The Deputy Minister of Tourism attended the meeting. The Auditor General South Africa (AGSA) briefed the Committee on its findings in the tourism sector, and specifically on the performance of the National Department of Tourism (NDT) and South African Tourism (SAT). In the 2013/2014 financial year, the NDT got a clean audit while the SAT had an issue of non-compliance. The financial statements of the NDT submitted for auditing were not prepared in accordance with the prescribed financial reporting framework and supported by full and proper records. Material misstatements of disclosure were identified by the auditors, with items needing to be corrected. AGSA explained that if attention was paid to the issues highlighted there was no apparent reason why both should not achieve clean audits. The financial statements had to be adjusted because of reclassification of certain items; there had been some confusion on exemptions granted in previous years in relation to the Expanded Public Works programmes. There were improved performance reports, and both entities were in good financial health. Generally, there were good controls and policies and each of the entities showed good governance, with functional audit committees and internal audit. Overall, there was compliance with laws and regulations except for the issue identified by the NDT. There was no irregular expenditure for either entity, but there had been one instance of fruitless expenditure on the part of the NDT. AGSA suggested that it would be useful for the Committee to request continuous updates on the controls to address the misstatements, and obtain feedback on possible effects of the new visa regulations on tourism, and the role of local government in tourism activities. In answer to Members' questions, AGSA noted that it could not comment on how budget drops might affect the ability to perform some programmes, nor on the steps to be taken to address performance challenges in the Expanded Public Works Programme. The modified cash standard of accounting was explained in brief.
The Deputy Minister noted that the global economic downturn had resulted, globally, in lessened growth of tourism but some of the figures were still encouraging, and South Africa was trying to maximise the potential of benefits and government was trying to mitigate any unintended consequences of the new visa regulations. The NDT was trying very hard to return to having a clean audit. It had achieved 86% of targets, was keeping the vacancy rate down to 6%, had over 5% employment of disabled people, and 53% women, its demographic breakdown was good, and many of the indications for staff and growth of its programmes were positive. Its partnerships were described. Many foreign nationals worked in the industry but the entities were trying to bring more local South Africans on board and involve more small enterprises. In all cases where the investigations had indicated culpability, prosecutions were instituted, and it was attempting also to recover funds from any defaulters. The Department was pleased to state that it had zero corruption. NDT had managed to achieve 98.4% of budget overall and the figures and breakdown of percentages were given. Each of the units then provided some details of their main focus areas, all of which were geared to trying to achieve effective service delivery. The complaints received and dealt with were summarized, and it was noted that there was full compliance with broad based black economic empowerment. Capacity building training programmes for local government and own staff took place. Annual tourist guideline reports were developed. A framework was developed for the Visitor Information Centre. Other points touched upon included the National Tourism Information Gateways, research reports, International and Domestic Tourism programmes and regional work.
Members asked about the targets, and urged that domestic tourism be boosted. Some Members suggested that there should be reappraisal of all programmes, asked about the mandate of the complaints officer, and wondered to what extent the Portfolio Committee could become involved in the review of the National Tourism Sector Strategy. They asked about media engagements, branding, communications strategies, and how many staff were being disciplined. Members asked that the Committee be apprised well in advance of efforts during tourism month, to be able to promote them. They urged that tourist guides should be thoroughly trained and fully conversant in the history and importance of the areas they were covering and perhaps focus needed to be placed on niche markets. The Deputy Minister asserted that the Department was fully committed to improvement and wanted to see excellent value for money and was trying to enter into agreements to have trainees absorbed on conclusion of their training.
SAT outlined its efforts and statistics in the growth of tourism and also expressed the hope that difficulties with the visas would be resolved shortly. Statistics and changes in the tourism figures and findings were presented. It had established strong partnerships with the Department and industry, including the South African Business Council and all stakeholders who were part of the industry. Provincial tourism boards worked autonomously from SAT, but the SAT would provide a robust marketing strategy that would support South African business events and tourism and facilitate the workings of the industry. Its legislative mandate was explained. The National Convention Bureau had now been established to market South Africa as a business tourism destination and its achievements were described. SAT would invest in activities that would increase the volume of tourists, ensure longer stays, try to encourage more spend and a wider variety of places visited and promote transformation. It had to understand and correctly brand and promote to the focus groups, and it had carefully chosen where to place regional offices. SAT had achieved over target on the numbers of international business delegates reached. Its partnership efforts were noted and its engagement with the Tourism Grading Council was set out. Governance issues were also raised. The staff component, vacancies and employment equity were also discussed. It derived its revenue from R880 million government grants, R111.6 million from the Tourism Marketing, and income from exhibitions. Interest had increased. The bulk of the spending was on marketing. Members appreciated the sound and strong report, asked about employment, particularly of foreign nationals, and said that rural development of tourism was very important. The possibility of uni-visas was raised and the less than full take-up of the benefits in relation to the Grading Council was queried.
Chairperson's opening remarks
The Chairperson stated that she hoped that in the future there would be no misstatements in the area of disclosure notes, involving the National Department of Tourism (NDT or the Department) and South African Tourism (SAT), and they would be able to achieve clean audits.
She also commented that in relation to the Department, the Committee would be paying attention to the Expanded Public Works Programme (EPWP), because the Department had not been doing well in that area, and she stressed her disquiet that this could lead to further qualifications. Although the SAT had achieved a clean audit for the financial year under review, the Committee wanted to hear how the budget was spent. The Committee was particularly concerned that there must be good spending to promote domestic tourism.
Auditor General South Africa (AGSA): 2014/15 Audit Outcomes of the tourism portfolio
A representative from the Auditor-General South Africa (AGSA) noted that the briefing would be focused on the audit outcomes of both the SAT and NDT, unauthorised expenditure and its root cause and recommendations, as well as giving an overview of the final outcome for the tourism portfolio overall. For the financial years of 2012/2013, the SAT had a clean audit, which meant there were no qualifications or modified audit opinions, but for the NDT, there were issues that needed to be clarified. In the 2013/2014 financial year, the NDT got a clean audit while the SAT had an issue of non-compliance. This was reversed again in the 2014/2015 financial year, with the SAT getting a clean audit while the NDT had an issue of non-compliance.
