Transformation in the tourism industry: briefing by Department of Tourism

Meeting report

National Department of Tourism (NDT)
The National Department of Tourism briefed the Committee on transformation in the tourism sector. The delegation comprised of Mr Victor Tharage Deputy Director General, Policy, Research, Monitoring & Evaluation, Ms Morongoe Ramphele Deputy Director General, Domestic Tourism Management, Mr Mankge Mathibela Director: Sector Transformation and Ms Beulah Mposupye Chief Director: Tourism Management.

Mr Tharage emphasised that studies had been done on transformation in the tourism industry, the results of which needed to be signed off. The briefing would explain amongst other things the Black Economic Empowerment concept, the projects that NDT had in place and what the results of those projects were. The NDT’s Annual Performance Plan would also contain specifics on transformation. Challenges faced by the NDT would also be highlighted.

Mr Mathibela undertook the actual briefing and started off with some background. In 2003 the Broad Based Black Economic Empowerment (B-BBEE) Act No 53 was enacted. Thereafter development of the Tourism BEE Charter was embarked upon and it was launched in 2006. The year before in 2005 the Tourism Charter was signed and a Charter Council was appointed. In 2007 the Tourism Charter was aligned to the B-BBEE Codes of Good Practice launched in the same year. The Tourism Sector Code was binding on all stakeholders operating in the sector. In 2011 the NDT made transformation one of the key pillars of the National Tourism Sector Strategy.  In the same year National Treasury aligned the Preferential Procurement Policy Framework Act (PPPFA) to B-BBEE.

The Tourism Sector Charter and Scorecard (Code) were developed within the objectives of transforming the sector, creating a globally competitive industry in addition to human resource and enterprise development. There was a Tourism Marketing SA (TOMSA) Levy which tourists paid, collected by players in the industry and paid directly into a TOMSA Fund. The Tourism Scorecard was binding on the public sector and when dealing with tourism goods and services providers, the Tourism B-BBEE Code took precedence.

The Committee was provided with detail on the seven elements of B-BBEE ie ownership, management control, employment equity, skills development, enterprise development, preferential procurement and socio economic development. The following figures were provided to members:

●Ownership- as at 2012 the B-BBEE figure sat at 20%, it was expected to increase to 30% by 2017
●Management Control- as at 2012 the B-BBEE figure was 50% and it was not expected to change by 2017
●Employment Equity- for 2012 the figure sat at 2% and it was only expected to increase to 3% by 2017
Skills Development- as at 2012 the figure was 2% and it was not expected to rise above 3% by 2017
Preferential Procurement- for 2012 the figure was 50% and it was expected to increase to 70% by 2017
Enterprise Development- as at 2012 the figure was 3% and it was not expected to increase by 2017
●Socio Economic Development- the figure was expected to stay at 1% from 2012-2017. In the first five years of implementation the industry would focus on human development elements such as management control, employment equity, skills development and enterprise development and preferential procurement.

He continued by elaborating on the framework for measuring Tourism B-BBEE. Companies exceeding R35m revenue had to comply with all seven elements of the scorecard. Qualifying Small Enterprises (QSE) with revenue between R2.5m – R35m had a choice of complying with four of the seven elements of the QSE scorecard. Exempt Micro Enterprises (EME) which had revenue below R2.5m was exempt and had automatic level 4 recognition. Members were provided with elaborate detail on B-BBEE classifications, points scoring and other related matters. 

On the 27 August 2012 the Minister had appointed members of the Tourism B-BBEE Charter Council to serve on it for the next three years. The Council served in an advisory capacity to the Minister and would meet four times a year. A list of Charter Council Members was provided to the Committee.

Discussion
The Chairperson stated that transformation in the tourism sector was needed. The tool with which to measure progress was the Tourism B-BBEE Codes (Scorecard). He noted that part of the problem was monitoring and reporting. He asked whether there were good enough incentives in place to encourage the private sector and other role players to transform the sector. Members would be interested to know how many hotels, restaurants and cruise ships were owned by blacks and if government was playing its part towards encouraging transformation in the sector?

Mr Tharage explained that tourism businesses that started off with zero and were now at R2.5m were exempt from B-BBEE requirements. The bulk of tourism businesses fell into this category. It was not quite the domain where transformation in ownership needed to be targeted. It was an incentive for businesses of the sort to comply with transformation requirements even though they were exempt.

DTI’s ceiling for exemption was set much higher at R10m. If the R10m ceiling was applied to the tourism industry then one might as well exempt everyone.

