South African Tourism (SAT) briefed the Committee on its Bi-Annual Report for six months, 1 April to 30 September 2013. Figures were provided to the Committee on overall performance for Quarter 1 (April –September 2013). On annual foreign arrivals, the Quarter 1 target of 3 125 275 was achieved and figures for Quarter 2 were still awaited. On domestic travellers the annual target had been set at 15m. The actual figure achieved was 5.5m, which was 36.6% of the annual target.
The SAT briefing showed that there had been a decrease in the number of provinces visited by all tourists when comparing figures for Quarter 1 for 2012 and 2013. The 21% drop in domestic trips from seven million in Quarter 2 of 2012 to 5.5 million in Quarter 2 of 2013 was due to the fact that people visiting friends and relatives had increased from 71% to 74%, whilst holiday trips had decreased by 9%. Affordability of trips was still a major challenge given that unemployment was at 25.6% in Quarter 2 of 2013. There was also lower consumer spending recorded in Quarter 1 of 2013, which was down at 2.3% compared to 2.4%, 2.7% and 3.2% for Quarters 4,3 and 2 of 2012. There was; however, a revamped Domestic Tourism Campaign in place to boost figures. During the first six months of 2013/14 financial year, SAT spent R604.7m, which represented 89% of its year to date expense budget of R682.6m. This meant that SAT was R77.9m behind its year to date budget as at 30 September 2013. The R604.7m spent was 62% of SAT’s 2013/14 operational budget of R968.6m. Also during the first six months of the 2013/14 financial year, SAT only managed to spend R1 279 916 or 7% of its total 2013/14 CAPEX budget of R18.7m. The reasons for this was that three planned overseas offices in Angola, Brazil and Nigeria had not been opened as yet while the fourth new office in Kenya was only planned for the end of the 2013/14 financial year. In addition, the approval for phase 1 of the planned head office extension had not been received from the relevant local authority as yet.
The Committee asked SAT whether its quarterly reports took into consideration the seasonality of North-South countries. Figures contained in quarterly reports could fluctuate based on what season it was.
Members were interested to know what SAT was doing about the issue of airlinks given that it could affect its work hugely. SAT was having discussions with South African Airways over the issue. It was also felt that a long term strategy was needed on domestic tourism as the reality was that South Africa had huge unemployment and poverty was rife. People had less disposable income and this impacted upon domestic tourism figures. Was the incentives provided by the Tourism Grading Council of SA creative enough to convince establishments to get graded? Members were interested to know why certain provinces attracted more tourists than others did. What was SAT doing to assist those less visited provinces? The Committee was provided with figures on the numbers of bids the National Convention Bureau had secured but members were also interested in the numbers of bids that SA had lost.
The Committee’s Budget Recommendations Review Report was adopted as amended. The Committee agreed that a provision should be included in the Report to the effect that local government should act as the guardian of projects. Members also effected grammatical and spelling changes where necessary.
The Committee also adopted minutes dated the 22 October 2013, unamended.
South African Tourism (SAT) Briefing on its Bi-Annual Report
South African Tourism (SAT) briefed the Committee on its Bi-Annual Report for six months, 1 April to 30 September 2013. The delegation comprised of Mr Thulani Nzima - the Chief Executive Officer, Mr Tom Bouwer - Chief Financial Officer, Mr Tom Scholtz - Chief Operating Officer , Ms Thembi Kunene - Chief Quality Assurance Officer, as well as SAT Board members Mr Frank Kilbourn – Chairperson, and Mr Zweli Mntambo Deputy Chairperson.
Mr Kilbourn, in a brief introduction, said that the first six months had been challenging for SAT. He noted that the first quarter’s figures were much better than anticipated. In the period in question SAT was well in line with tracking world trends.
Mr Nzima proceeded with the briefing. Figures were provided to the Committee on overall performance for Quarter1 (April –September 2013). On annual foreign arrivals the Quarter 1 target of 3 125 275 was achieved and figures for Quarter 2 were still awaited. On domestic travellers the annual target had been set at 15m. The actual figure achieved was 5.5m, which was 36.6% of the annual target. Quarter 1 and 2 targets for domestic travellers had been set at 4m respectively. On trended revenue the Quarter 1 and Quarter 2 targets had been set at R27.7bn and R 26.5bn respectively. The Quarter 1 target was slightly missed and Quarter 2 targets were awaited. SAT had also obtained an unqualified external audit report.
