Social Responsibility Implementation programme: Department of Tourism on briefing

Meeting report

National Department of Tourism (NDT)
Mr Kingsley Makhubela Director General, NDT commenced the briefing with a broad overview. Upon joining the NDT in 2010 the unusual practise of upfront payments being made to project implementers on Expanded Public Works Programme (EPWP) projects was observed and queried with National Treasury. National Treasury confirmed that upfront payments were allowed. The NDT embarked on an exercise of reviewing many of the projects. A great deal of projects was under implemented. The aim of having projects was to alleviate poverty and to create employment. The NDT had contracts with project implementers and the NDT made it a requirement that the project implementers had to have auditors that reported to the NDT for better accountability. The NDT took a decision to hire quantity surveyors on a contract basis to determine whether buildings were built according to specifications. The quantity surveyors were hired as they were needed. The issue of ownership of projects was also reviewed- projects should be community owned. If it was found that projects were doing badly the NDT could repossess them. The NDT tried to make projects as sustainable as possible.

The National Chefs Training Project was an initiative by the NDT. Five hundred chefs were trained per year and in 2013 it was decided that enough chefs had been trained. A challenge was to ensure that all the chefs trained obtained employment as the point after all was to get people employed. The NDT intended to perform an assessment on the chefs trained. Another project was the “Youth Tourism Buddies”. The idea was to train persons in basic skills. It was essential to note that the NDT could not train attitudes. Many projects had challenges- if a project was under implemented in its 1^st phase how could it be allowed to continue to its 2^nd phase? The NDT had done forensic audits in the past and it had led to criminal action being taken against certain project implementers. Forensic audits would be done again. The NDT had a good working relationship with the Hawks and systems were in place. 

Ms Lerato Matlakala Chief Director: Social Responsibility Implementation, NDT, continued with the briefing. The objectives of the SRI programme were poverty alleviation and job creation through tourism development as well as skills development. For the most part.over the past few financial years the NDT spent its complete SRI budget that had been appropriated. For 2014/15 as at 30 August 2014 it had spent 52% of its budget. There were a total of 41 projects throughout the provinces and members were given a breakdown of figures per province. Specifics were given on projects that were still in planning and those undergoing tendering processes. Eight projects were in planning phases and nine were undergoing tendering processes. Successful projects were- the Hector Pietersen Memorial Square in Soweto which currently received 20 000 visitors annually; the Zithabiseni Resort in Mpumalanga was another through which a total of 127 work opportunities had been created and 119 persons were permanently employed by the resort; the Ubuntu Craft Market and the Steve Biko Centre both in the Eastern Cape; the Witsieshoek Mountain Lodge located in the Free State Province, the George Tourism Information Centre in the Western Cape’; as well as the previously mentioned National Chefs Training Project.  

The Committee was also provided with particulars on projects that had challenges. It included the Barolong Boo Seleka Project in the Free State which was incomplete and the project implementer had been liquidated. The NDT was currently instituting legal action against the project implementer.  Another was the Qwaqwa Guest House Project also in the Free State Province which was incomplete. The NDT had commissioned a forensic investigation against the project implementer in question and another company had been appointed to complete the project.

Observations revealed that most of the SRI projects were in rural provinces which lacked enabling infrastructure. In most instances the projects were handed over to either a municipality, a provincial government department, provincial tourism authority or the community itself. The problem was that there was limited technical and management expertise of community based owning agencies and to some extent local municipalities, to commercially run tourism projects and to ensure that they were sustainable over time. Community based businesses required substantial financial and non-financial support. The NDT had to do an assessment of viability and due diligence before committing any funds. Some corrective measures implemented by the NDT included strengthening project management and internal controls, the development of application and business plan guidelines and checklist, the consideration of joint ventures between the owning agency and private sector, closer cooperation by the NDT with provincial departments and local municipalities to ensure the long-term sustainability of projects as well as instituting forensic audit investigations where mismanagement of funds were alleged.
On funding processes, project proposals had to be submitted via the provincial department which was responsible for tourism. Each province had a tourism provincial structure which discussed and prioritised proposals to be submitted to the NDT for funding. The NDT in turn interrogated proposals and did assessments on viability. Due diligence was also done. Funding criteria included a bias towards rural areas and poverty nodes with tourism potential. One of the funding requirements was a detailed business plan and a feasibility study report.