The Chairperson noted that the briefing made reference to black women. He asked what was the policy resolution regarding this designation. Was it under the Department of Trade and Industry (DTI) or the NDT?

Mr Tharage reacted that it was part of the Employment Equity Act. It spoke about different categories of targeted groups of employers’ workers.

Ms Mposupye said that there was an effort to highlight participation of black women in the Tourism Scorecard.

Mr Tharage said that the NDT took transformation very seriously. Plans were in place. The NDT also ensured that there was BEE compliance. He was glad that alignment had taken place. He additionally felt that the Auditor-General’s Office could play a bigger role in transformation.

Mr S Farrow (DA) said that there were 708 businesses supported by DTI by way of loans yet few of them had any recognition of sustainability. He referred to statistics of loans to small and medium enterprises and asked what the success rate of these businesses was. A great deal of capital had been made available to fund small businesses run by women but unfortunately not many had fared that great. Many of them had failed because they did not have business plans in place. Another downfall was that government itself was not using the smaller bed and breakfasts and when government did use them, payment for services rendered was many a time late. The Committee needed a progress report of what was happening at grassroots level.

He referred to the establishment of the BEE Charter Council in August 2012. He hoped that the Charter would be taken forward. What was the situation at present?

Mr Tharage explained that the mandate of the Charter Council was to have an advisory function. The Charter Council had to develop a position and thereafter make a recommendation to the Minister. However the fact of the matter was that the Minister had to take responsibility at the end of the day.

He noted that transformation by the tourism sector went beyond the benefits of procurement opportunities. As awareness of transformation was taking place, it emerged that procurement activities was an incentive for being compliant. He would in the near future provide specific information on transformation on different categories in the sector to the Committee. All was not doom and gloom.

In order for the NDT to take action they first needed to identify areas of challenges. Black women and skills development were two such challenges. There was a great deal of dynamics that needed to be considered. The Charter Council recommended plans to the Minister; the Minister in turn approved and signed the plans. Once approved it could be presented to the Committee.

Mr F Bhengu (ANC) commented that transformation could not only be done by government. It had to apply to those who benefitted all along. Those who were benefitting was still benefitting up until 2010. The same types of individuals were still in control. Who was advising government? Were all South Africans committed to transformation? It was 18 years on since SA became democratic but transformation was still in its planning stages. The issue of transformation needed close scrutiny. He as a member of parliament was not sure whether transformation was taking place as it should. What then was the ordinary person to think?

Ms V Bam-Mugwanya (ANC) remarked that it was unfortunate that the NDT was a new department who was still trying to find its feet. People should know what transformation meant. Members might be sounding emotional about the issue but the bottom line was that progress on transformation was slow. People at grassroots level and in rural areas did not feel the effects of transformation. Transformation figures of 2% and 3% were far too low. It seemed as if transformation was only starting. What measures were in place to secure that black graduates without work experience in the tourism industry would find employment and failing that would otherwise become entrepreneurs. She felt the Tourism Scorecard to have been introduced by advantaged persons and not disadvantaged persons. It benefited the advantaged.

She added that no assistance was being given to entrepreneurs. The NDT was supposed to monitor and empower people to whom they had provided with finance. Many of the projects started in provinces were white elephants. Government tended to parachute projects in provinces. Transformation as being discussed in the briefing referred to persons who employed people in a workplace. Transformation should also look at entrepreneurship. All stakeholders needed to strategise afresh.

Ms Ramphele conceded that there were projects that were white elephants in provinces. The NDT had a strategy in place to attend to transformation in the provinces. NDT officials were now working with provinces. Not only were provinces on board but local government as well. The NDT did an audit to better understand what was already out there. 

There was an Enterprise Development Programme, which was run by the Tourism Enterprise Partnership (TEP). It identified niche projects in provinces. Support was given by way of mentorship, coaching and market access. There was an urban bias but rural communities were also included.

There was also a Rural Tourism Strategy the aim of which was to uplift communities. The NDT worked with the Department of Rural Development.

On tourism support from DTI, they would continue to run programmes. The NDT would however review programmes to see which programmes worked and did not work. On skills development there was a chefs’ programme in place at various hotels.

Ms Mposupye said that on the issue of apprenticeships, well off students who enter private schools in the tourism sector were almost guaranteed to find employment after completion of their studies. The problem was placing graduates from Further Education and Training (FET) colleges. The NDT thus focused its efforts on FET college graduates by placing them at Freedom Park and at various museums so as to get work environment exposure. 