Tourist arrivals to SA for January to March 2013 grew by 8.6% over 2012 to reach 2 461 999. All regions showed positive growth but Asia showed the highest growth of 27.1% in tourist arrivals. Total foreign spend generated from tourist arrivals decreased by 5.4% between Quarter 1 of 2012 and Quarter 1 of 2013. Europe remained the main source of foreign tourist arrivals to SA, with a 9.3% growth from 2012 figures.
There had also been a decrease in the number of provinces visited by all tourists when comparing figures for Quarter 1 for 2012 and 2013. Gauteng and the Western Cape were by far the most visited provinces. The 21% drop in domestic trips from 7m in Quarter 2 of 2012 to 5.5m in Quarter 2 of 2013 was due to the fact that people visiting friends and relatives had increased from 71% to 74%, whilst holiday trips had decreased by 9%. Affordability of trips was still a major challenge given that unemployment was at 25.6% in Quarter 2 of 2013. There was also lower consumer spending recorded in Quarter 1 of 2013, which was down at 2.3% compared to 2.4%, 2.7% and 3.2% for Quarters 4,3 and 2 of 2012. There was however a revamped Domestic Tourism Campaign in place to boost figures.
Ms Kunene continued with a breakdown figures for graded tourist establishments. The number of graded establishments as at the end of September 2013 was 5 675. The Tourism Grading Council of SA (TGCSA) was receiving record numbers of applications to get graded but at the same time there were also those establishments that were deregistering.
Mr Scholtz elaborated upon the work of the National Convention Bureau. There were 30 bids submitted in Quarter 1 and Quarter 2. It would cover 131 days and 41 900 delegates would be in attendance. The economic impact was estimated to be R 622 300 000.
Mr Bouwer spoke to the financial performance of SAT for the 6 months up until 30 September 2013. During the first six months of 2013/14 financial year, SAT spent R604.7m which represented 89% of its year to date expense budget of R682.6m. This meant that SAT was R77.9m behind its year to date budget as at 30 September 2013. The R604.7m spent was 62% of SAT’s 2013/14 operational budget of R968.6m.
During the first six months of the 2013/14 financial year, SAT only managed to spend R1 279 916 or 7% of its total 2013/14 CAPEX budget of R18.7m. The reasons for this was that three planned overseas offices in Angola, Brazil and Nigeria had not been opened as yet while the fourth new office in Kenya was only planned for the end of the 2013/14 financial year. In addition, the approval for phase 1 of the planned head office extension had not been received from the relevant local authority as yet.
The Chairperson asked for a brief summary on the performance of capital expenditure and the performance of personnel expenditure.
Mr Nzima explained that the CAPEX Budget was to cover the opening of four new offices for SAT. There were however delays caused by red tape in the countries where the offices was intended to be opened. SAT had gone through the vigorous process of registering itself properly in those countries in respect of tax and labour laws. The CAPEX expenditure was for furniture for those four offices, but the purchase had to be delayed. On the SAT head office revamp, two options were being considered. The first was to extend the existing building and the second was to use the car park area. It was decided to go with the car park option and a plan was put in place. He pointed out that there were delays in Human Resource Expenditure which was affected by the delays in the opening of the four SAT offices abroad. New personnel would be employed in the new offices and money would be spent on marketing. SAT also had to consider the issue of foreign currency exposure risk. SAT had received additional funding from National Treasury but it was still not enough to fill all the gaps.
Mr S Farrow (DA) asked whether the quarterly reports of SAT took into consideration the seasonality of the North-South countries. How did the SAT factor it in? Quarterly reports could fluctuate depending on what season it was. He pointed out that it seemed as if airlinks was impacting upon the work of SAT. The apparent breakdown in the alliance between the South African Airways and Nigerian Airways could impact upon the work of SAT. How involved was SAT in persuading travel agents abroad to package South African products? There had to be a bucket list that overseas tourists had to cover when visiting SA. Places like Table Mountain and the Kruger National Park should be on the list of places to visit. He asked whether SAT interacted with the Southern African Development Community (SADC) countries in order to spread the load of tourists around. He referred to the tourism figures for Gauteng Province and asked if those figures were not perhaps tourist transit figures. Were embassies assisting SAT in the opening of its new offices? Embassies were well equipped to assist SAT as there was a great deal of red tape in those countries.
