National Department of Tourism, and SA Tourism, 2014 Strategic & Annual Performance Plans, in presence of Minister and Deputy Minister

Tourism

04 July 2014
Chairperson: Ms B Ngcobo (ANC)
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Meeting Summary

The Minister and Deputy Minister of Tourism attended and contributed to the briefing by the National Department of Tourism (NDT) on its Strategic and Annual Performance Plans 2014/15 to 2018/19. In his introductory remarks, the Minister noted the alignment between the National Development Plan, particularly its emphasis on employment, and the plans for the tourism sector which was doing quite well and must continue to improve. Targets were set out in the National Tourism Sector Strategy (NTSS), and the Minister believed that the target of 225 000 jobs was attainable and hopefully could even be exceeded, particularly as growth would lead to more jobs, both direct and indirect. SA Tourism marketed tourism, and, with 10 million tourists coming to the country each year, tourism was doing well, but this must be sustained and the eight World Heritage sites would play a huge part. The NDT was being well managed, and would focus on domestic and international tourism. Members felt that tighter definitions were needed for “tourist”, “direct jobs” and “indirect jobs” so that a common understanding could be reached. They suggested more focus on domestic tourism, commented that Robben Island needed severe attention, said that tourist sites should be affordable for locals and that grading of establishments must be looked into, both in terms of the value this offered, and for consistency. They asked why the NDT had not made any submission to the Minister of Home Affairs on visa regulations, and asked what cooperation it had with sister departments, whether there was any problem with concurrent functions between the spheres, and how NDT would promote transformation in the industry.

The NDT set out specific figures and statistics for its budget, its general goals and the plans and achievements of the various programmes in the Department, on Administration, Policy and Knowledge Services, International Tourism and Domestic Tourism. The total budget allocation for all programmes was R1.6 billion for the 2014/15 financial year. The domestic tourism budget growth over the MTEF was set to rise by 18.39% in 2015/16 and 26.04% by 2016/17, in recognition of the shortage of capacity at provincial and local government level and the need for extensive assistance to promote domestic tourism. The additional funding it had obtained would be ring-fenced for this function. The NDT had 544 posts, of which 97 were unfunded. NDT had partnerships with five universities in order to train people in tourism. South African diplomats were now tasked with marketing South Africa abroad. Various research areas were critical to the work of the Department, particularly research into why international tourists chose to visit one country over another, comparative advantages, comparative marketing, level of spend and marketing opportunities in Africa. Organisational risks facing the NDT included lack of IT structures and systems, non-compliance with performance management requirements, and the need to tighten up the financial statements. Programme 1 would focus on good corporate governance and effective management, and production of organisational performance reports. Programme 2 supported sector policy development and evaluation, research and knowledge management, promotion of transformation and responsible tourism. It would focus on implementing local government support programmes and training of municipalities. A Local Government Conference would be hosted in February 2015. The implementation of the National Responsible Tourism Strategy would be checked, and other reports would cover national standards, universal accessibility in tourism and universal accessibility in provincial parks. Programme 3 provided political and policy direction to international tourism, and development of South Africa’s tourism potential throughout the world. For 2014/15, the focus would be on the potential benefits of sports tourism for SA from the Brazil and Argentina hub, expanded market penetration in North Americas, and research into interventions in the Nordic region, Russia, Indonesia and the Gulf regions. It worked with the Department of International Relations and Cooperation(DIRCO) and its missions. The Domestic Tourism Programme was also aimed at increasing the contribution of the tourism sector to inclusive economic growth, and NDT played a most important role in implementing existing strategies and developing integrated support packages, funding and capacity building. Incentives would be implemented to support growth of enterprises, particularly in the rural areas and amongst the historically disadvantaged people.

Members stressed that distinctions between tour guides and tour operators must be recognised, questioned whether there was not duplication between the NDT and SA Tourism on research, questioned why universities had been chosen to do research and why the market still preferred to hire university, rather than FET College, graduates, also citing problems in standards at some training institutions. Many Members expressed concern at the lack of capacity at local government level and asked how NDT would address this. They asked for reports on why there were agreements with certain countries, to assist oversight, what challenges there might be with those, whether it considered the budget adequate, and whether it had an asset register. Other questions were asked on time frames for career expos, how NDT conducted its research, an the adequacy of allocations to some programmes.

SA Tourism (SAT) presented its 2014 Strategic Plan and Annual Performance Plan 2014/15 Review. SAT aimed to make South Africa to be the preferred tourist destination in the world, maximising the economic potential of tourism, and thus intended to develop a world-class tourism marketing strategy. It was implementing domestic, regional and international marketing strategies, informed by research, implementing a business events strategy, and maintained internationally-benchmarked quality assurance processes. It was concerned that all spheres of government and industry must be aligned when marketing tourism, and wanted to remove any obstacles to tourism growth. It aimed to brand South Africa as a global player, and grow the contribution of tourism to the economy. Some of its specific initiatives to achieve this included investing in selected markets, to deliver volume and value, engaging with stakeholders to deliver quality experiences to visitors and promoting the country through various channels. Its approaches in Africa had changed, and it concentrated on countries that had more than 3 million people, and 150 000 people traveling each year. Globally, it chose prime targets according to GDP Purchasing Power Parity (PPP) of $11 000 per annum, as a filter for affordability, and also tried to market in hubs. It was hoping to aggressively increase African tourism, and was setting up five marketing offices in Africa. In the domestic market, it was promoting short breaks. Although total spend had increased, the number of trips, and nights spent away, was declining. SAT had an additional budget of R100 million to increase domestic tourism, engage low cost airlines to improve regional distribution, and promote the culture of domestic tourism. He explained the net grading revenue, staff establishment and Capex spending.