The audits of both the NDT and SAT focused on the quality of submitted financial statements, performance reports, the supply chain management, financial health, human resources and information technology (IT). If attention was paid to these areas then both the NDT and SAT should be close to getting clean audits. Regarding the quality of financial statements, it was noted that the NDT had an adjustment to its financial statements for the year under review. This was because unspent amounts of money on the training projects reclassified from transfers to goods and services were not included in commitments. There were changes to the accounting framework being implemented. The root cause was the slow response by management in taking corrective action. AGSA recommended that management should include the amounts as calculated in the commitment disclosure note. In the 2013/2014 year, there was an exemption for the NDT in relation to disclosure of the Extended Public Work Programme (EPWP) but in the 2014/2015 year; the exemption for this disclosure was temporary.
In relation to the quality of the performance reports, the NDT showed positive movement in comparison to the previous year, which implied an improvement in the performance quality, and the supply chain management also showed an improvement. It showed good financial health. There were no findings in relation to human resource management. In IT, the NDT had improvement. The SAT had a risk management plan that was to be implemented but by now it had been developed, but as yet to be approved, and the AGSA hoped that once it had been approved, then there should be a movement to a clean audit. In relation to compliance with legislation, the audit of commitments in the NDT showed unspent amounts of money on the training projects reclassified from transfers to goods and services, which were not included in commitments.
At senior management level, the quality of financial statements needed improvement in certain areas. For the NDT, if the financial statements had not been corrected, there would have been a qualification. Again AGSA wanted to reiterate that there was no correct accounting in terms of financial management, but that could be corrected once the NDT and National Treasury agreed on how to disclose the EPWP in the financial statements. The NDT finally got an unqualified financial report, but with a paragraph indicating non-compliance.
As for the key controls, the leadership had implemented the right controls and policies. The governance of the entity was still good, the audit committees were functional, and the internal audit teams had been doing a good job of ensuring that the Department and other entities were on track. Since the annual audit report had commented on the usefulness and reliability of data provided, there was no reason to believe that the information provided from random checks on the Department and entities was not useful or reliable.
The audit report also provided information on compliance with laws and regulations,and there were no adverse findings in that regard; it was only in relation to the quality of the financial statements that there were matters of emphasis, and that was because the NDT had not entered correct information on its commitments – as indicated earlier. Once that had been corrected, however, the report was acceptable. Both the NDT and SAT had a clean bill of health in regard to no unauthorized expenditure. There was also no irregular expenditure (described as expenditure in contravention of key legislation in this year, although the SAT had irregular expenditure of R196 693 in the 2013/14 financial year. In the 2014/2015 financial year, there was an avoidable (fruitless) expenditure of R49 000 by the NDT as against the 2013/2014 financial year, where this figure was reported to be R1 952 000. The auditors recommended that leadership should put in place controls that correctly accounted for EPWP, though that was not quite so easy as it appeared. It was important that, whatever was implemented, this should be correctly disclosed at the end of the financial year.
In the previous financial year, some commitments were made that were carried over into the present financial year. Firstly, there was a plan to follow up on the controls being implemented by the management of the NDT and SAT to address the misstatements in predetermined objectives. This had been successfully implemented. In relation to IT, there was a commitment to follow up on action plans implemented by the management of the NDT to address IT findings, and this was also successfully implemented. Also, with regards to information technology, the SAT had a commitment to follow up on action plans implemented by the management of the SAT to address IT findings and this commitment was currently in progress. With regard to financial health, priority was placed on providing feedback on foreign currency impacts on the operations of the SAT, this action plan was also successfully implemented in the current financial year. For the next financial year, the new commitment would be to follow up on progress, by further discussions with the National Treasury regarding the correct accounting treatment for EPWP infrastructure expenditure at the Department.
AGSA finally set out the recommendations for the Portfolio Committee which should address certain issues. These included that the PC should ask for continuous updates on the controls being implemented by the NDT to address the misstatements in the financial statements. The Committee was also expected to obtain feedback on matters that were raised during the budget debates and these included the possible decrease in long-haul travellers due to the new visa requirements, the budget not being sufficient to achieve the mandate of the portfolio, the implementation of an interdepartmental task force by the Minister to address the challenges of tourism and lastly, the role of local government municipalities in maintaining tourist attractions.
The Chairperson wanted the SAT and NDT to make their respective presentations before the interactive session with the Committee but Mr G Krumbock (DA) raised a point of order and asked that Committee Members should firstly raise queries and concerns from the AGSA presentation.
Mr G Krumbock (DA) asked if the changes to the budget would still allow the entities to carry out their mandates. This was an issue that had been raised before. Mr Krumbock was of the opinion that there was no econometric study to actually identify what the optimal budget would be so that nothing in the mandate was left out, and so that the Department would also not over-spend. In his province, the provincial allocations to tourism were cut. He asked AGSA if any performance audit was done on the budget, to assess what the departments could achieve with the budget given, and whether there were any recommended optimal amounts for, for example, policy knowledge. He also sought clarification as to the role of the Auditor General in determining any optimal amounts.
Mr J Vos (DA) made reference to the Minister’s new commitment to follow up on progress with the National Treasury regarding the correct account for the EPWP. He asked for more clarity, commenting that most of the EPWP projects had failed, and some had made payments for incomplete jobs. According to him, there was in excess of R50 million spent on projects that were non-operational as a result of contractors who failed to carry out legal contracts, and that was totally unacceptable. He asked why there was a “new commitment”, since the same issues were raised in the previous financial year. He would rather see steps or actions being taken against contractors or government officials involved in or responsible for the failed projects, because it was criminal to allow such waste in projects that were specifically designed to empower the host communities who were meant to benefit from the EPWP programmes.
The AGSA official responded to the issue of the EPWP by saying that the comments on this in relation to the NDT were purely accounting issues and had nothing to do with implementation of projects. In relation to accounting for some of the EPWPs, the NDT usually would get some exemptions in terms of how it would account, because there was a modified cash standard, from there a framework and then guidance, policies and presentations to finally the disclosure. The disclosure was the part that needed to be worked on, although the previous steps also were interwoven. The NDT usually tried to follow this, but sometimes there was a realization that projects could not always be implemented in the way they were designed to be done. When the audit was completed, the team visited a number of EPWPs and there was nothing to suggest that the audit team put in any different information to the audit than what was actually on the ground, therefore the new commitment was as a result of the agreement with the National Treasury (NT) that there should no longer be any deviations acceptable and henceforth everyone must comply with the guidance from NT. If this was not done on time, there could be problems.
