Department of Tourism briefing on the sector's Black Economic Empowerment Framework

Meeting report

Broad Based Black Economic Empowerment (B-BBEE) implementation in Tourism Sector
The Department of Tourism briefed the Committee on transformation and the implementation of the B-BBRR within the tourism sector. The departmental delegation comprised of Mr Dirk Van Schalkwyk, Acting Director-General, Ms Buella Mosupye, Chief Director: Transformation and Mr Ralph Ackermann, Chief Financial Officer. Ms Mosupye undertook the briefing.

The Tourism Empowerment Council of SA (TECSA) no longer operated separately from the Department. It was now incorporated within the Department. From the 1 April 2010 the Tourism Empowerment Programme now operated as a unit within the Branch of Tourism Development. Through this incorporation TECSA would have access to the necessary support to implement its work and achieving maximum impact. As was required by the BEE Act 53 of 2003, the Department was tasked with reviewing the Tourism BBBEE Charter Advisory Mechanism. It would be the platform where the partnership and commitment by government and private sector was given expression through an agreed action plan to drive compliance of the tourism sector to BBBEE. A National BEE Advisory Council chaired by the President was also formed. It had its first meeting on 4 February 2010. The Council comprised of nineteen members from business, labour, government and communities. A challenge was perhaps that there was a lack of alignment of the Public Preferential Procurement Framework Act with BBBEE. Without alignment government would not be able to maximise its impact on transformation through procurement. The Committee was given a breakdown of the Programme’s 2010/11 business plan highlights outlining strategic objectives, key performance indicators, initiatives and specific budgets that had been allocated. The Department had embarked on a national study to measure the transformation progress achieved to date. Access to finance, the production of scarce and critical skills and the global and national recession was identified as some of the challenges to achieving rapid transformation. Challenges were addressed through the initiatives outlined in the business plan. (Refer to document)

Discussion
Mr L Khorai (ANC) addressed several issues. Firstly, he asked who the private sector was and what was expected from the private sector. Secondly, he asked who was represented by the community in the Council. Was it urban or rural persons? Were the youth and women represented? Finally, he examined whether it was correct for the President to chair the Advisory Council. If decisions relating to operations had to be made who did the Council refer to.

Ms Mosupye replied that the private sector comprised of owners of accommodation, restaurants and people who operated within the industry. Community representation within the Advisory Council was covered demographically, youth and women were included.

Ms M Schinn (DA) asked how the 19 persons on the Advisory Council were chosen. She also asked what informed the decrease of the BEE Rating from R5m to R2.5m. It seemed that much of the work that was being done was a duplication of The Tourism, Hospitality & Sports Education & Training Authority (THETAs) work. What was the budget for the BEE Programme? Was the supposed R4.3m budget of the Programme inclusive of salaries and administration?

Mr Van Schalkwyk conceded that the tourism function in government was fragmented. The challenge was to address this fragmentation. The pace at which THETA was progressing was slow hence the Department had to step in. The total budget for the Programme was R7m. It was the original amount that had been allocated when the Tourism Empowerment Council of SA (TECSA) was a separate entity from the Department. The figure remained the same when TECSA was incorporated within the Department. The budget was considered insufficient. There was alignment with the Tourism Enterprise Programme. The budget included salaries. 

Ms Mosupye noted that limited funding did not allow the Programme to embark on physical projects. The best that it could do was to create awareness. Limited resources forced reliance on partnerships. The Advisory Council was managed by the Department of Trade and Industry (DTI). Names of possible candidates were recommended to the President. The threshold before the BEE Charter had been gazetted whilst consultation was ongoing had been R1m.The DTI had in the meantime developed a Code of Good Practice which recommended a threshold of R5m. There was unhappiness with the R5m and after discussion a middle ground had been reached at R2.5m. In as far as duplicating the work of THETA, the BEE Programme stepped in to incentivise industry to embark on skills development which would allow them to score points. 

The Chairperson asked what the performance was since the inception of the Tourism BEE Charter and the Scorecard. Were there mechanisms for transparency? He said that when individuals asked for assistance they were referred from one tier of government to another.
The Industrial Policy Action Plan (IPAP) was now in place. How did tourism feature in the scheme of things? The Chairperson noted that IPAP had to target sectors.
Mentorship programmes were considered vital. Incentives were needed to attract the private sector.

Ms Mosupye said that the Tourism Bill dealt with issues of transparency.

Mr Van Schalkwyk stated that the Department’s Strategic Plan was aligned with IPAP. The tiers of government responsibility were that national was responsible for policy, provincial and local government was responsible implementation. He noted that the alignment of budgets was not geared for tourism. The Department set up a budget structure for provinces and local government to talk to tourism. The allocations for tourism was minute compared to the revenue that tourism contributed to the fiscus. Tourism contributed more to the fiscus than mining.
The Department also granted bursaries aligned to tourism. There was a shortage of funds which prevented tourism from developing. The Human Resources Strategy of the Department allowed for alignment with the Department of Tourism.

Ms Mosupye commented that s there was a need for alignment of finances and support in as far as the different tiers of government was concerned. The Transformation Unit was a one stop shop. The idea was to avoid the situation of double dipping. Activities needed to be aligned so that there was clarity as to which tier provided assistance where. The tourism Scorecard was developed as an incentive mechanism. People development in the tourism sector was necessary. Skills development and employment equity was also important. If private companies implemented BEE or employment equity for instance then it would earn them extra points on the scorecard. 

Mr G Krumbock (DA) asked why the Department micromanaged the tourism industry. Why were regulations passed in relation to outcomes? In as far as tourism education was concerned, was it not better to support and encourage those classes in schools that supported tourism. It was better to create empowerment through facilitation. Why was the Department insisting on being bureaucratic? Regulations were used to dictate what should be done. The best approach was from the supply side.

