the country at the same time. Some might only follow their teams and would depart if their teams were knocked out, whereas others might only wish to attend opening ceremonies or selected matches. The Department was confident that there was sufficient accommodation.

The meeting was adjourned.