On the issue of the budget, AGSA was not posing questions but instead it it highlighted key methods it felt could be used in getting maximal performance out of the budgeted amounts.
Ms S Xego (ANC) said she felt disempowered by the fact that page 5 of the document presented was not in the pack. This talked about concerns by the Auditor-General in getting assurance levels of the Committee, and she wanted more clarity on this.
AGSA responded by saying that the information in that slide was based on the assessment of issues which the Committee raised in the previous meeting. Both the implementation and the outcomes of the audit indicated that the Committee had provided an assurance that there were no concerns at the moment, and AGSA was happy with the way things had moved so far, as seen by the improvements in the audit outcomes.
National Department of Tourism 2014/15 Annual Report briefing
Minister’s opening remarks
Deputy Minister of Tourism, Ms Tokozile Xasa, began the briefing by stating that the Department had taken into consideration the Budgetary Review and Recommendation Report (BRRR) of the Committee when planning for the subsequent year. The Department was committed to making tourism one of the most resilient sectors within the South African economy and globally, as it continued to grow.
The global economic downturn had affected both the inbound and outbound tourism of South Africa. This was not peculiar to South Africa alone, but a phenomenon worldwide. The Department was looking at ways to make this situation favour South Africa. A combination of factors affected the volume of tourist flow into the country and one of these was the new immigration laws that had been introduced in the country, however the government was working hard to find ways at mitigating the effect of these new regulations on the tourism sector and was working tirelessly to resolve unintended consequences from these immigration regulations.
In relation to the EPWP, forensic investigations had been completed and action was being taken, based on the recommendations of the investigations, including opening cases with the police. This was a distinct part of the Annual Report (AR) of the Department and it also showed what was being done on implementation of the report. Lessons were being drawn from the Auditor-General’s findings that were used in strengthening the performance of Department and for this year the Department was striving to get back to an unqualified and clean audit report.
The Deputy Minister was happy the SAT achieved a clean and unqualified audit and she assured the Committee that the Department would strive to perform better, working on the areas which had being highlighted in the AG’s report. In this financial year, the NDT was able to achieve 85% of its goals and the vacancy level at the end of the financial year was at about 6%, and hoped to keep it at this level. Despite any contrary indications, many of the indications were positive, which signaled career growth of the team members.
The current Director General was formerly a Deputy Director General which showed that the Department had had capable successors internally, without sourcing external staff. Overall there was a 53% representation of women. The Department was also able to maintain its position in the list of top six performing departments, as recorded by the Department of Planning, Monitoring and Evaluation.
Working with the Portfolio Committee on Tourism, the Department intended to continue partnering with the SAT to ensure that there was a growth in the number of tourists coming into the Republic of South Africa. The Department also hoped to work closely with the government on the immigration issues and give reports to SAT about this. The Department gave an assurance to continue working closely with all sister agencies and government organisations, including the Department of Home Affairs (DHA) in order to grow tourism.
With regards to immigration, the Deputy Minister stated that there were a lot of foreign nationals in the country who worked in the tourism industry but this did not give an indication of what was really happening in the industry, as this scenario was denting the effect of the EPWP programme on training and recruitment of locals. She was very particular about the need to be patriotic and absorb more South Africans into the industry, while also looking at how the Small and Medium Enterprises (SMEs) could grow.
Mr Victor Tharage, Director General, NDT, presented the Annual Report. He highlighted some
issues which had been brought up for discussion earlier. Thirteen projects were subjected to forensic audit to ascertain what went wrong with those projects, and these were all linked to the implementation strategy, where the balance between money meant for the actual project and money meant for wages was augmented by seeking interventions.
In some instances, it was established that compliance on contracts showed disparities and management here had looked into each individual file, to ascertain where the discrepancies arose, with a view to holding those culpable responsible. Where mismanagement of funds was established, the police had been involved, prosecution processes had started and information on each case would be provided on conclusion. The Department had done everything possible in cases where it had found inappropriate steps. Mr Tharage assured the Committee that every project that actually needed to be completed for the growth of tourism in the affected areas would be completed. He also said funds would be recovered from the defaulters.
Issues around full project accountability were not limited to the NDT alone; this happened in other departments also. Whilst the NDT was hoping to get a clean audit, it had been asked to restate some of the figures to reflect figures for matters waived earlier. This led to the report no longer being clean. He noted that an explanation on this was being sought from the Office of the Accountant General because there was no template provided for the preparation of such a report under consideration and it would be unfair to write a report based on unaudited items. He did, however, want to state categorically that the Department had a zero level of corruption and he hoped the results of the forensic audits would show that.
Mr Ralph Ackermann, Chief Financial Officer, NDT noted that the NDT had been able to expend 98.4% of the total budget. R1.5 billion was appropriated and almost this entire sum was utilised. There had been a few instances of under spending in the budget. For the Administration programme, there was 97.7% spending. In the area of policy and knowledge there was full spending, the International Tourism Management showed 99.8% and 94.7% spending was achieved on Domestic Tourism.
A breakdown of the actual expenditure per programme showed that the Administration programme took 14%, policy and knowledge stood at 60%, international tourism had the smallest fraction at 3% while domestic tourism, which included the EPWP projects, had 23% of the actual expenditure. A summary of the expenditure per economic classification was given. It was explained that current payments stood at R6.816 million which was a combination of compensation of employees (R572 000) and goods and services (R6.244 million). Transfers and subsidies did show some variance but capital assets and financial assets did not.
Ms Nomzamo Bhengu, Chief Director: Governance & Support, NDT, described that the issues that NDT concentrated upon in order to achieve effective service delivery included cooperative governance management, the reputation of South Africa, which continued to look positive to tourists, culture and heritage, and the economic infrastructure on the ground. In regard to infrastructure, it was noted that certain improvements were necessary. In relation to governance, the audit committee of the Department had continued to live up to expectations in terms of its oversight functions. Risk assessments for the operating environment were successfully carried out. Financial interests were declared by SMS employees, as required by law. For projects domiciled outside the Department, the tender committee members were required to look at the declarations in each of their sittings so as declare any conflict of interest. The Department had a code of conduct for its employees and any breach of these codes was regarded as misconduct, to be investigated and followed by disciplinary action and appropriate sanctions. Training had been carried out for fire marshals and first aid to ensure the working environment was safe for both staff and visitors.