Mr Kilbourn addressed the issue of seasonality, saying that figures were calculated on a year on year basis. The numbers were comparable. He noted that the patterns of visiting to provinces were a multidimensional issue. SAT promoted all nine provinces. There was a provincial road show programme in place.
Relationships with embassies had been deepened. He conceded that it had been a tough road to open the SAT Angolan office but the office was now a reality. SAT also teamed up with South African Airways (SAA) and other stakeholders. He stressed that tax regimes overseas were also changing. SAT had to open up its offices in its own right and could not couple with the Department of International Relations and Cooperation. If it was too difficult to open offices in certain countries then alternatives would be considered. He also noted that SAT’s relationship with SADC countries was improving significantly.
Mr Nzima agreed that airlinks did impact upon tourism. The Beijing airlink was a case in point. He was concerned about where SAA was pulling out of markets. SAA and SAT needed to align their mandates. SAT was holding meetings with SAA. SAA should not make decisions unilaterally. He noted that in some markets South Africa was wrongly packaged as a high end destination, whereas it was an affordable destination. In Nigeria and Angola, SAT had shared offices with SAA. There was co-operation from embassies. SAT in Brazil had received assistance from the SA Ambassador for a very long time.
Mr R Shah (DA) said that it was all good and well that SAT had a plan to develop domestic tourism. However in SA, the reality was that unemployment was high, taxes were high and the bottom line was that people had less disposable income. SAT needed a long term strategy. The mindset of the ordinary South African needed to be changed. The process had to start with influencing the young at school level. The departments of education could come on board and make provision for tourism in its curriculum. He was concerned about the persons that were going to be appointed in those new SAT offices abroad. He hoped that there would be no nepotism and favouritism. The appointments process should be professional as these persons would be ambassadors of SA. Germany was SA’s second biggest trading partner. Was this the reason why SA had a growth rate of 7.6%? It was perhaps a trend that should be looked into whether if there was an increase in trade between two countries there was also an increase in visitors between the countries. What criteria was the Department of Home Affairs using to separate the figures of tourist arrivals from all arrivals? He asked whether SAT’s budget for the marketing of domestic tourism was sufficient. What improvements had the Tourism Grading Council of SA (TGCSA) made? Did they have creative incentives to attract establishments to get graded?
Ms Kunene answered that TGCSA incentives were work in progress. The TGCSA was the only institution tasked with grading. Its biggest selling point was that star grading gave establishments an edge. The challenge was that people did not see the tangible value of being graded. Gradings’ ongoing value was not seen. People were under the misconception that grading was expensive when it was not. It was the upkeep and maintenance of establishments that was expensive. One of TGCSA’s creative efforts was to enter into a relationship with TripAdvisor. It was the largest review site in the world. The benefits of the collaboration were that the TGCSA could confirm whether an establishment had a particular star grading. TripAdvisor also provided reports on complaints received regarding bad service etc. She noted that the TGCSA had come up with three tangible benefits for establishments to stay graded but she did not wish to divulge them until internal discussions on it had been finalised. Once discussed it would be communicated to the Committee.
Mr Kilbourn noted that Germany was outperforming everyone else in Europe. Germans still had disposable income for travel. There were six or seven tour operators who almost controlled the entire German market. SAT was well covered in Germany.
Mr Nzima stated on the issue of the criteria used by the Department of Home Affairs for categorisations, that a task team was working on it. SAT was working closely with the Department of Home Affairs. He noted that SAT’s budget was not enough. SAT had a constrained plan which was within its budget and an unconstrained plan which was SAT’s aspirations. SAT was professional in its approach and would not appoint persons in the offices that it had opened based on nepotism.
Mr Mntambo said that on domestic tourism the issue was about changing the culture of South Africans. Most adults and youngsters did not know much about SA. There should be a long term strategy to change mindsets and to inculcate travel into South African culture.
Ms M Njobe (COPE) said that SA was getting a great deal of visitors from China and Brazil. Were they business people or leisure visitors? On the figures of tourist visits to various provinces, which provinces’ figures were the worst? It seemed to her that Mpumalanga and the Free State Provinces were the worst hit.
What was SAT going to do differently to penetrate the global market better. Why was SAT focusing on 18 year olds. They had no money and were most probably still studying.
The opening of the SAT office in Angola had been on the books for a long time. Had the office been opened? If Angola was a problem why was opening up of offices in alternative countries like Namibia not considered?