Mr Van Schalkwyk replied that the new outcome based processes of government would address some of the problems. The alignment of departments in terms of tourism would take time. He partly agreed that perhaps in certain instances there was a needed to be a “buy in” but legislation and regulation was also needed. There was a good relationship between the industry and the Department.

Ms Mosupye indicated that an alternative to regulation was perhaps the use of the BEE implementation framework. Businesses were encouraged to behave in a desired way. If huge industry players assisted, BEE small businesses recognition was given. It was called enhancement recognition.

Ms X Makasi (ANC) asked for a list of businesses that had been assisted by the Programme. She noted that Members had visited provinces and many complaints were received from small businesses that DTI had not assisted them in any way. In essence these businesses were fending for themselves.

Ms Mosupye said that the Department would try to compile a list. The numbers of persons taking part in skills development and employment equity programmes would have to be measured.

Ms J Maluleke (ANC) referred to the presentation which alluded to the fact that five women were to be entered as candidates for the annual BEE awards in the women category. She consequently asked how the candidates were to be chosen. Were the candidates from rural or urban backgrounds? 
Lack of critical skills was a concern. What was the Department doing to address the issue?
The Department needed to work more closely with the Department of Education on how to empower graduates. How was the Department also engaging with schools?

Ms Mosupye replied that the five women were shortlisted from a list of twenty. Women from both urban and rural areas were included. The Department’s business plan was part of a bigger business plan. Linkups did take place with the Department of Education. Human Resource development linkups also took place. The role of the Department was facilitation and monitoring. Partnerships with the private sector were the norm.

Mr Van Schalkwyk noted that skills development was taking place. It was being done by both SETAS and departments. Good progress was being made.

Ms Schinn referred to the Tourism Bill and asked whether it was correct that it was expected around September or October 2010. Would the Bill shed light on the differing roles of the Department and of DTI? She felt that the Bill should set out the role of the Department clearly. Entrepreneurial development should fall within the scope of DTI.

Mr Van Schalkwyk explained that the Tourism Draft Bill tried to define the role of the Ministers and MECs. Conflicting things would be built into legislation.

Ms V Bam-Mugwanya (ANC) described the felt the document as a “frustrating document”. Tourism was far out of reach for the ordinary person at grassroots level. She felt that the work that was being done was a duplication of work that was being done by DTI. Was the lower threshold of R2.5m an indication of capital invested or of profit? The threshold of R2.5m was still out of reach for the average person. She noted that it was difficult to access funding for emerging entrepreneurs from organisations like the Development Bank of Southern Africa and Khula yet the Programme obtained funding from them. How were partnerships encouraged? How were big industry players like Southern Sun encouraged to assist small businesses? The presentation information was more applicable to existing industry role players rather than new entrants.

Ms Mosupye said that the Tourism Act would set out guidelines as to whom and how participation was to take place in the sector. The R2.5m turnover was for companies who were already in the sector and needed to be verified. Businesses would receive support under the implementation framework. The R2.5m turnover threshold was for those already in the industry to reach compliance. Partnerships between big business and small businesses were also encouraged. Southern Sun Hotels did offer assistance to small bed and breakfasts on how best to run their businesses.

In relation to start up businesses Mr Van Schalkwyk, explained that the Department’s Strategic Plan outlined specific projects. There were eight projects in rural areas. More could be done but unfortunately there were financial constraints. The Department had requested R1.5bn over three years. Partnerships with provinces were also important.

Mr L Khorai (ANC) referred to the challenge faced by the Department regarding a lack of alignment between the BBBEE and the Preferential Procurement Policy Framework Act (PPPFA) and asked who was responsible for the alignment. What were the timeframes?

Mr Van Schalkwyk said that the BBBEE was the responsibility of the National Treasury; while DTI was responsible for the PPPFA. He noted that there was an impasse between the two Acts. Timeframes were determined by the Minister of Finance.

The Chairperson asked what was being done to monitor persons who were continuously awarded government bids.

Mr Van Schalkwyk said that the Chairperson’s concern was valid. National Treasury was discussing the issue. The concept of a tender board that was used in the past was being considered again. An amendment to the PFMA was perhaps needed.

Ms Mosupye noted that there was an element of economic realisation. Broad based ownership was needed.

Ms M Njobe (ANC) said that there was not only an alignment of budgets needed at provincial and local level but also at national level. She pointed out that in terms of Budget Vote 34, SA Tourism had received a huge allocation. Could SA Tourism not be tasked with ensuring that there was alignment? It was felt that provinces and local government should not undermine tourism.

Mr Van Schalkwyk said that SA Tourism was a national entity tasked with marketing SA internationally. There were nine organisations like SA Tourism doing the marketing of the provinces. He conceded that alignment of work being done was a difficult debate. Money spent on tourism should find its way back into tourism.

The Chairperson stated that he was yet to listen to a radio programme about tourism. Why was it so? Radio should be used more as it was an accessible medium to both the poor and persons staying in rural areas.

Committee Report on Department of Tourism budget and strategic plan
The Chairperson asked Members to forward any inputs on the report to the Committee Secretary, Mr Jerry Poltina by Friday 23 February 2010.Thereafter the Committee would adopt the Report.

Ms Njobe asked if comments on the report were to be forwarded to the Committee Secretary how would members know whether the inputs made was acceptable to the Committee.

The Chairperson responded that if changes needed to be made to the Report, then it would be done.
He added that it was the last meeting of the Committee for the current parliamentary session. The Committee would return to Parliament on 4 May 2010.

The meeting was adjourned.