She noted that the Department, against all odds, was about to achieve 84% of its set targets for the 2014/15 year. Achievements were based on verifiable information, as provided by the Department. These audits were carried out both internally and by the Office of the Auditor-General. The Audit Committee held four meetings in 2014/15 to discharge its oversight responsibilities and ensure that Department maintained effective, efficient and transparent systems of financial, risk management, governance and internal control.
Mr Dirk Schalkwyk, Chief Operating Officer, NDT, repeated that all except for two targets were completed in this year. The NDT fell short on number of strategic documents to be delivered and compilation of reports. The reports on risk management were not ready because they were to be handed in only after the 31 March, and this anomaly would be corrected.
There were 35 complaints from tourists and these complaints were related to transportation, the quality of accommodation, which in some cases led to issues of monetary refunds, complaints about the attitude of the tourist guides and issues around visas. Some Memoranda of Understanding had been signed to address these issues.
The vacancy rate of the Department stood at 6%, and out of a work force of 546 positions, 513 were filled, with 33 vacancies. These arose within the year, and it would normally take about six week to fill the vacancies, from advertisement to appointment.
485 staff received trainings and 335 of these were skilled programmes. There was a target of maintaining a minimum of 50% women representation, and female representation at 31 March was at 53%. The target of maintaining a minimum 5% rate of people with disability was achieved, with a 5.3% rate. Black representivity, at 31 March 2015, was at 95.1%
The ICT unit over-achieved its target with an uptime of 98% and maximum 1.25% down-service time. This was usually done over the weekends or when there was a long holiday.
There had been full compliance with broad based black economic empowerment (BBBEE). Two communications targets were not met, which gave rise to a 9% deviation in the implementation of the communication strategy. This was primarily due to some administrative issues.
The figures for the HR division showed eleven misconduct cases reported, with nine resolved and two left outstanding. Ten cases of grievances were reported and six were dealt with, with four outstanding.
The workforce demographics showed Africans at 87% representation, Coloureds at 5%, Indians at 3%, White at 5%, Persons with Disabilities at 5.3% representation.
Ms N Siluwane, Acting Deputy Director General: Policy and Knowledge, NDT, stated that her unit achieved all set targets for the year except for two. Capacity building training programmes were organised for local government. A target was set for setting up programmes to implement compliance with tourist guidelines and regulations, and annual tourist guideline reports were developed. The target of producing tourist guideline reports in provincial parks throughout the country was also met. The Department had targets for monitoring and evaluation of tourism sector performance so that the Department could have a clear knowledge of areas where impact was being made and also to monitor returns on investments. Two targets were set in terms of monitoring; this was to develop the 2013 State of Monitoring Tourism report and the 2013/14 National Tourism Sector Strategy (NTSS) annual implementation report. They were both achieved. Targets were set for development of the Tourism Sustainability Report and this target was also achieved.
There were strategic objectives to provide key training for key policy and decision making, and here more efforts were concentrated on knowledge systems to be developed for the Department. Database tools were developed for the Department. A framework was developed for the Visitor Information Centre which would be used as a baseline for the development of visitor information across the country. Targets were set to develop and maintain two National Tourism Information Gateways (NTIGs) – and although the one at the land entry port of Beit Bridge was not developed, one at Oliver Tambo International Airport had been, where there was already a functional and operational gateway, which only required maintenance. Alternative means were needed to cater for the earmarked infrastructure, especially in areas with large volumes of visitors and tourists. Security issues were also raised, making the Department look at other options.
In 2012 the Department had signed MOUs with five universities, and six research studies were to be undertaken in the 2014 15 year. Five research reports were produced and one not – this was due to be produced by the University of Zululand but there was a default. The process of research proposals up to peer review was concluded, but the Department had discovered on due date that the report had not been completed; the University said it would need the services of an external service provider and still could not complete the report, despite extension of time. The NDT had managed to recover all research funds assigned to that university for the production of the research.
Two programmes were implemented to promote compliance with the Tourism Sector Specific B-BBEE Scorecard and Verification, and an amendment of the Tourism B-BBEE Codes and Feasibility assessment of creating a database of black owned enterprises in the tourism sector was done.
Ms Aneme Malan, Deputy Director General: International Tourism Management, NDT, said her unit was focused on driving bilateral multilateral engagements, economic diplomacy and development of South Africa’s tourist potential throughout the various regions of the world. The programme, in the previous year, had six performance indicators and eight targets. All the targets were met except the strategic political interventions for the Nordic region. Here, it was discovered that the platform to be used was not the best and this would be captured in the next financial year.
Attempts were made to institutionalise tourism in SA missions abroad. This was achieved by provision of marketing collateral in foreign languages and also training on tourism functions being included as part of the economic diplomacy training for officials of SA Missions abroad.
To reduce barriers to tourism growth per year in SA, policy direction on situational reporting for segmented tourism markets was done. An assessment was conducted into the potential for tourism in positioning South Africa as an aviation hub for the Southern Corridor to enhance tourism competitiveness.
In order to implement international agreements, capacity building workshops on grading were done and statistics were targeted at African countries with whom South Africa had signed agreements. A review of the implementation of the Indaba expansion policy was finalised, and the policy framework for international placement for skills development was developed, to improve the skills of the workers.
Under the target for strategic engagements in multilateral fora, NDT made an attempt at regional integration by the development of South Africa's policy position on tourism. within the SADC & AU.
Ms Morongwe Ramphele, Deputy Director General: Domestic Tourism Management, NDT, gave the presentation on domestic tourism management. In the year under review, the Eastern Cape hosted the National Tourism Career Expo (NTCE). Nine educators' seminars were also held and a total number of 8 670 learners benefited. The annual tourism month, which was usually hosted by the less visited provinces, was hosted in the Northern Cape, at African Farm in 2013/14 and in Limpopo in 2014/15.
Priority was given to programmes for Pillars 2, 3 and 4 of the National Tourism Service Excellence Strategy and this was implemented. The level of public awareness was raised and workers were encouraged to maintain certain standards of service and norms.