Members commended SAT on a good presentation, but thought that it could have had even more impact had the figures for tourists and arrivals in the country been further broken down, with more detailed analysis on spending once the tourists had arrived. SAT agreed, said that it was working with Statistics SA and would present an analysis in due course. Members suggested that the Grading Council should not only assess accommodation, but also tour operators, sites and other services, and furthermore suggested that it would be in the interests of quality should grading apply throughout, and no fee be levied. They indicated that the loss of revenue would be relatively small, but the potential risks of poor branding in social media would be substantially reduced. They were worried that despite the spending on the World Cup, the spending had not achieved the expected dividends for long enough. It was suggested that unemployment would not affect visitors, and SAT had to look honestly at the real constraints to growth, including why it was falling behind other countries’ growth. Members also asked what specific initiatives there were to target the middle class in Africa, and if targets could be met.

Meeting report

National Department of Tourism (NDT): Strategic and Annual Performance Plans 2014/15 to 2018/19
The delegation from the National Department of Tourism included Mr L (Kingsley) Makhubela, Director-General, Mr Dirk van Schalkwyk, Chief Operations Officer, Mr Victor Tharage Deputy Director General: Policy and Knowledge Services, Mr Myron Peter, Acting Deputy Director General: International Tourism, Ms Morongoe Ramphele, Deputy Director General: Domestic Tourism and Mr Ralph Ackerman, Chief Financial Officer.

Minister of Tourism’s introductory remarks
Mr Derek Hanekom, Minister of Tourism, noted that as a former guest-house owner, he had some experience in the tourism industry.

He noted that the National Development Plan (NDP) was a good plan that expressed a consensus vision, and was an excellent point of reference for the National Department of Tourism (NDT or the Department). The NDP addressed poverty and unemployment. It aimed at creating 610 000 jobs and creating 4.6% direct employment. The tourism sector was presently doing quite well and for it to regress was simply not an option.

He noted that targets were set out in the National Tourism Sector Strategy (NTSS). The aim was that there be a growth in jobs in the sector. The target of 225 000 jobs as set in the NTSS was attainable, and he believed that this figure could be exceeded. Growth in itself would lead to more jobs. There were also indirect jobs that could be created as spin-offs from tourism.  If more opportunities were created then jobs would flow from them.

He  noted that it was the duty of SA Tourism to market tourism. South Africa received about 10 million tourists annually. He reiterated that tourism was performing impressively, but over the next few years there was a need to look at creative measures to build and sustain this. South Africa had eight World Heritage sites and there was a need to build from that platform.

The Minister asserted that the NDT was a well managed department and only had a single entity, SA Tourism, to oversee. It would measure the performance for itself and the entity against the Strategic Plan over the next five years. The promotion of domestic tourism was just as important as the promotion of international tourism.

Discussion
Mr G Krumbock (DA) referred to the direct and indirect jobs that the Minister had alluded to, which the tourism sector could create, but wished to bring it to the Minister’s attention that there was a definitional problem as to what “indirect jobs” actually were. The concept of “indirect jobs” needed to be unpacked in the future. Mr Krumbock said that another definitional problem was related to how a “tourist” was defined, and how to classify any person who visited South Africa. There needed to be a better common understanding of the concepts.  He asked the Minister, with the assistance of the Committee, to look into those issues.

Minister Hanekom agreed that there was no easy solution to the definitional problems as highlighted. He agreed that it would be necessary to “unpack” the issue, and it would require intensive discussion. It would be necessary to interrogate the issue thoroughly even if it meant that there was a downward adjustment in “tourist” figures. Persons who were essentially in transit could not really be classified as tourists. When travellers arrived in and moved out of South Africa all the time, a distorted picture was created. It would be necessary to tighten up on the data, to capture correctly who arrived in South Africa for tourism purposes, and how long they stayed.

Mr Hanekom said that the problems with defining “indirect employment” were common to all sectors, not only tourism. He conceded that at times the figures did not add up. For every guest house that operated there were many other matters that needed to be taken into consideration – such as tour operators, transport and services. There was no doubt that tourism was a growing sector, and so the only issue was to get the figures correct. There were, however, many indirect jobs created as a direct result of tourist activity.

Mr J Vos (DA) agreed that tourism was a key driver for growth. He, however, felt that more focus should be given to domestic tourism. Local residents should also be able to afford to visit local tourist attractions. Robben Island was currently going through a rough patch and the NDT should try to assist to get it back on track.

Minister Hanekom agreed that locals should be able to afford to visit local tourist attractions. There should also be synergy between the NDT and its sister departments. The Department of Arts and Culture oversaw Robben Island and had conceded that this site was experiencing problems. It was of concern, and he and freedom struggle stalwart Mr Ahmed Kathrada would be visiting Robben Island in a couple of weeks. The issue of Robben Island would thus be getting his personal attention. A close working relationship with the Departments of Arts and Culture and f Environmental Affairs was planned to deal with the issues.

Mr Vos noted that SA Tourism had an important role to play in the marketing of South Africa. The Tourism Grading Council of SA (TGCSA) was established in terms of the Tourism Act. The Committee, however, had to evaluate the performance of the TGCSA, as there were clearly some issues that needed to be addressed. The TGCSA was tasked with ensuring that minimum standards were met in the tourism industry. In reality, many establishments were not up to scratch.

Mr Hanekom agreed that the integrity of the grading system was paramount. Discussions with the TGCSA were therefore very important, and he agreed that engagements should take place. Many tourists nowadays checked with TripAdvisor online, to get information where to stay at a particular destination. Festivals like the Grahamstown Festival were important platforms to promote local and international tourism. He had recently stayed at an un-graded establishment, which had previously been graded, and on making further enquiries, the owner of the establishment had informed the Minister that he had not seen value in being graded by the TGCSA.

Mr Vos also brought up the issue of visa regulations. He noted that the Director-General of the Department of Home Affairs had stated that he had not received submissions from departments I relation to how the visa regulations affected departments. He was concerned whether the NDT had made a submission to the Department of Home Affairs (DHA) on the effect that the visa regulations would have on the tourism industry. He pointed out that he knew of many international examples of how countries dealt with the problematic issue of visas. For example India came up with the concept of an e-visa.