In conclusion members were provided with a schematic step by step guide on the SRI Project Development Process.

Discussion
Ms P Adams (ANC) referred to the use of quantity surveyors by the NDT on a contract basis as the need arised and asked whether they could be considered consultants. She also asked whether the NDT worked with the Department of Public Works (DPW). Could the DPW not have done the work on the quantity surveyors? It was commendable that the NDT spent 100% of its appropriated funds; the issue was whether value for money was received in return. The SRI projects were undertaken for job creation and skills development. How many persons had been skilled and with what kind of skills.

The Hector Petersen Memorial had been established in 2002 but it currently only had 20 000 visitors annually; what was the NDT doing to attract more visitors to the Memorial?  Could the NDT not honour Ashley Kriel in the same manner in Cape Town as was done with Hector Petersen? What was the number of visitors at the Steve Biko Centre. In reference to the women’s cooperative which produced curtains and furniture in the Free State could the NDT link the cooperative up with the Department of Trade and Industry? Reference was also made to the NDT’s National Chef Training Project and it was pointed out that many of those that had been trained were unemployed. Only 50% of them had found jobs. It was an expensive Project. Could the funds not have been better spent on other types of skills training? The funds could have been spent on tourist guide training for example.  What had gone wrong with the chefs’ training project that only half of the trainees could find employment? If it was correct that the NDT engaged with the Afrikaanse Taal en Kultuurvereninging ATKV, the Tourism Guiding Council of SA (TGCSA) and SA Tourism why were trained persons not sold to them. What was the duration of the chefs’ training and was the training accredited? What was the cost to train a single chef?
 
Mr Makhubela noted that the NDT did work with the DPW. The NDT had an agreement with DPW and National Treasury that the benefits of full time jobs were greater. Some of the projects would create permanent jobs.

Ms Matlakala responded that the chefs training provided were accredited. The youngsters who were trained were employable and marketable. The training on offer was more like a learnership. The trainees received practical experience.

Mr Thulani Sibeko Director: Programme Management, NDTsaid that the visitor numbers at the Steve Biko Centre would be provided to the Committee. The womens’ cooperative in the Free State also produced lights and light shades. The NDT was pleased that the cooperative was benefitting from the operation of the Witsieshoek Mountain Lodge in the area.

Ms Matlakala agreed to forward figures on jobs created to the Committee. The jobs created were mostly construction jobs and not post completion jobs.

Ms S Xego-Sovita (ANC) was concerned about the issue of upfront payments made by the NDT. What risks were attached to making upfront payments? How did the use of upfront payments come about?
With regard to the application for funding having to go through provincial departments, the concern was that at provincial level there could be so called “gatekeepers” to prevent new entrants into the industry. The tourism industry as it were was monopolised. Could an applicant make application for funding directly to the NDT? If the NDT did mentoring, what happened once ownership of projects was handed over to communities? Was the NDT satisfied with its expenditure on SRI projects for the current financial year to date which was at 52%?  If the NDT was not satisfied, what plans did they have in place? It was advised that the NDT request SA Tourism to market its SRI projects.

Ms Matlakala responded that the model on upfront payments had been changed. Service providers were now appointed and only received payments when milestones were reached. In regard to the submission of applications through provinces, it was explained that it had been based on a decision that was taken at Ministers and Members of Executive Committee (MinMEC) level. In the past provinces had not been involved and hence many projects had failed. It did not however mean that applications could not be made directly to the NDT.

Mr Sibeko said that the NDT was satisfied that its SRI expenditure thus far which sat at 52%. He gave the assurance that the NDT would spend the rest of the funds that had been appropriated to the NDT.

