Tourism Budget Review and Recommendations Report


20 October 2015
Chairperson: Ms B Ngcobo (ANC)
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Meeting Summary

The Chairperson officially opened the meeting and handed over to the Content Advisor of the Committee, Dr S Khuzwayo. The Committee considered the recommendations and Khuzwayo commenced with the recommendations that were addressed to the Minister of Finance, Mr Nhlanhla Nene. There were only three main issues encompassed by their recommendations that were raised by Dr Khuzwayo. They include; appropriation of tourism budget, correcting the accounting treatment that relates to the EPWP budget, and lastly a permanent solution to the Rand/Dollar foreign exchange rate leakages.

He followed with the issues and recommendations that were addressed to the Minister of Tourism, Mr Derek Hanekom. All the recommendations are reflected in the report on page 56 from paragraph 9.1.

Members raised a number of issues as the Content Advisor was taking the Committee through the recommendations. A study was undertaken by the Department of Tourism that outlined the benefits of the e-Visa, and it was important that the outcome of that study be received by the Committee so that it could be an additional recommendation to say that together with the recovery plan about positive messaging and about the study to ascertain if there were unintended consequences, the third recommendation should then be about the benefits of e-Visa and biometrics should be explored as a measure to streamline tourist facilitation to South Africa. The members agreed on some of the issues and recommendations that were suggested by the Content Advisor.

Meeting report

Committee Budgetary Review and Recommendations Report (BRRR)
The Chairperson tabled the document.
Mr S Bekwa (ANC) requested a few minutes to go through the recommendations in the report. The Chairperson granted the few minutes.
Mr J Vos (DA) then asked if the draft Committee Budgetary Review and Recommendations Report would be adopted that day.
The Chairperson suggested the report should not be adopted that day but encouraged Members to go through the report as a Committee, but only the recommendations section of the report for both the Minister of Tourism, Mr Derek Hanekom, and the Minister of Finance, Mr Nhlanhla Nene. The adoption of the report was then set to take place on the following Committee meeting when the consideration of the draft minutes of the 11 September and 16 October 2015 took place. Members agreed to this.
Mr S Khuzwayo, content advisor to the Committee took the Committee through the recommendations for both the Minister of Tourism and the Minister of Finance.
Policy recommendations
The Chairperson asked the Content Advisor to take the Committee through the policy recommendations.
Dr S Khuzwayo, Committee Content Advisor, directed Members to page 55 of the report, and noted that the recommendations were based on a number of issues that occurred throughout the year, and were also based on the oversight visits that the Committee undertook, together with briefings that the Committee received from other entities, and feedback and findings from the Auditor General. The recommendations also stemmed from the work the Committee did throughout the entire year. He stated that the recommendations wee divided into two sections addressed to the Minister of Finance, Mr Nhlanhla Nene, and the Minister of Tourism, Mr Derek Hanekom.

Recommendations addressed to the Minister of Finance 
Mr Khuzwayo commenced firstly with the recommendations addressed to the Minister of Finance under section 9.1. He proceeded with the appropriation of tourism budget, stating that this was because of the under-expenditure of the budget by the Department of Tourism. Therefore, there would be no increase in budget for the Department; which was also due to the fact that there were irregular expenditures that took place throughout the year. An issue pointed out was to increase the ring-fenced amount for domestic tourism; this was in line with the first recommendation. Another issue pointed out by the Auditor General was EPWP expenditure in terms of the accounting treatment of the EPWP and so there was danger if the Department of Tourism continued like this. The second recommendation that he pointed out was with regard to assisting the Department with correcting the accounting treatment relating to the EPWP budget so that the error is avoided. The following issue was a recurring issue from the previous report which related to the issue of foreign currency exposure, and he lamented that this was made worse given the Rand/Dollar exchange rate because the SAT (South African Tourism) is operating in the global market and so they mainly transact in Dollars given the foreign currency usage, this gave rise to a lot of leakages that they get from the money that is given to SAT so there must be a permanent solution to this and currently there is an arrangement between Treasury and SAT with regard to giving money to SAT upfront in order to circumvent the leakages, but that is not a permanent solution because Treasury does not allow the hedging of funds. Those were the main three recommendations suggested to the Minister of Finance.
Mr Vos asked what had come from the previous recommendations.
Dr Khuzwayo replied that Treasury allowed SAT to pay the money up front to their service providers, so that they can ensure that they end up paying all their services providers. They brought it up again because it is a very serious recommendation, they lost about R100 million in the past from the Tourism budget. Another reason why they have brought it back is because it was not previously dealt with appropriately, it was a recurring issue that still needs to be attended to and provided a permanent solution.
The Chairperson emphasised that some of the recommendations are definitely recurring, and those that are recurring need to be prioritised and a report is required on that note. Secondly, for the ring-fenced money to be improved, a lot of conversion needs to take place instead of having a skew situation. 
Mr Vos, referring to the previous recommendations that specific reference was made with regard to the e-Visa, stated that the implementation of e-Visa, although it is reflected under the Minister of Tourism section, he believed there should be an economic and regulated assessment impact.
The Chairperson said it was coming under regulations i.e. the economic and regulated assessment impact, an econometrics study still needs to be done, secondly, the Committee is still looking into that and they should allow the process to take its course.
Mr Vos asked if the recommendation was specifically for the minister of Finance. He had done some research on the subject, and his findings were that the correct place for the studies to be placed would be for the Minister of Finance to commission a study to see what the economic impact would be on such a study and economic regulated studies. So this recommendation should be specifically addressed to the Minister of Finance, and it appeared to be addressed to the Minister of Tourism in the report.
The Chairperson suggested that perhaps instead of directing it to the Minister of Finance; they should say that the Ministers were both working together because it was an issue that affected Tourism significantly.
The Committee deliberated that this recommendation should fall under the recommendations addressed to the Minister of Tourism, Mr Derek Hanekom.
Recommendations addressed to the Minister of Tourism
Dr Khuzwayo stated that the first recommendation involved Government and Leadership issues, a matter that was raised by Auditor General whereby the Department submitted statements with errors, and the recommendation raised in response particularly spokie to the office of the Chief Financial Officer to submit the financial statements according to the accounting standards and ensure that the annual financial statements are also disclosed according to the legislation. Following the former issue was accountability to Parliament. This issue was raised because members from other Committees raised issues that were not attended to immediately by the Committee. It was therefore, suggested in the report that in the beginning of the next financial year around the time when the Department is laying out their strategic and performance plan, they should also come with responses to the recommendations that members were making now. 