Mr A Whitfield (DA) noted that synergy between departments was important. He asked which departments the NDT intended to work with. The Departments of Arts and Culture and Co-operative Governance and Traditional Affairs were important. He had served on the Arts and Culture Portfolio Committee and had often seen plans falling through because capacity was lacking at local government level. He asked if it was the NDT’s intention to create working relationships with sister departments.

Ms Thokizile Xasa, Deputy Minister of Tourism, explained that the NDT had already entered into memorandums of understanding (MOUs) with sister departments, including Arts and Culture and Home Affairs. The NDT also worked with the Department of Rural Development and Land Reform on rural tourism.

Minister Hanekom emphasised that a closer working relationship with the Department of Co-operative Governance and Traditional Affairs was needed, to sort out the capacity problems at local government level. Tourism needed to feature in the Integrated Development Plans of municipalities. Tourism should be especially important to metros like the City of Cape Town and Nelson Mandela Bay.

Ms L Makhubela-Mashele (ANC) felt that transformation in the tourism industry was important, and asked how the previously disadvantaged communities had actually benefitted thus far. She also felt that community tourism development was important, and asked what the NDT’s plans for that were.

Deputy Minister Xasa pointed out that the NDT looked at seasonal niche markets and consequently dealt with community tourism. Regarding transformation in tourism, she noted that the efforts of the NDT were outlined in its programmes, so this was ground that had been covered already.

Minister Hanekom also spoke to transformation in the sector. He agreed that ease of entry into the tourism sector was important. Many establishments found it difficult to pay the grading fee. More inclusive growth and more sustainable projects were needed. The bad state of roads at certain tourist attractions also did not help matters. The Department of Rural Development and Land Reform was an important partner, to assist with these specific issues. Roads also fell under the jurisdiction of provinces.

Mr J Esterhuizen (IFP) asked whether it was correct that R18 million had been allocated for domestic tourism at the end of the current term. He also pointed out that the safety of tourists was a concern, and he asked what plans the NDT had in place to take care of the problem.

Minister Hanekom said that the safety of tourists was important and a closer working relationship with the South African Police Services (SAPS) would be established and put into operation. However, he did point out that much of the crime in South Africa was related to domestic violence.

The Chairperson said that the Committee would invite the Minister and NDT to speak in more detail to the issues raised by members.

Minister Hanekom agreed to make himself and the NDT available to discuss issues and come up with ideas.

Ms P Adams (ANC) asked whether concurrent functions compromised the Minister’s mandate. She asked how to improve the situation to develop tourism. Greater co-operation was needed between departments, provinces and municipalities.

Minister Hanekom responded that concurrency had not as yet compromised his efforts, and he did not think that it would in the future. He noted that he would be working closely with Members of Executive Committees (MECs). There might be a challenge if parties involved were to work in a fragmented and uncoordinated fashion. Careful liaison with MECs was needed.

Presentation of Strategic and Annual Performance Plans
Mr L Makhubela, Director General, Department of Tourism quipped that he recognised Mr Krumbock as a “surviving member” of the Committee in the previous Parliament. He noted that, all round, there were knowledgeable people in tourism, at ministerial, departmental and parliamentary levels. The NDT had solid management and the entire management team would cooperate fully with the Committee.

He pointed out that the NDT was made up of four branches. There were, in all, 544 posts, of which 97 were unfunded. The NDT had partnerships with five universities in order to train people in tourism. In relation to international tourism he noted that South African diplomats were now tasked with marketing South Africa abroad. Domestic tourism was the backbone of the NDT. The NDT had come to the realisation that capacity was lacking at provincial and local government level to promote domestic tourism.

He made the point that over the last few years concurrence had no longer been an issue. Strategies were shared amongst the various spheres of government.

One of the NDT’s areas of challenges, as well as it focus, was domestic tourism, where it had not been doing well. A total of R100 million had been allocated to the Domestic Tourism Branch to market tourism domestically. The funds would be ring-fenced. The NDT hoped for better results with the new approach.

The context of the NDT’s work was an ever emerging growing market. He cited that many questions would have to be answered, such as why Nigerians were the biggest spending tourists in the United Kingdom, and why they were not choosing to spend in South Africa.

He noted that the focus of the NDT was on  policy and strategy formulation. SA Tourism was tasked with marketing SA.

Mr Makhubela handed over to the branch line managers, to outline the activities and aims of their branches.

Programme 1: Administration
Mr Dirk van Schalkwyk, Chief Operations Officer, NDT, presented the vision, mission and values of the NDT (see attached presentation for full details) and gave some insight into legislative and policy mandate of the NDT. Some of the NDT’s strategic goals were to achieve good corporate and cooperative governance, integration of tourism priorities into the planning of the private sector stakeholders and the three spheres of government, and to increase the contribution of the tourism sector to inclusive economic growth. Amongst the organisational risks were the non-availability of IT infrastructure and systems, non-compliance to performance management guidelines and the material misstatements, as set out in the disclosure notes to the last financial statements.

Mr van Schalkwyk then spoke to the purpose of Programme 1, namely to provide strategic leadership, centralised administration, executive support and corporate services to the NDT and Ministry. In keeping with the strategic goal of achieving good corporate and cooperative governance, the NDT undertook to provide an effective organisational performance management system. Programme performance indicators were set, and one of those was to develop and implement a number of strategic documents. A baseline target was set for producing four quarterly organisational performance reports. For the financial years 2014/15, 2015/16 and 2016/17 the medium term targets were respectively set at producing 11 strategic documents in each year.  A baseline had also been set for an Annual Performance Report 2012/13 with targets set for each of the previously mentioned financial years, as well as four quarterly reports.
 
Another strategic objective was to provide corporate legal support. Compliance with legal services litigation protocol was set as the performance indicator, with a 100% compliance target. The same applied to each of the financial years following.