Mr J Vos (DA) regarded SRI projects as game changers in the tourism industry. A total of R300m had been allocated to SRI projects, but R40m worth of projects were incomplete. The intention of SRI projects were to alleviate poverty and to create jobs at community level. The value chain in the tourism sector was huge. A total of R200m of the NDT’s budget was spent on training in the hospitality sector. There were so many other skill sets that could be developed. The Committee should visit the SRI projects of the NDT. The NDT should bring the private sector aboard on SRI projects, especially since municipalities and provinces could not handle the projects given their shortfalls in capacity and funding. On many of the problematic projects, the problems lied with project implementers. In some instances the same project implementer was used on a variety of projects and if the project implementer was problematic it made all the projects problematic. There were instances where the project implementer was also the contractor. How many of the projects had been forensically audited?  Could the findings and outcomes of the forensic audits be provided to the Committee?  How many NDT officials had been implicated in wrong doing? Why had the outcomes of forensic audits done in 2011 not been submitted to Parliament? Projects with challenges in total were valued at R37m.The Barolong Boo Seleka project in the Free State had challenges yet the NDT had not given details on how much the project had cost-  research had shown that the cost of the project was R10m. In total there was R40m worth of projects that had challenges. The NDT needed to do a serious rethink. There had to be strict guidelines. The NDT also needed to develop a tourism toolkit for municipalities. Coordinating forums needed to be set up in provinces so that the private sector could be brought on board.

Mr Makhubela conceded that the Expanded Public works Programme was a headache. It was difficult to keep a hand on all projects. Sometimes what people reported was often times different from the realities on the ground- this was a huge challenge. The Barolong Boo Seleka project did have challenges. One of the challenges was that the ablution facilities could not handle the amount of persons that was catered for in its amphitheatre. Substandard equipment had also been used. On forensic audit reports, they were part of investigations and if made public could compromise investigations. Some of the cases were at sensitive stages. Once the matters had reached conclusion at court the Committee would be provided with the information.
 
Ms Matlakala conceded that it was true that there were instances where a single project implementer was managing multiple projects. The NDT however followed the guidelines set by the Public Finance Management Act. New companies were now coming in.

Ms Morongoe Ramphele Deputy Director General: Domestic Tourism Management, NDT stated that the NDT did have a toolkit for municipalities. Capacity building initiatives had been undertaken by the NDT in poverty nodes.

Mr A Whitfield (DA) noted that the problem with placing projects in the hands of municipalities was that municipalities lacked capacity. To make matters worse municipalities did not include the projects in their Integrated Development Plans (IDPs). Hence no funding was committed towards projects. A more desirable outcome would be to see  the visitors’ numbers at projects. The shift from a reliance on local government to public-private partnerships was commendable. There were also non profit organisations that could handle projects. There were apparently 32 infrastructure projects and 9 training projects and R200m had been spent on training. Perhaps there should be more training projects than infrastructure projects. 

What was the NDT’s definition of social responsibility? The Minister of Tourism had stated that there were no extra funds for tourism and that existing funding should be used to gain maximum benefit. Hence the Committee needed to know what the NDT’s return on investment was.

Ms Matlakala confirmed that it was true that municipalities did not commit funds for projects.

Ms Ramphele said that the NDT failed to participate on the IDP processes of municipalities. There was no doubt that capacity building was important for municipalities.

Mr Makhubela responded that visitors’ numbers were directly related to the NDT’s Domestic Tourism Strategy. The challenge was that there was a need for domestic marketing to take place.  The NDT had allocated R100m to SA Tourism to do domestic marketing.

Mr J Esterhuizen (DA) emphasised that there was a need for community based tourism. Part of the difficulty was that many communities had high expectations.  How communities were supposed to benefit if projects were not profitable. The question was whether the taxpayer was getting value for money. Heritage sites needed to be protected and maintained. 

Mr S Bekwa (ANC) pointed out that the NDT had inherited many of the projects. Some of the projects were incomplete and others were vandalised. The NDT had done an admirable job to try to get things in order. The Committee needed to assist the NDT to close gaps. On the funding requirements of the NDT ie business plans etc how did the NDT intended to assist persons in rural areas.

Mr Makhubela noted that the NDT did assist communities with planning etc. Knysna steam locomotive that had been a huge tourist attraction which was no longer functional ; the NDT intended to revitalise the attraction.