Mr Kilbourn said that 18 year olds had been targeted because travel had to be inculcated into the young.
Mr Nzima speaking to tourism visits to provinces, said that some provinces had hidden gems. Each province had to maximise what it had to offer. SAT was looking at why some provinces were not doing well and whether financial assistance could be given to them. On the issue of whether visitors from China were in SA for business or for leisure, he noted that in 2012 48% had been here for business. The Angolan Office was now a fully fledged office.
Ms F Mohamed (ANC) said that the TGCSA had not said much about those establishments that had closed down. Figures had been given on the number of bids that had been won by SA but how many of the bids had SA lost and why. The issuing of visas by the Department of Home Affairs surely affected tourism. To what extent was tourism affected. She referred to page 7 of the briefing document and asked why was the Middle East whose tourist arrivals figures sat at 25.5% not considered a core market to SA.
Mr Kilbourn stated that SAT had a good relationship with the Department of Home Affairs.
Mr Nzima agreed to provide the Committee with figures on the amount of bids that SA had won and lost. He stated that the different markets in which SAT categorised countries had a certain level of investment attached to them.
Mr F Bhengu asked how SAT and the National Department of Tourism (NDT) interacted on the Investment Policy Framework legislation that was coming before parliament. The Eastern Cape figures on tourists were dismal, what was being done to uplift the province. Port St Johns should be a tourism hub. Locals in the area were complaining.
Department of Tourism Budgetary Recommendations Review
Mr Sibusiso Khuzwayo, Committee Content Adviser, informed the Committee that no substantive amendments had been made to the BRRR.
Mr Farrow made the point that if mention was going to be made of key policy areas like the National Development Plan then it should be included in the BRRR.
Mr Shah was concerned that in the oversight findings of the Committee on Social Responsibility Initiatives (SRI), the BRRR only mentioned the criminal activities of project implementers and did not make mention that there had also been political interference.
Mr Bhengu asked Mr Shah to define what political interference was. The Committee had discovered problems with project implementers and had engaged with all relevant persons to resolve issues. He asked whether weaknesses at local government level could be considered as political interference. If challenges emerged at local government level then the Committee would tell the NDT to deal with it.
Mr Farrow stated that it was correct that the Executive Mayorship had interfered in QuaQua. He emphasised that under the local government sector there needed to be local economic development and a tourism branch needed to be established. Discussions with implementers should take place and their roles should be clearly defined. The bottom line was for local government to realise their role.
Mr Shah said that the issue he was raising was not about political scoring. If the project was handed to the implementer by the NDT, then local government had no business influencing it. What the Committee found was that a speaker of a municipality was the cause of a project being burnt down. The speaker had not been the implementer of the project. How was it possible that a speaker could take over a community asset? Somewhere in the BRRR it should be stated that there should be no political interference in SRIs. To him it did not matter to which political party the wrongdoer belonged to.
The Chairperson said that the Speaker that Mr Shah was referring to had since been dismissed. The Speakers’ private interest overrode his public interest. He had hidden the fact that he was the Speaker at the time of his wrongdoing.
Mr Shah agreed with the Chairperson’s sentiments and said that the BRRR should have a provision which stated that public office bearers should not use their office for private interests.
Ms Mohamed agreed with Mr Bhengu and Mr Farrow that an enabling environment needed to be created.
Mr Bhengu said that wrongdoing had been identified by the Committee and action had been taken. The perpetrator had since been dismissed. Corrupt persons could be anyone. The present matter being discussed might even be before the courts at present.
Ms Njobe suggested that the Committee accept that the term “political interference” was too broad. She pointed out that the sentiments of the Chairperson already gave an idea of how the issue should be captured in the BRRR. A further addition should be made to express the appreciation of the Committee that action had been taken.
Mr Shah was sensitive to what members were saying but noted that it had not been the NDT that had take action but it had been the political party to whom the perpetrator belonged to that had taken the action. The provision to be included in the BRRR should state that public office bearers should not use their political power for financial gain.
Mr Farrow said that the interference had taken place at local government level. He said that local government had not acted as the guardian of these projects. Somewhere in the BRRR it should state that local government should act as the guardian of projects.
Mr Shah agreed to Mr Farrow’s suggestion.
Mr Farrow effected semantic changes to the BRRR.
The Committee adopted the BRRR as amended.
The Committee adopted minutes dated the 22 October 2013, unamended.
The meeting was adjourned.
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