Programme 2: Policy and Knowledge Services
Mr Victor Tharage, Deputy Director General: Policy and Knowledge Services, NDT, stated that the purpose of Programme 2 was to support sector policy development and evaluation, research and knowledge management, promotion of transformation and responsible tourism. In line with the strategic goal of integrating tourism priorities into the plans of private sector stakeholders and the three spheres of government, Programme 2 had a strategic objective to develop, implement and update tourism policies, strategies, programmes and plans. Programme performance indicators were set, which included initiatives aimed at implementing local government support programmes. A baseline was set for the training of municipalities. One of the medium term targets set for the financial year 2014/15 related to capacity building of tourism practitioners and policy makers at local government. The Minister would be hosting a Local Government Conference in February 2015. Over 50 municipalities had participated thus far. For the financial years 2015/16 and 2016/17, respectively, targets had been set for the continued training of municipalities and for holding more Local Government Conferences.

Another strategic objective was to promote responsible tourism practice, and here, the performance indicator was to report on the implementation of the National Responsible Tourism Strategy.  The baseline set was three initiatives, the first was an implementation report on the rollout of South African National Standards (SANS) 1162 initiatives, the second was to report on Universal Accessibility in Tourism (UAT) compliance framework in one city destination, and the third would be a Draft Report on the state of UAT in provincial parks. In 2014/15 it was planned to produce a report and Implementation Plan for Universal Accessibility (UA) in provincial parks, as the NDT had already worked with such parks on accessibility, although the final figures would be contained in the report. The idea was look to what extent persons with disabilities or difficulties could be accommodated, and the report would look at possible solutions for the elderly, mothers with children and the disabled. The targets set for the financial years 2015/16 and 2016/17 were two initiatives each.

Programme 3: International Tourism
In the absence of Ms Aneme Malan, Deputy Director General: International Tourism, the briefing was undertaken by Mr Myron Peter, Acting Deputy Director General, NDT. He said that the purpose of Programme 3 was to provide strategic political and policy direction for the development of South Africa’s tourism potential throughout various regions of the world. In keeping with the strategic goal to increase the contribution of the tourism sector towards inclusive economic growth, an objective was set to provide and international tourism market analysis (by country and/or region) to inform strategic interventions. NDT had a target for set numbers of response plans on markets per year. For 2014/15, there was a target of three response plans for priority areas in markets were to be developed and implemented. The three response plans decided upon were:
(i) potential benefits of sports tourism for SA from the Brazil and Argentina hub
(ii) a policy directive for expanded market penetration in North Americas
(iii) strategic political interventions for the Nordic region, Russia, Indonesia and the Gulf Cooperation Council (GCC) region to be developed and piloted.

For the financial years 2015/16 and 2016/17 response plans for four additional priority areas in markets were to be developed and implemented.

Mr Peter added that South Africa had bilateral and bi-national commissions which were spearheaded by the Department of International Relations and Cooperation. There were also multilateral agreements in place within Africa and the African Union. He noted also Brazil, Russia, India, China and South Africa (BRICS) agreement. He noted that missions were South Africa’s institutional footprint in countries abroad and South Africa had around 124 missions abroad.

Programme 4: Domestic Tourism
Ms Morongoe Ramphele, Deputy Director General: Domestic Tourism Management, NDT said that the purpose of Programme 4 was to provide political, policy and strategic direction for the development and growth of sustainable domestic tourism throughout South Africa. The strategic and outcomes-oriented goal was stated that increasing the contribution of the tourism sector to inclusive economic growth.

The strategic objectives for this programme were outlined as:
- to implement tourism growth and development strategies in order to increase tourism’s contribution to inclusive economic growth
- to coordinate and facilitate the development and implementation of integrated Support Packages to enhance destination competitiveness
- to provide support to tourism businesses, through funding and capacity building, in order to grow tourism’s contribution to Gross Domestic Product (GDP)
- to create employment opportunities by implementing tourism projects targeted at the unemployed, through the Expanded Public Works Programme (EPWP).

The indicators (see attached presentation for full details) demanded that there be four national programmes activated from the approved Domestic Tourism Growth Strategy’s action plan, that projects be implemented for the development of integrated support packages, such as access, amenities, attractions, accommodation. An incentive programme would be implemented to support enterprises to grow and the indicators looked to the number rural enterprises supported each year, mentorships, market access assistance, and the numbers of Historically Disadvantaged Enterprises (HDE) supported per year. This programme would also help with training, through industry workshops, customer service, toolkits and business skills. The number of Full Time Equivalent (FTE) jobs supported and created each year were also set out.

Budget
Mr Ralph Ackerman, Chief Financial Officer, NDT said that the total budget allocation for all programmes was R1.6 billion for the 2014/15 financial year. The Departmental budget growth over the MTEF baseline was estimated to be 12.10% by 2015/16, and a further 11.45% by 2016/17. Domestic tourism budget growth over the MTEF would be 18.39%, rising to 26.04% by 2016/17.

Discussion
Mr Vos said that it should be realised that there was a difference between a tour guide and a tour operator. He referred to the three new policies that the NDT aimed to develop, and the development of regulations for tourism information, and for  tourist guides. He noted that a tour operator ranged in function, and at times also conducted tours on the ground, whereas a tour guide only offered tours and thus would be contracted by a tour operator. He felt that it was very important to highlight that distinction so that policy discussions also took that into account

Mr Vos wondered if there were not duplications with regard to policy knowledge services and South African Tourism (SAT), because there was a budget specifically in the Department and within SA Tourism for research. He asked if there was correlation between the two, and wondered if the money could not be better channelled to avoid duplications across the entity and NDT.