Mr Bernard Joseph (EFF) asked how communities were made aware of the NDT’s projects. How were outreaches conducted? If the NDT had done forensic audits on some of the projects and some matters had been to court, could the Committee be provided with details? How did the NDT mitigate risk on SRI projects? To whom did the NDT transferred its funds - a better understanding of the process was needed. It was a risk to provide funding upfront but the issue was how the NDT mitigated the risk. It was suggested that the NDT enter into relationships with the National Youth Development Agency (NYDA) and Skills Education and Training Authorities (SETAs). Stakeholder relations and cooperation with sister departments were important.

Mr Makhubela noted that awareness of the NDT’s projects by communities was a challenge. The NDT did have a National Tourism Sector Strategy Forum at which the NDT interfaced with tourism stakeholders.

Mr G Krumbock (DA) stressed that care should be taken regarding the choice of projects and the allocations of budgets to it.  The Hector Petersen and the Steve Biko memorial sites should exist even though they were not profitable. They were of importance to SA for reconciliation and nation building. It was undesirable for the state to act as an industrial entrepreneur. Why was the Zithabiseni Resort in Mpumalanga Province run by the state- why was the state playing a role in the competitive private sector sphere? The state was never going to recover its costs on the Ubuntu Craft Project in the Eastern Cape. It was more desirable to see some of the projects under a private sector licence. Limits could be set; tenders could be called for and in the end let the private sector run with the project. A cost-benefit analysis should be conducted on SRI projects that had been funded in order to determine whether it would have been better for them to have been private sector projects. The issue was whether taxpayers were getting value for their money by investing in these projects which were essentially competing in a private sector environment.  

Mr Makhubela in response to whether the NDT was competing with the private sector noted that in the North West Province there had been a EPWP project that had declared dividends to a community. The dividends had been used to build schools. In Limpopo Province the NDT had met with traditional leaders in an area where the NDT had built a lodge. As money was made the funds could be used to equip schools. The issue was about managing funds when a project was successful. There were projects that had great potential. In Mpumalanga Province there was another project which the Protea Group wished to run as a hotel. It was a 30 minute drive from Pretoria and had huge golfing and conferencing facilities. As soon as profits were made the funds would be ploughed back into the community. Indeed capacity needed to be developed in order for things to get done and projects should be viable. However not every area had tourism potential. A great deal of monitoring needed to be done. The NDT did undertake assessments in order to determine viability of projects.

The Chairperson pointed out that there were so many projects in various areas; were there adequate signage providing directions to the sites? If a tourist arrived in Gauteng Province he should know what was on offer in the Province. As projects were undertaken it should be remembered that the aim was on job creation and poverty alleviation. On the issue of upfront payments it was reassuring that things were being monitored by the NDT.

Mr Makhubela stated that if any of the issues raised by the Committee’ had not been addressed; the NDT would ensure it dealt with such issues.
 
Mr Sibeko noted that the NDT did have projects that focussed on general tourism signage. Perhaps the NDT needed to revisit the issue.

Ms Ramphele added that on signage there was a team from both the NDT and the Department of Transport that had earmarked a project on it.

Mr Vos referring to the criminal cases instituted by the NDT and said that it had been instituted as far back as 2011- although the wheels of justice in SA turned slowly, it was not that slow. Where wrongdoing had been found did it involve project implementers?
The NTSS action plan spoke about resorts and properties owned by government. The NTSS had been adopted by the NDT. There were many small towns that had government resorts that were badly managed- what had the NDT done to identify these resorts and government owned properties? Private public partnerships should be considered on these resorts. Government should not compete with the private sector. Small resorts like those mentioned were hidden gems. Their value to the small towns in which they were located was endless. Government should work with the private sector on it.
Mr Makhubela noted that the NDT had received good cooperation from the Hawks on the criminal cases. A great deal of investigation had taken place. Progress had been slow but in the last few weeks there had been a great deal of developments.

Mr Krumbock gave an example where signage was lacking. Tweedy was a town in Kwazulu-Natal where ex President Mandela had been captured by the Apartheid Regime. There was no signage on any of the highways informing people of this important factoid. The NDT had been requested to put signage in place over the last 4 years with no resultant response.

Mr Makhubela confirmed that there was a team working on signage. Signage had been a mandate of the Department of Transport. There was however agreement that signage impacted upon tourism. Mapping had already been done.

Committee Minutes
Minutes dated the 5 September 2014 was adopted as amended.

The meeting was adjourned.