Another target related to the implementation of the tourism interpretation signage in Mapungubwe, Richtersveld, Cape Floral (Baviaanskloof) and Ukhahlamba – Drakensberg, The Department did not physically implement the tourism signage, but it had transferred funds to the four management authorities and one NGO to implement, after National Treasury had authorised the request to do so. That implementation would continue into the new financial year. This, however, was a deviation; the Department had targeted implementing the signage itself, but this had not been possible because the target was not properly formulated.
Another target related to implementing incentive programmes to support enterprises in their growth. The target was partially met, as the Tourism Incentive Programme (TIP) was partially implemented. The system was designed, developed and the programme was launched, but there was a deviation since calls for applications were not made, thus no applications were received and there was no adjudication.
For enterprise development, there were six targets out of which two were not achieved. There was a target to support 489 rural enterprises but only 466 were reached. The target to support 450 businesses with market access was underachieved by 168.
For EPWP, there was a target of 4 369 to be reached, but only 3 037 were achieved. The challenge here was that the tenders from two provinces were not compliant so had to be re-advertised. Another factor which contributed to this was the reduction in budgetary allocation. The Department had revised its strategies on the EPWP; payments were no longer made upfront, but only as against specific milestones achieved. Responsibilities between the building engineering firms and contractors had been separated so that there would be check and balances. Post construction, the Department had devised measures to offer support and mentoring so as to promote continuity and sustainability.
Mr Vos wanted to be sure about the number of targets that were not met by the Domestic Tourism unit. He pointed out that the government should do everything possible to boost domestic tourism. He cited an example of giving all South Africans an opportunity of experiencing their country, and making sure every South African had the means to visit places that they could not previously visit. He also pointed out the need for the Department to use all the resources possible, which comprised the provincial and local government funds, to ensure that all the municipal resorts and parks were used to boost the domestic tourism. He stated that all the programmes and targets of the Department must be geared towards the objective of tourism, which included job creation, affordability and availability of tours. He went further to state that in the future a reappraisal should be done on programmes, to be sure they were actually necessary and that they would speak to the issues that needed to be addressed.
He asked if it was possible for the Portfolio Committee to be a part of the review being planned for the National Tourism Sector Strategy, specifically speaking to the municipal holiday resorts.
Referring to page 19 of the presentation, detailing complaints made to the tourism complaints officer, he noted that all had been dealt with, but was worried about 35 cases around the visa regulations introduced by the government. He further stated that the present regulations were detrimental to the tourism industry. After consulting with the tourism complaints officer, he was told that those complaints actually did not fall within his mandate. Mr Vos thus wanted to know what the responsibility of the tourism response officer was.
Mr Vos noted that page 24 mentioned the missing of a target because of disagreement between Minister and Director General and wanted to know what type of media engagements took place, and it they had to do with branding. He also questioned what communications strategies were used for issuing media statements.
Referring to page 45 of the presentation, detailing staff members undergoing disciplinary actions, Mr Vos asked if any NDT staff were investigated in relation to the EPWP projects.
He also made reference to the tourist guide profession, and wanted to know the details of that programme on international tourism. In respect of the Aviation Hub Strategy, he wanted to know the outcome.
The Chairperson welcomed the report of the Auditor-General and the NDT. She stated that both reports were very informative and were an improvement on the previous year. She would reserve her comments on the NDT’s findings by the AG, and hoped that corrective steps would bear fruit in the following year.
Ms Xego referred to page 41 of the presentation by the NDT on deviations in domestic tourism, and drew attention to the items on the bottom of the page. She strongly urged the NDT to implement all the recommendations of the Auditor-General to keep better control over the EPWP programme and to be able to account fully for it. She was, generally, satisfied with the presentations and Annual Report.
Mr R Cebekhulu (IFP) referred to page 19 of the presentation and the vacant positions, asked whether they were key posts that should be filled, and whether the NDT was confident it would be able to do so.
The Chairperson asked if the position of the Acting Deputy Director General was already advertised. She also asked about the impact of all activities already done in domestic tourism. She also noted that the Committee would look into the forensic audit of the Department once it was concluded. On the issue of Beit Bridge, she wanted to know if the Department would do feasibility studies or carry out pilot projects before embarking on major projects. On the issue of the Tourism Month, which involved a whole range of activities, she asked the Department and SAT to look into the events calendar well in advance, so that provinces, municipalities and the public could buy into the activities to put tourism on the agenda. She hoped to see an excellent audit result in the following year.
Mr Tharage noted that two posts for Deputy Director Generals had been advertised, and the closing date had passed.
On the pilot projects, he noted that both Beit Bridge and Johannesburg projects were pilots, to see if the projects were likely to give the kind of results the Department hoped for, so they could be replicated. The results were positive for the International airport but for Beit Bridge there was a major issue around the flow of people at the border, and it would have been very different for people to stop. There were plans to move these as close as possible to the borders.
He believed that the Department did receive value for all the activities and programmes it implemented. Recently, he had seen many expensive cars near the border towns, registered to Zimbabwean nations, which proved that people were travelling on leisure trips to South Africa. The question was how to tap that value, providing the right information for these people as they came in to help them stay at the right places and fully enjoying the hospitality of South Africa.
He noted that there were two parts to the communication strategy. The internal part was not entirely achieved. The external part related to the brand presence and brand strengthening, and ensured that the messages of the Department were put out, and that the reputation of the Department was managed, and individual programmes were run. The main issue here was that outreach was organized, where the values of the organisation were instilled in the staff members, and this was done on the day after financial year-end.
The Chief Operating Officer responded to the issues about staff members being investigated; none were being investigated at the moment. He reiterated that it would take around six weeks to fill posts, but the NDT was trying to expedite this. The government target was to keep vacancies in government below 12% but the Department had set a lower target, to drive job creation.
Ms Malan responded on the impact of the programmes planned and said that even though the full effects of the NTCE might not be seen now, they would be appreciated over the later years. The whole idea was to engage with young people who travelled from various provinces to take part in these activities. They were involved in excursions and took part in competitions, doing photography and poetry and art about the country, and these were all learning process for the future travellers. However, this should be done in a coordinated manner so they understood that it was of key importance to travel within their own country. One group of school learners from Pretoria had gone to Nairobi in a partnership between the NDT and Department of Economic Development. She further submitted that if a lot of resources were put into making young people understand the importance of traveling within the country, it would go a long way towards solving the current problem of lack of domestic travel.