Mr Vos noted the references made to the National Tourism Sector Strategy, which clearly outlined the current responsibilities and institutional arrangements for all spheres of Government, including the district councils and various inter-provincial government and local government forums. However, his concern was that many municipalities lacked capacity, resulting in poorly marketed and packaged destination information at tourist visitor centres or bureaus. There was also duplication of tourist advertising across these spheres, which seemed to indicate that the forums were not in fact working. The Summit that the Minister would host early next year could address that particular issue. He therefore strongly recommended that the Minister should consider taking over those information bureaus at affected municipalities, to ensure quality services, proper packaging and information marketing and planning of tourist destinations, to avoid duplication and wasteful expenditure. That was very important, to ensure that budgets were not wasted.

Mr Vos noted, from the presentation that the International Tourism branch had entered into Memoranda of Understanding (MOU) with several countries, like Kenya, Egypt, Vietnam, Ghana, Zimbabwe, Lesotho, and Seychelles. He asked on what basis those countries were chosen, and whether any reports had been tabled to the Committee, to allow it to do proper oversight, saying that it was one thing to sign an MOU and another to follow it through to the letter. The Committee needed to ensure that the agreements were to the benefit of South Africa.

Ms Makhubela-Mashele asked what the plans were of the department with regard to the training institutions, noting that most of the tourist guides did not meet the norms and standards; although they may register and attend the results and final grading left much to be desired. She asked if the qualifications being issued by the training institutions were linked to the qualifications approval by the South African Qualifications Authority (SAQA). If not, she wanted to know how the NDT would guide and influence those training institutions to improve their standards and qualifications so as to minimise the frustrations to the potential tourist guides.

Ms T Xego-Sovita (ANC) asked about the policy and knowledge services, for although the NDT had partnerships with five universities she was concerned that the Department did not mention the Further Education and Training Colleges. Not all students could get into universities.

Ms Xego-Sovita asked what the incentives were for the Department to attract the youth to universities to study tourism, and to assist them in passing so that when they exited, they entered that sector. She asked for details on the time frames for the Career Expos, and whether they would be run for consecutive years in a province.

Ms P Adams (ANC) asked how gate waves were recorded.

Ms Adams asked what challenges NDT encountered with the agreements the Department had entered into with the Southern African Development Community (SADC), and how the Department intended to work on those challenges. She urged that greater tourism investment was needed on the African continent.

The Chairperson asked whether the Department had a budget when it moved to a separate department from the former Department of Environmental Affairs and Tourism. She asked if the NDT felt that the budget was adequate, and whether it had any specific requests to make of the Committee.

The Chairperson asked if the Department had an asset register, whether it was updated, and whether it would be available for inspection.

The Chairperson asked how the Department did its international intensive research, and how it was able to cover all countries.

Ms Adams asked the Department to elaborate more on the Medium Term Expenditure Framework (MTEF) baseline. She was particularly concerned about the different allocations, since Programme 1 was allocated 13.3% of the budget, compared to an allocation of only 3.1% for international tourism. This seemed low in view of the fact that international tourism enhanced the country’s economic growth and would lead to job creation, and could also contribute to the growth of the Gross Domestic Product (GDP).
  
Mr Makhubela replied to the budget questions, and confirmed that when the NDT had become a separate department, it received its own voted budget. More than 75% of its allocation was transferred on to SA Tourism, which was why, as seen under different projects and programmes, a large portion rested with SA Tourism. The Minister had told this entity to perform better, since it received 75% of the Department’s budget.

Mr Makhubela said that when the International branch was created, it was recognised that the NDT needed to have an understanding and profile of every country on which to base the decisions on delivery of the  message and services from NDT; size of economy and structure was very important and was included in the profile. Most of the information came from DIRCO and the Department of Trade and Industry, so the information was already available and did not need further specific research. Whilst NDT did attend to further analysis of countries, looking at trends and developments on spending and visits elsewhere, this was based on information already obtained from those countries. In NDT’s interaction with DIRCO, it had also initially looked at the trends but started to read those from a tourism perspective rather than a trade perspective, and was now focusing on the potentials these countries offered, in terms of tourism. For instance, NDT needed a better understanding about how the French were spending abroad and where they spent, and why they were visiting particular countries, and comparative values. That was being done together with SA Tourism. Profiling would essentially inform NDT, to help it do better policy formulation and to develop better strategies.

Similarly, NDT had realised a few years ago, in discussion with SA Tourism, that the world was changing, and becoming economically integrated. This was particularly the case in the Scandinavian countries that were very economically and politically integrated, and this meant that there was more potential to harness from those markets.  In East Africa, there was a similar approach of integration of market forces. There was no longer need to look at isolated countries, and the same would also apply to those investigating South Africa, which must be seen in the context with the SADC and region, particularly focusing on proximate and neighbouring countries. Again, NDT was working with DIRCO in developing integrated policies.

Mr Makhubela heard the concerns about local government, and said that there was positive tension in all spheres of government, as local government always guarded its space and did not want the national government to interfere in its areas of local jurisdiction. The NDT had instead opted to invite local government to participate and contribute to planning sessions. Local government appreciated the value of this, and in turn issued reciprocal invitations to NDT, so that the plans were now more aligned. This was the reason why problems around concurrence that previously existed had now disappeared. He cited the example of Western Cape Province, where the previous MEC decided that the Province would in future rely on SA Tourism to do international marketing, leaving the Province to focus on domestic marketing.

Even in the domestic marketing area, however, SA Tourism was providing strategic leadership, and R100 million had been budgeted for next year for work with provinces and local government. That did not imply that it would spend money on advertising areas where there was not in fact tourism potential; it must be recognised that opportunities for tourism did not exist everywhere, and tourists would visit places that did have certain offerings. In some areas there was no tourism potential, yet there was a different economic potential on which there should rather be a focus by other departments. SA Tourism would be focusing on those areas with definite tourism potential that it could start to package and market, as a destination area, and the NDT and SA Tourism and other entities would work together.