Dr Khuzwayo proceeded with the issue of avoiding under expenditure, and further noted that for various programmes there were some form of under expenditure particularly in domestic tourism, where an amount totalling R78 million was to be taken back to Treasury. He advised that the Department, particularly around the planning of projects, must take precautionary measures. Most of the projects were not planned properly, so the Department needs to prepare for projects in due time and ensure that no under expenditures will take place. Following that was the issue of determining the budget for the Department of Tourism; this issue is also recurring, and requires to be looked into. He stated the following issue referencing the concern that Mr J Vos raised earlier with regard to the e-Visa. It appears that the matter was under severe scrutiny because there may be a number of jobs that would be lost in the process of implementing electronic Visas. So the recommendation was that the Minister needs to conduct a study in order to ascertain if there were any unintended consequences created by the introduction of the e-Visa. There were a number of negative perceptions created in some countries with regard to issuing travelling Alva varies, and others threatening to pull out on, therefore, there needs to be counter-measures from the department especially SAT to ensure that they address the negative perceptions created by the introduction of immigration regulations. 

The following issue involves corporate citizenship in the tourism sector which was raised before, and the Deputy Minister also raised this issue on Friday where employees were somehow abused and others were not paid according to the Department of Labour determination. Therefore, the recommendation to the Minister of Tourism in collaboration with the Minister of Labour to conduct a study in line with sector wages determination because there are those that the Department of Labour always issue for each sector. And then to investigate corporate citizenship employment pertaining to the Tourism sector and ascertain if the jobs created in the sector benefit the citizens of South Africa. Also in line with this is the issue of cultural performances - people who perform in tourism facilities. He noted an oversight visit in KZN as an example. The people who performed were not paid directly by the establishment in which they performed, they depend on gifts and stipends from the Department of Tourism, so there must be a structure that provides such establishments with a transaction in order to ensure that the performers are not exploited by the industry. The following issue involved forensic audit of projects, he noted that there needs to be a structure that allows the Committee or the Department to scrutinise the projects that it commissioned and be able to track the progress of the project.
The Chairperson said some projects were in areas where the Department did not know that there were such projects and had never been to see them. Budgets were placed into those projects but the Department did not follow the money.
Dr Khuzwayo continued on the issue of planning for EPWP projects, the recommendations in this one were that the Department needs to enhance project planning to include all aspects of the project, for instance, a comprehensive study must have been conducted in order to ensure that the projects are legitimate before payments were done. Then there were issues of coordination and planning at provincial and local levels, it was a recurring issue that the department must continue to assist local government or municipalities in order to advance local tourism.
The Chairperson interjected that even before going into local level the Department itself must tell the Committee which municipality actually had people that were trained.
Dr Khuzwayo continued with the issues of economic transformation. There were still structural economic imbalances within the tourism sector so the Department should not only look at the BEE scorecard, so the recommendation is that government must look at more rigorous projects that can try and increase the transformation base of the sector. Another issue was the improvement of closing infrastructure, this issue was broader and some of its extensions were already mentioned; the Department should collaborate with other departments and spheres of government to ensure that tourism infrastructure was improved, this was where the issue of tourism maintenance that also spread out to other departments came in, hence, the Department needs to unpack it in collaboration with those departments that are affected by various projects that the Department undertakes. The following issue is the professionalisation of tourist guides, this is a serious issue that the Chairperson has already started discussing with the Department Arts and Culture, in order to standardise information about heritage sites in the country because some people mislead and provide tourists with false information; the standardised information made available should be basic. the Chairperson felt the Committee must include there a dedicated website dealing with the issue of the Shot Left campaign because what is contained in the SAT website may not be user-friendly. The issue of statistics also came up, and the recommendation is that Statistics South Africa should finalise the methodology of conducting domestic tourism statistics and international tourist arrival figures; this issue was raised before.
The Chairperson, reminded Members that when they had visited the Cape Town Airport (DF Malan International Airport) ABSA was able to collect substantial amount of data or statistics, SAT should try and work with the likes of such entities in order to be able to obtain all the data that they could not obtain because they only depend on their methodology and not beyond.
Dr Khuzwayo suggested as a recommendation that the SAT should work with StatsSA and other government entities as well as ABSA and provincial entities in order to collect tourism statistics, and proceed to finalise the methodology in terms of what works for them. He proceeded with the issues stating the issues of addressing geographical spread and seasonality, this is a matter that has been raised before, and during the time the Committee met with SAT. The recommendation is that SAT should initiate effective programmes to deal with geographical spread and seasonality throughout South Africa. 