She added that the NDT was looking at ways of introducing young people to entrepreneurship. Young persons were being work-shopped on how to identify business opportunities. It would be introduced across provinces.

The Chairperson pointed out that perhaps there were rules and regulations that did not allow things to happen. Members should be clear as to what was perceived as challenges and what was being proposed to deal with them.

Mr L Khorai (ANC) referred to the recently established Tourism B-BBEE Charter Council and asked what its operational plans at grassroots level to advance BEE were. Did it have plans to simplify the Public Private Partnership toolkit for the tourism sector?

Ms M Njobe (COPE) suggested that perhaps the Tourism B-BBEE Charter Council should be invited to the Committee to brief members on what its role was. She also suggested that the Committee be briefed on the B-BBEE Act so that members could understand it better. Transformation at grassroots level was needed. Many small tourism businesses lacked capital. The issue was about getting previously disadvantaged persons to participate in the industry.

She noted that National Treasury should provide funding for the NDT to do transformation in the industry. The issue needed to be approached in a very practical manner. The funds were available; the problem was its distribution.

The Chairperson referred to public-private partnerships and asked whether efforts were being made to encourage the private sector to come on board by way of partnerships or concessions. He asked how the issue of government procurement assisted in the process and what was being done on advocacy in relation to smaller businesses.

Mr Farrow referred to slide 6 which was headed “scope of application” and said that the Committee needed to see the actual programmes. The charter and the code was the basis on which transformation would take place. Members needed to see practical examples of how many contracts were awarded to previously disadvantaged persons or how new curio entrepreneurs entered the market.

The Chairperson said that communication seemed to be the problem. The Committee at the end of the day needed statistics and practical examples of transformation in the industry. He gave the example of a school providing training to persons in tourism studies without having completed matric. It seemed to be working and the NDT should look at it. SA should move away from the matric mentality as there were individuals who had potential. There was too much emphasis on maths and science. Cuba was producing doctors without persons having completed matric, done maths or science.

Mr Farrow pointed out that SANParks had taken its TOMSA levy amount and had used it in other areas of development.  Was it necessary to look again at the levy as to whether it was working or not. He added that the NDT was providing internal training to tour operators but the issue was whether the courses offered were accredited. Perhaps the funds should be used to send tour operators to accredited colleges.

Mr Tharage noted that there was the TOMSA Levy on the one side and a conservation fee on the other. The objective of SANParks was conservation. SANParks used tourism to promote conservation.  The NDT on the other hand promoted tourism. It was decided that a need existed to market SA abroad, hence the introduction of the TOMSA Levy. The tourist paid the Levy and it went directly into the TOMSA Fund. None of the funds were ring fenced anywhere. The TOMSA Levy was working well and was achieving what it was supposed to. 

Ms Bam-Mugwanya was concerned that there was a lack of alignment between the tourism training on offer and what was actually needed in the industry. The products on offer did not meet the demands of the tourism industry. The Minister of Tourism was supposed to look at the realignment of tourism courses. It was yet to be done. She asked whether the NDT held workshops in rural areas to inform people about the NDT’s new train of thought.

She pointed out that Port St. Johns had been identified as a developmental node but to date nothing was happening. It did not even have an aquarium.

Mr Tharage noted that in 2007/2008 it was realised that there was a need to create hype for tourism to be a career of choice. Tourism was more of a second or third choice of field of study.

He agreed that a concerted effort should be made to bring black women into leadership positions in the tourism industry.

Ms Ramphele responded to the issue of Port St Johns and said that the NDT was working with provinces and local government. Projects needed to be evaluated whether they were beneficial and sustainable. Projects were part of the plans of provinces and of local government Integrated Development Plans (IDPs).

She added that the TEP was to be found in all provinces.

The Chairperson reiterated that communication was the problem. For example the Shoprite Checkers Woman of the Year was a Ms Nyeleti Mushwana who was from within the tourism industry. The Committee was unaware of this piece of information.

On transformation the Committee needed to see tangible results. Members were aware that there were challenges.

Mr Tharage noted the comments made by members and said that the NDT would try to strike a balance. The Committee would be provided with specific examples on transformation. Transformation in ownership was even taking place.

He added that outreach programmes were provided at community and other levels.

The Chairperson was glad that the NDT had a sound base with which to move forward. SA was moving away from resources more towards manufacturing and services. The nation was moving towards a SA that was more conclusive. Tourism should play a greater role in SA’s economy.

The meeting was adjourned.