Mr Makhubela also said that this linked in to the question on negative competition. A few years ago, he recalled that there were some common “paylines” in advertising; such as visit Cape Town because it had less crime or less HIV, whereas other provinces would suggest that their areas be visited because they had no malaria, or less traffic – and that was what was referred to as negative competition. The NDT had tried, with local government, to manage that, although it had been a lengthy issue. The biggest problem in local government was the deployment at the political level across the parties, which meant that the best people were not always holding the jobs. There was a tendency to support parties, and national government, rather than working properly to support local government level. However, despite the fact of political problems, the NDT had managed to train officials, helping them to properly developing budget proposals that would help them capacitate their units.

Mr Makhubela referred to the questions on cooperation with universities and said that NDT had taken a conscious decision to work with five universities, recognising that it needed to use these institutions of high learning not only to do research for them, but to start developing human resources. NDT would allocate certain funding to them to encourage the development of the tourism faculty in those universities. In the long run, it was hoped that more people would be drawn in, and that was why their postgraduate students had been asked to do some research in areas that posed a challenge to NDT. Using the university connections provided not only the DT itself, but the private sector also, with better human resources, to the greater capacity of the whole sector. Universities had been selected from both rural and urban areas and University of Zulu Land and University of Venda were part of the partnerships. The more and less affluent universities would also work with each other, to develop better research potential. NDT preferred not to try to duplicate and felt that the university partnerships would be more advantageous. It did not want to extend the existing partnerships yet to other institutions, but concentrated on better management of those it had, rather than taking on more.

Mr Makhubela then dealt with questions related to research in the NDT itself and in SA Tourism.  The department looked at broader policies around marketing research, for instance, how it was to align the policy framework with other departments, how it interfaced with the Department of Home Affairs in relation to the NDT research results on the potential of e-visas. There were a few countries that were implementing e-visas, but South Africa was not, and NDT believed that it was a good practice, and was thus suggesting that DHA should learn lessons from the countries already implementing, and look at the benefits they were getting, particularly for facilitating travel.

Mr van Schalkwyk said that the Department did have an asset register and the Auditor-General’s report would come before the Committee which would reflect how both NDT and SA Tourism were managing assets in accordance with the Public Finance Management Act (PFMA).

Mr van Schalkwyk then spoke to the budget allocations to Programme 1, and explained that this programme was responsible for support in the Department, and its expenses included the rental charged by Department of Public Works for the building, ICT infrastructure, and the transfer system for National Treasury. However, he stressed that the needs of each programme, and the planning process, would be taken into account when setting allocations, and National Treasury would take those into account when giving the MTEF baseline funding.

Mr van Schalkwyk answered the question whether the budget was sufficient by explaining that the NDT did what it could with the funding that was made available to it. The NDT had managed to get additional funding, which would be ring-fenced, specifically for domestic tourism. Mr Makhubela had suggested that the SA Tourism budget be linked to foreign currency amounts, to avoid a repeat of previous years, where effectively the whole budget for ICT had been lost through exchange fluctuations, and a cash injection was necessary to bring it back to meaningful levels.

Ms Ramphele said that the market place still preferred to take in a graduate from university, rather than one from an FET College. The industry claimed that there was not parity on the qualifications. The NDT had entered into a partnership with Umalusi, to assist in drawing a curriculum relevant to market needs, when indeed it was found that there was a serious mismatch. The report on what needed to be done was currently being finalised. However, the NT had tried very hard to have the unemployed graduates placed in freedom parks, or museums, in 2012, and in 2013 it had managed to get 100 graduates placed at various hotels and guest houses in three provinces, KwaZulu-Natal, Limpopo and Mpumalanga. The mismatch should be corrected by ensuring that training would be relevant to the industry in future.

Ms Ramphele confirmed that the NTCE ran on a three-year cycle in each province but all the provinces participated and each brought 30 learners and an educator. Unfortunately, for the past three years Gauteng had not brought learners, although educators did attend, having seen the value of those educator seminars. The NDT had done an evaluation to check whether it was relevant in terms of the NTCE. There were proposals to run this on a yearly basis, which were being considered. The current cycle was in Eastern Cape.

South African Tourism Strategic Plan and Annual Performance Plan 2014/15

Summary:

SA Tourism (SAT) presented its 2014 Strategic Plan and Annual Performance Plan 2014/15 Review. SAT aimed to make South Africa to be the preferred tourist destination in the world, maximising the economic potential of tourism, and thus intended to develop a world-class tourism marketing strategy. It was implementing domestic, regional and international marketing strategies, informed by research, implementing a business events strategy, and maintained internationally-benchmarked quality assurance processes. It was concerned that all spheres of government and industry must be aligned when marketing tourism, and wanted to remove any obstacles to tourism growth. It aimed to brand South Africa as a global player, and grow the contribution of tourism to the economy. Some of its specific initiatives to achieve this included investing in selected markets, to deliver volume and value, engaging with stakeholders to deliver quality experiences to visitors and promoting the country through various channels. Its approaches in Africa had changed, and it concentrated on countries that had more than 3 million people, and 150 000 people traveling each year. Globally, it chose prime targets according to GDP Purchasing Power Parity (PPP) of $11 000 per annum, as a filter for affordability, and also tried to market in hubs. It was hoping to aggressively increase African tourism, and was setting up five marketing offices in Africa. In the domestic market, it was promoting short breaks. Although total spend had increased, the number of trips, and nights spent away, was declining. SAT had an additional budget of R100 million to increase domestic tourism, engage low cost airlines to improve regional distribution, and promote the culture of domestic tourism. He explained the net grading revenue, staff establishment and Capex spending.

Members commended SAT on a good presentation, but thought that it could have had even more impact had the figures for tourists and arrivals in the country been further broken down, with more detailed analysis on spending once the tourists had arrived. SAT agreed, said that it was working with Statistics SA and would present an analysis in due course. Members suggested that the Grading Council should not only assess accommodation, but also tour operators, sites and other services, and furthermore suggested that it would be in the interests of quality should grading apply throughout, and no fee be levied. They indicated that the loss of revenue would be relatively small, but the potential risks of poor branding in social media would be substantially reduced. They were worried that despite the spending on the World Cup, the spending had not achieved the expected dividends for long enough. It was suggested that unemployment would not affect visitors, and SAT had to look honestly at the real constraints to growth, including why it was falling behind other countries’ growth. Members also asked what specific initiatives there were to target the middle class in Africa, and if targets could be met.