She added that she did not believe that over-emphasis should be placed on “Tourism Month”, but on activities that would promote tourism throughout the year. This was why it was important to make a business case for tourism, so people could know tourism was of value. She added that service excellence was something which was needed for people to repeat their visit.
Partnerships with the provinces and local governments could not be wished away, because the Department thrived on what people had done. Local governments provided the basic services and municipal resorts, particularly in the rural areas, could not be abandoned.
In relation to the CIP, Ms Malan explained that the implementation did not happen because the design was not done in time, and it had to be launched after there had already been calls for proposals. Part of the funds for the CIP were used in mentoring to ensure that whoever was brought in as an operator would break even within a certain time frame and that their skills would then be transferred to the communities. The Department would oversee, not abandon the projects.
Mr Ramphele responded on the question of involvement of the Portfolio Committee on the review of the National Tourism Sector Strategy. Areas that needed to be focused on would form the basis of the review, which would lead to a proposal that would outline the whole processes. With respect to the Tourist Guides, he noted that awareness programmes would be carried out in the provinces to highlight legislative requirements and compliance issues from the 2014 Act. This report had touched on training of the tourist guides and what changes were needed to the sector requirements. The provincial areas appointed provincial registrars, formally appointed by MECs, through gazetting, and they were monitored by the Department. The provincial registrar must keep a data base of tourist guides throughout the country and promote the usage of registered tour guides. All of this was aimed at improving visitor experiences.
Ms Malan noted that perhaps South Africa was not yet ready to be an aviation hub in Africa and the world, and a lot of work still needed to be done in that direction.
The Chairperson commented that the job of the Committee was limited to oversight so that the Committee should not actually become involved in the review of the NTSS, as it might lead to an encroachment of functions. The Chairperson asked Mr Tharage to set up an effective monitoring so as not to fall short of the law. In relation to tour guides, she noted her own experience, visiting a particularly prominent park, where she had not been impressed by the tour guides. It was important that the guides were well conversant with the places where they were responsible for tour guiding, particularly the places that were of great importance in the country, and should also take into cognizance the various provinces.
Mr Tharage welcomed all the comments and inputs. There were some areas where the Department would undertake work which was not in its mandate, because this could make things better when it did get directly involved with people responsible for a particular style of strategy.
He noted that there were certain areas with high tourist potential identified and they would be particularly targeted for getting priority for skilled tourist guides. Tourism should not just being seen as “a job” because it was “an option” and indeed even a calling. Legitimate training would be conducted and at the end, guides should be people with knowledge of the area, the story should be their story, and they should take a route to becoming tourist guides, including going through a system of recognition of higher learning. One issue was that of a language barrier, where some tourists may not understand the language, and a common language would need to be found. In some settings, there might be translators but it did not always happen. More people could take advantage of this, particularly culture and nature guides. There was a cooperative effort, with the aim of getting people who could see an opportunity in this. River rafting guides was one such area.
The Deputy Minister of Tourism re-emphasised the commitment of the Department to improving on the financial matters and development of the Department. The issue of the immigration policy was reiterated and she noted that the visa concerns tended to overshadow all the good work being done by the Department. She said every programme being run by the Department had value. Citing the example of the artisan school recently opened and accredited, she noted that 68 out of about 100 who participated in the training had permanent employment. That programme was now being piloted in all nine provinces of the country. Commitments were being extracted from industries where such training was conducted, to absorb the trainees at the end of the programme. The Department had raised the tourism awareness levels at schools and it was working hard to make tourism, as a subject, recognised at entry levels at universities.
The Deputy Minister also addressed the Beit Bridge project and stated that although this border post was not an area of competence for the Department it had nonetheless identified it as a potential booster for tourism. There should have been proper planning or prior understanding. It had been noted, so that next time the Department would not be caught off guard when it came to implementation of projects.
She would not like to make categorical statements on the numbers but did believe that there had been an increase in the number of tour guides in the country. The Department was trying to identify what kind of support and training could be given to some of them.
South African Tourism (SAT) Annual Report 2014/15 briefing
Mr Zwelibanzi Mntambo, Chairman, SAT, noted that this was the fourteenth consecutive year in which SAT had achieved a clean audit. Despite the global economic situation, there was a growth record of 6.6% in the past year. Other global challenges such as wars had hampered the travel rate. so in the next year, it was hoped that the present growth rate would be sustained. It was also hoped that issues relating to visa regulations would be resolved soon as that could help grow the number of tourists coming into South Africa.
In comparison to previous years, more people coming into the country now stayed for shorter periods, and this was an reflection of the economic realities. On the domestic front, there was a sluggish economic growth rate which in some way would impact the domestic growth strategy, but in regard to the domestic growth strategy, it was hoped that in the coming year more South Africans would be encouraged to travel within the country.
The harsh economic realities also impacted on the job creation drive of the SAT. It had hoped to grow jobs in the coming year. The SAT had also grown strong partnerships with the Department and industry, including the South African Business Council and all stakeholders who were part of the industry.
Mr Thulani Nzima, Chief Executive Officer, SAT, stated that the provinces worked autonomously to the SAT, which implied the SAT had no control over the budgets of the provincial tourism boards. The mission of the SAT board had not changed, and it would still provide a robust marketing strategy that would support South African business events, tourism and facilitate the workings of the industry. He said that the emphasis must on the word “facilitate”.
The SAT had a legislative mandate to market South African products and facilities internationally and domestically, develop and implement a marketing strategy for tourism that promoted the objectives of the Act and the NTSS, advise the Minister on any other matter relating to tourism marketing, and establish a National Convention Bureau to market South Africa as a business tourism destination.
Whatever the SAT did, it must create a sustainable GDP growth and sustainable job creation. Since the budget of the SAT was low, it had chosen six key strategies through which it intends to meet its targets. These included investing only in activities that would increase the volume of tourists coming into South Africa, ensuring that people stayed for longer periods when they came into the country and this translated then into tourists also spending more money. It would encourage tourists to visit a lot of touristic places. Finally, SAT would promote transformation.
To achieve this, it was important for the SAT to understand the market, choose attractive destinations and market these. It was also important for it to remove as many as possible of the obstacles hampering tourism. SAT would not do this itself, but it would rather engage with other parastatals such as immigration, in removing these obstacles. It would facilitate the product and would also monitor the experiences of tourists when they visited, by conducting interviews. All was geared to trying to make their experiences better.
In terms of the governance structure, he described that the SAT reported to the Minister. The Tourism Board and SAT management ran the operations. The internal auditor reported directly to the Board, and this gave SAT objectivity without interference from the management. The Company Secretary also reported directly to the Board.
As stated by the Chairman, the SAT had had an unqualified audit report for 14 consecutive years, and of these two were completely clean audits. He was grateful to AGSA for its close working relationship with the SAT over the years. Special thanks were also given to the Portfolio Committee, who highlighted issues for SAT to consider, which then helped in getting the unqualified report.
The tourism industry was a healthy, but volatile one, as events in other countries played a significant role. According to the UNWTO the tourism industry was estimated at R1 billion in 2012, with a potential for growth. In 2014, that figure grew by 4.7%. The South African tourism industry had a growth of 3.7% in arrivals. Regional Africa accounted for 76% of total tourist arrivals in 2014, with the Africa land markets making up the majority of this total. Tourist arrivals from land markets grew by 8.8%, while the Africa air markets declined by -4.1% in this period. Visits from all regions grew, with the exception of Central and South America and Asia. For South and Central America, there was a a 16.4% drop from 2013 while the Asian market recorded a decline of 16.0%. The Brazilian market was affected by the hosting of the 2014 World Cup and the electioneering process.
The SAT identified markets with a lot of potential and marketed its products there. These markets were called the core markets and offices were established in these environments. The offices were in Nigeria, Brazil, USA, Australia, China, India, France, Germany, and the UK. These countries were hubs to other countries within their region. Nigeria, for example, was a hub to countries in the Western African sub region.
In relation to the performance information, he noted that increasing the foreign visitor arrivals coming to South Africa was a priority, but the SAT had moved away from just looking at foreign arrivals to looking at specific touristic arrivals. The target for foreign arrivals was 16 033 947 but there was a deviation of 3.9%. There was a target of 427 buyers that South African Tourism would host at meetings for Africa Indaba during the financial year, and this was exceeded by 5.6%. This was due to an increased focus on the correct trade to showcase South Africa at the Indaba. The target for buyers’ participation at Meetings Africa was achieved.
The sluggish South African economy also took its toll on the volume of domestic travellers. A target was set for 12.9 million, people but the actual achievement was 12.0 million people, showing a deviation of 7%. There was still a poor culture among South Africans in taking holidays and as a result the retail sector benefited more than the travel sector. The number of total domestic trips stood at 28.0 million. Although the poor economic performance was recorded, some regular travellers had increased the frequency of their travel, mainly for visiting friends and relatives, giving rise to a growth of 8.1%. For the number of trips during which taking a holiday would be the primary objective, there was a deviation of 9.5%. Global spending on travel and tourism grew by 3.4%, but it was weaker than expected in line with the global macro-economic performance. Furthermore, the exchange rates were rather volatile in the year, and the US dollar appreciated against major currencies. There was a planned target of R128.0 billion in revenue (foreign and domestic) but only R119.18 billion was feasible, which was a deviation of 6.9%. The target of increasing the South African brand awareness was achieved and South Africa was competing well in the global market. The number of international business events delegates in South Africa targeted was 58 500, but 69 955 were achieved.
The SAT worked with some global players due to their wide audience reach and ability to reach the audiences in various languages. National Geographic reached 458 million households in 172 countries in 38 languages, including Dutch, English, Chinese, French, German, Italian, and Spanish. The CNN had a global distribution to over 484 million households, hotel rooms and airports worldwide.
In Africa, SA Tourism had exhibited in a number of travel shows to build brand awareness, create market access and to increase strategic support for SA events. These included Swahili, Tanzania, Magical Kenya, BITUR in Angola and AKWAABA in Nigeria. SA Tourism also partnered with Association of Travel Agencies and Tour Operators in Nigeria, Kenya, Ghana, Angola and Tanzania to increase tourism growth from those regions. A partnership with Intercape and Flight Connect was entered into for the distribution of brochures that profiled 52 Getaway itineraries in South Africa on board the buses and flights. More than 7 000 travellers from Mozambique and Botswana were reached through this initiative. Trade and media from different markets were hosted throughout the year, to showcase leisure and business experiences leveraging on: Vodacom’s Durban July, the Standard Bank Joy of Jazz, the Cape Town Jazz Festival, Indaba and Meetings Africa.
He then moved on to pointers around the Tourism Grading Council (TGCSA), saying the focus of TGCSA was to implement a recognisable and credible globally bench-marked system of quality assurance for tourism experiences, which could be relied upon. TGCSA developed a strategy aimed at achieving engagement with partners to deliver a quality visitor experience that reaffirmed brand promise, increasing value for graded establishments through the introduction of the Basket of Benefits, partnerships with NDT for SMME support, and integration of online reviews in the grading system. The key initiative of the TGCSA was to create a comprehensive offering to graded establishments that provided various value-added benefits, tailor-made to their specific needs. In 2014 the Universal Accessibility (UA) minimum entry requirements and grading criteria were revised to consider mobility, communication and visual impairment.
The South African National Convention Bureau (SANCB) was “the new kid on the block”. It would host major events in the economic sectors which could contribute significantly in accelerating macro-economic benefits for the country. It also focused its efforts on attracting events in economic sectors that had been identified by the government as priorities for future development.
52 event bids were submitted, with a potential to attract 119 477 business delegates to South Africa over the next five years, and an estimated economic impact of R1.6 billion, and a total of 230 estimated conferences. Five tradeshow platforms were created for the industry, which generated 75 leads with a combined estimated economic impact of R490 million, a potential to attract 53 795 delegates and generate 451 event days. 177 business events were secured around the country for the next five years, which would attract 253 128 delegates, creating 753 event days and generating an estimated R3.5 billion for the economy. SANCB launched 30 delegate boosting activations and 30 local on-site events in more than 20 cities around the world to promote South Africa as a host country and to encourage return visits to the country. These were all key initiatives.