Minutes:
South African Tourism Strategic Plan and Annual Performance Plans for 2014/15
Mr Thulani Nzima, Chief Executive Officer, South African Tourism, noted that the vision of South African Tourism (SAT) was for South Africa to be the preferred tourist destination in the world, maximising the economic potential of tourism. SAT intended to develop and implement a world-class tourism marketing strategy for South Africa. Its objectives were thus:
- to implement domestic, regional and international marketing strategies, informed by research
- to implement a business events strategy
- to implement and maintain a recognisable, credible and globally benchmarked system of quality assurance
- to facilitate strategic alignment of Provinces and industry in support of global marketing of tourism
- to facilitate the removal of identified obstacles to tourism growth
- to ensure the efficient use of resources to deliver the tourism strategy

SA Tourism recently refined its current objectives and strategies, in line with Government’s Performance Information Management Policy. In addition to creating a thriving tourism sector by making South Africa a tourism and business events destination of choice, it aimed to brand South Africa as a global player, in portfolio markets, hubs and decision making centres. It was hoped to grow tourism’s revenue to the economy by 1.5% per annum.

SAT had adopted certain strategies to achieve this. It was, amongst others:
- investing in selected markets, to deliver volume and value
- attempting to convince consumers that South Africa could be trusted to deliver memorable experiences
- engaging with stakeholders to deliver quality visitor experiences that re-affirmed the brand promise
- working the distribution channel to promote South Africa
- energising and empowering SAT to innovate and achieve excellence

Mr Nzima noted that SAT had a different approach in the African continent. It was, for SAT’s purposes, divided into five regions or hubs. Countries with outbound of less than 150 000 people per year, and a population of 3 million people were excluded, and he noted in this regard that the average outbound for other African countries was 500 000, while population was at least 7 million. The aim was to include as many countries as possible, hence the very low threshold. The SADC countries automatically qualified because of their proximity.

For the rest of the world, SAT would no longer use the $2 000 Gross Domestic Product (GDP) filter, but instead chose the countries according to GDP Purchasing Power Parity (PPP) of $11 000 per annum, as a filter for affordability. This was similar to the Big Mac Index. SAT planned to use the Hub Strategy approach around the world, to increase market penetration. The Hub approach would also be applied when markets had been filtered through all the other criteria, so that it could combine markets in the portfolio based on proximity, language and trade links - for instance, the US and Canada; Japan and Korea as well as Netherlands and Belgium – among others. The 5th Portfolio Review Outcome was to be implemented from 1 April 2014 to 30 March 2017. The Hub Strategy for Global Markets should increase market penetration, footprint and efficient resource utilisation.

Mr Nzima said that in terms of African growth, the Medium Term Expenditure Framework (MTEF) allocation was intended to aggressively grow tourism in Africa. SAT would ring fence the budget to increase arrivals and spend from Africa, to contribute to GDP and job creation. There was budget of R50 million for 2012/13 and R84 million for the MTEF period up to 2016/17. SAT would set up five marketing offices in key African markets by 2020. There would be an implementation of regional tourism programmes. In Africa Air markets, there was a sizable opportunity to attract high value business and leisure travellers.

Mr Nzima moved on to the efforts in domestic tourism. A new domestic tourism campaign called, “Nothing is more Fun Than a Sho’t Left” was launched in September 2013, to promote the opportunities for people to discover their own country and its hidden gems, and to instil a culture of taking short breaks.  Total annual domestic spend had increased from R21.8 billion in 2012 to R24.3 billion in 2013, and average spend from R850 per trip to R960 per trip. The number of trips undertaken, however, decreased from 25.4 million in 2012 to 25.1 million, and the number of nights spent away from 4.8 to 4.4. In this year, SAT had an additional budget allocation of R100 million to increase domestic tourism, to engage low cost airlines to improve regional distribution, and to strive to influence and promote the culture of domestic tourism.

Mr Nzima said that the strategic objective of SAT was to increase the foreign visitors’ arrivals in South Africa, to increase domestic tourism in the country, to increase the tourism trended revenue contribution to the economy, to provide quality assurance for tourism products, and to increase business events.

Mr Nzima, presenting the breakdown of tourism budgets in terms of revenue and expenditure estimates, said that it must be noted that only the net grading revenue, after the deduction of assessor fees, was disclosed in the audited Annual Financial Statements for 2010/11, 2011/12 and 2012/13 respectively. Net grading fees for 2013/14 were R1 520 250 after deducting assessor fees of R10 393 618.

He noted that the current staff complement of 206 was not expected to change in the 2014/15 financial year. The estimated Capital Expenditure (CAPEX) of R9.82 million in the 2014/15 financial year related to Phases 1 and 2 for the Head Quarters (HQ) office extension. The estimated expenditure was R8.01 million in the 2014/15 financial year, for software, hardware, vehicles and lease improvements.

Mr Nzima concluded that the challenges remained linked to South Africa’s fragile economic recovery and expected economic recession. There was a promise of outbound tourism growth but short–haul travel was affected by shrinking disposable income due to austerity measures, and exchange currency weakness. Although there was a growing middle class in Africa, unemployment was dampening domestic tourism.

Finally, he screened a short Global Audio Visual called “Reconsider South Africa”.

Discussion
Mr Vos appreciated the good presentation. He noted that it was a fact that the Grading Council focussed on accommodation, not on tour operators, which was part of the supply chain management. He asked whether the Grading Council only assessed accommodation, and, if so, why tour operators and attractions that actually formed part of the tourist experience were not also assessed – it made little sense to separate visits and accommodation, as the quality of everything including the operators and service providers needed to be assessed.