The SANCB also participated in international trade shows. One in IMEX. Frankfurt, Germany, had generated 25 qualified leads with a total value of combined leads of R170 702 000. The second was at IBTM CHINA. These meetings generated nine hot leads with a total value of combined leads standing at R134 million. The South African industry was able to break even at the IMEX show, and a few awards were won. Anzelle Vorstmann from North West University in South Africa collected the MPI Foundation Student Scholarship Award. The DMAI Destination Marketing Humanitarian Award was won by Johannesburg Tourism and collected by Nabintu Petsana, Head of Tourism. The Managing Director and founder of Conference Consultancy South Africa (CCSA), Pieter Barend Francois Swart, received the PCMA Global Meetings Executive of the Year Award.
He moved on to discuss governance and said that the board members fulfilled their roles, duties and functions with due regard to the fiduciary responsibilities bestowed on them in line with the Tourism Act. The members met quarterly, or more frequently if circumstances required. The members provided oversight to the executive management by ensuring that all material matters were subject to board approval. The board meetings were well attended. It was important to note that the board members had been discharging their duties without any salary or allowances.
As stated earlier, the internal audit unit was independent of the SAT management. The report from the Audit and Risk Committee showed there were no matters reported that indicated any material deficiencies in the systems of internal control or any deviations. A formal risk assessment was conducted during the period under review and the top ten strategic risks affecting the business were identified. In line with the Public Finance Management Act (PFMA) and King III Report on Corporate Governance recommendations, the Internal Audit Unit provided the Audit and Risk Committee and management with the assurance that the internal controls were appropriate and effective.
The Board's approved structure had 202 positions but the current headcount was 171 positions, still maintaining the vacancy rate of below 7%. There were some vacant positions which were really not active. SA Tourism was well within its Employment Equity targets based on the employees at Head Office and country managers abroad. Oversees, the employees were not bound by the employment equity.
Mr Tom Bouwer, Chief Financial Officer, SAT, said SA Tourism realised total revenue of R991.6 million during the 2014/15 financial year. This amount comprised of R880 million government grants received from NDT and R111.6 million received from Tourism Marketing South Africa (TOMSA). This was a R14 million increase from the previous financial year. TOMSA contributed about 11% and government grants 89%. The sundry income balance of 56% mainly consisted of income received from exhibition shows such as Indaba and Meetings Africa. The net impact of the foreign currency movement was an unrealised forex gain, which equated to 25% of total other Income. Interest received increased by R10.5 million due to upfront grant allocations. 77% of SA Tourism’s expenses were attributable to marketing while 16% of total operating expenses related to employee costs.
The Amsterdam residential property was correctly converted to an Investment Property as at 31 March 2015. After 25 years, SA Tourism finally terminated the lease contract in London, resulting in significant savings. Leased assets’ net book value as at 31 March 2015 declined from R 9.2 million to R741 000 in the current year.
In conclusion, it was reiterated that the sluggish South African economic growth would still impact negatively on South Africa, increasing job losses in various industries, and the tourism sector would continue to be negatively impacted by the immigration regulations. In 2015/16, SA Tourism would continue to intensify its engagement with trade as part of the implementation of the domestic tourism campaign. Whilst SA Tourism did not meet all set targets it had achieved growth in foreign arrivals and revenue. Domestic traveller numbers remained flat compared to the previous year. However, SA Tourism and the Board were already hard at work implementing recommendations of the Ministerial Review Panel on SA Tourism.
Special thanks were given to SA Tourism staff, Board, NDT, the Ministry and the Portfolio and Select Committees for their support.
The Chairperson congratulated the SAT for a report that had already answered many questions from the Committee members.
Ms Xego agreed the presentation was self-explanatory but she referred to the issue of statistics about employment in the industry. She wanted to know the source of the statistics being given out and the origin of the people being employed. If there were cheap labour practices being carried out, then she urged that relevant authorities sensitise the people, to discourage such practises. She asked if anything was to be done about non-remuneration of non-executive members.
The Chairperson raised a point on the rural development of tourism in relation to employment. She wanted to know what the SAT and Department were doing about it. The Chairperson also pointed out the concerns about bringing in and exploiting foreign nationals in the hospitality industry and wondered if there was some way in which the Department of Labour could be involved or better intelligence carried out. The chairperson also pointed out the possibility of a uni-visa for Africa to prevent people from crossing borders illegally. The Chairperson noted the recommendation of SAT that there should be a ring fenced increase in the domestic tourism budget to encourage domestic tourism. She noted that there was less than full implementation of the basket of benefits in relation to the Grading Council and asked what was the current level. She asked what SAT was doing to try to diversify.
Mr Nzima responded to the issue of remuneration and he said the Ministers of Tourism and Finance had come to an agreement for payment of non executive board members. A new scale had been agreed on and it was awaiting implementation.
Mr Tharage responded to the question on employment in the tourism industry by stating that, globally, 30% of the people working in tourism were not locals. The US and UK were not exempt from this either. There was a fundamental question to be asked; if they were to return to their own countries, would South Africa be able to fill their posts. He urged that South Africans should be cooperative in this regard. He also stressed that there was a need to make it easier for investors to bring in their investments effortlessly, whenever the opportunities arose.
He then also spoke to funds accrued from visa issuing. The biggest problem was the practicality of how to collect visa fees. The SADC regions were visa-free except for countries like DRC, Angola and Madagascar.
Ms Sthembiso Dlamini, Chief Operations Officer, SAT, stressed that the SAT was fully aligned to the government planning cycle. It would look at the government priorities to check which needed support from SAT. In relation to the domestic campaign, the SAT was building a culture of travel among South Africans and encouraging other Africans, especially within the SADC, to visit and travel within South Africa. Ms Dlamini stated that since the basket of benefit programme had been launched, out of the 96% graded communities registered on the programme, 46% were actively using the service.
Mr Nzima remarked that the SAT does not invest money in events, but would rather supports the investors and would buy particular benefits in any event which could promote tourism. SAT would thus promote events, using its media platforms. In relation to the likelihood of the uni-visa, he agreed that it would be most helpful if regional integration could be made possible, and this would also make the movement of airlines easier.
The Deputy Minister remarked that the work in progress was seen as a result of the cooperation between the Portfolio Committee and the Department of Tourism,. She remarked that heads of states were looking into the possibility of a uni-visa.
The Chairperson summarised that the Committee would like to see a calendar of events because sometimes invitations came at the last minute, and the Committee had to battle to find time. She again offered special thanks to the Auditor-General for work well done.
The meeting was adjourned.
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