Mr Vos asked whether there were sufficient assessors, noting that in some provinces there were small numbers of establishments that were assessed as opposed to the Western Cape where many establishments were assessed. He also asked whether there had been any correlation between those establishments that were assessed and feedback received and evaluation.

Mr Krumbock said the question must be asked what had changed in the last ten years, in regard to grading of establishments. The former Minister, in one of his key-note addresses, said it was the level of expertise and information that was readily accessible to the tourists. It was not possible to give a tourist a bad experience and expect people not to hear about it. He noted the reference earlier to the website TripAdvisor, but noted that social networks like Facebook and Twitter would spread bad news very fast, and could destroy tourist businesses. In 2010, SAT and the country took steps to ensure that would not be the case, to protect the brand. However, it was very hard to keep a consistently good profile, and nearly R1 billion had been spent in marketing the country, and it took only one or two unscrupulous service providers to destroy that brand.

Mr Krumbock said that the concern was that not every tourism resort accommodation or B&B was in fact graded. As the Minister had mentioned, many operators were disincentivised by having to pay a fee. Looking at the figure of R1 million that the fee brought in, he wondered if it was even worth charging, or whether no charge should in fact be levied, but everyone should be graded. Whilst revenue would be lost, he believed that this was a small price to pay rather than allowing substantial damage through social media should accommodation remain ungraded. He thought more people must be encouraged to be graded, to protect the product.

Mr Krumbock made the point that tourists and arrivals were two different matters: there were 96 million tourists, but 10 million arrivals. He pointed out the presentation had been very good, as it had been in previous years also, but SAT needed to take this a step further and actually interrogate those numbers more closely – for instance, there might be an increase in tourists, but they may be spending less time and money in the country. He suggested that it was necessary to draw down much deeper, and see whether the markets were contributing to growth, and were holding strong. He thought that actually there had not been growth. This would make the presentations even more meaningful.

Mr Krumbock concluded that South Africa had spent about to R70 billion on the 2010 World Cup not for love of the game as such, but because there was an opportunity to re-brand the country. This was why R16 billion was spent on the stadiums, to give tourists a good experience, as well as to increase the numbers of tourists in. For the next couple of years after the World Cup, the numbers did increase more than the global average, contributing to the economy. However, in the last year, the figures had slipped back behind other countries in Africa. He asked what had happened in the last eighteen months, to slow the growth, and pointed out that the World Cup dividends clearly paid off for only three years, not the expected decade. That was a very worrying statistic.

Mr Krumbock said that there was nothing much in the presentation about unemployment, except in relation to internal tourism. South Africa’s own unemployment would not affect the number of visitors, and he suggested that SAT had to be quite honest when looking at the real constraints to growth, including why growth was falling behind other countries.

Ms Adams said that the presenter stated that there was a growing middle class in Africa, and wanted to know what targeted approach SAT had to address this market.

Ms Makhubele-Mashele said that the budget allocation, with about 76% of the tourism budget coming to SAT, showed that it was doing much of the work, and asked what main policy drivers there were directing its work.

Ms Makhubele-Mashele asked whether the budget allocated to SAT would talk to the figures of 50 million arrivals projected by the President in the State of the Nation Address (SONA) and to the creation of the number of new jobs in terms of the National Tourism Sector Strategy, the blueprint for the sector.

Mr Nzima responded to Mr Krumbock’s suggestions on voluntary grading. When the new Tourism Bill was presented, there had been discussion on this point, but no conclusion that grading would be a compulsory process. SAT agreed with Members’ concerns, and management and the board had realised that the revenue obtained was not worth reputational damage risks. Quite apart from tourists who might experience lower services than they were used to overseas, SAT had seen that establishments themselves, each year, were remonstrating about the grading process, and saying that it damaged reputations. The board had also had to write off some amounts, and there were bad debts because some establishments opted in to the programme but had not honoured their payments. He agreed that the revenue was probably, at the end of the day, not worth the problems. SAT was taking steps to address this, including whether there were enough assessors, whether they were professional enough, whether the assessors’ culture was linked to the overall SAT strategy, and their remuneration. SAT had proposed a bold strategy for consideration by the Board, and was looking to the Act to determine the real rationale for establishment of the Grading Council. SAT was somewhat comforted to see that Committee Members and SAT seemed to be on the same page on that issue.

Mr Nzima said that benefits of grading were not purely cosmetic. If it became compulsory for government itself, a large spender in the sector, to use graded conference and personal accommodation, the owners would see the benefits of grading. Enforcement was another problem, and the Committee would be asked to give input on that.

Mr Nzima confirmed that the protection of the brand was indeed paramount to SAT. There were very many small things that had nothing to do with SAT that could damage the brand, and it tended to be quite protective of it, and wanted to know exactly how, for instance, international tourists were experiencing the country; it carefully analysed the feedback the tourists gave on leaving the country.

Mr Nzima agreed that the differing figures of tourist arrivals and foreign arrivals was something that was receiving attention, and said that a detailed analysis was necessary. SAT was also worried about those figures. There were neighbours coming from Botswana, Lesotho, Zimbabwe, and other African countries, and, together with Statistics South Africa, SAT was embarking on an exercise on spending. SAT wanted the numbers that Statistics South Africa produced to be able to help it with its decision making, and to speak to certain important pointers in the tourism industry. He did not want to be “anecdotal” at this point but would prefer to come back with the detailed analysis. However, he wanted to assure Members that all investments were directed to achieving the right volumes and the right revenue. China had become the prime country from whom South Africa was getting the greatest revenue and volumes coming into the country.

Mr Nzima added that said that some of the other markets in Africa were actually very good, because their visitors were spending hard currency money and were coming to South Africa with the intention of spending money. This made volumes increase. SAT was very mindful of that situation. Therefore, SAT would make sure, whatever efforts it took in Africa, that the middle classes it was targeting was actually a realistic middle class. For example, millionaires in Nigeria were millionaires in dollar-terms, not in local currency. SAT had positioned itself in those markets.

The meeting was adjourned.
 

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