The following issue involved the grading council, Members would recall that there was an SAT review commissioned by the Minister of Tourism, and the report is out; they recommend that the entity must be a stand alone entity and they must implement the report commissioned by the Minister because they will continue doing whatever they deem fit. Also the grading council should enhance and implement all the current basket of benefits tourism activities in South Africa; in their report the Members would have seen they have not implemented the whole basket of benefits whereas they were meant to enhance grading and there are still a lot of establishments that remain ungraded and are still out of the system. The following was on the national conventions bureau throughout the oversight visits that members have gone to; they have heard provinces and municipalities complaining about support of events. So it was recommended that the NCB assist provinces that did not have capacity to generate the follow-on leads and acquire business events in particular in the Eastern Cape, the Nelson Mandela Municipality they are able to generate the leads but there is no follow up that takes place thereafter. 

The following issue was addressing concerns on the TOMSA levy. TOMSA said that as much as their collections have decreased but the amount of money has increased, and the reasons for decline in TOMSA levy collectors was they said they were not happy about how many were dispersed by SAT; so the recommendation is that SAT must address those concerns raised by the industry in terms of how the TOMSA levies are collected.
Mr Vos pointed members to page 56 under bullet 9.4 relating to the recovery plan with regards to the  immigration relations, he welcomed the issue, and stated that because all the studies that were done thus far were conducted by the private sector, the tourism business council of South Africa tended to  suck up on various studies , so it’s very important for the Department to have an economic and regulated impact assessment, and develop a recovery plan about positive measures on messaging, he maintained that it is the responsibility of the Minister of Finance to conduct economic impact assessments because ultimately we have seen from studies done that there have been huge declines in tourists arrivals, loss of jobs and revenue generated. So the Minister of Finance should conduct the economic impact in order to determine exactly the economic impact of the tourist visits in the country. 

Mr Vos said further that a study was undertaken by the Department of Tourism that outlined the benefits of the e-Visa, and it was important that the outcome of that study be received by the Committee so that it could be an additional recommendation to say that together with the recovery plan about positive messaging and about the study to ascertain if there were unintended consequences, the third recommendation should then be about the benefits of e-Visa and biometrics should be explored as a measure to streamline tourist facilitation to South Africa. 

Mr Vos proceeded to point out paragraph 9.7, the need for local government to step up because tourism is a concurrent function and therefore local government plays a key role; the recommendation that states that the Department must continue to assist provinces. He recommended inserting instead that the Department should develop a strategy in line with all the previous recommendations and assisting those municipalities to increase their capacity and put in some tangible action steps on how to help and assist those municipalities. He submitted that a while ago the Department informed the Committee that it was helping local municipalities and one way was through the local government tourism conference, he believed that is not enough. So specific actions steps are needed to be inserted as a recommendation there in order to assist all the municipalities that are incapacitated, because in various provinces you will find that a lot of the facilitation centres are under-staffed, do not have enough capacity and do not train people to sufficiently.
Dr Khuzwayo responded that the Department developed a toolkit that specifically addressed and deals with local government issues; everything is included in the toolkit it just lacks implementation.
Mr Vos stated that simply to just assist is not enough, the toolkit should include specific action steps, he emphasised. Under 9.11 the professionalisation of tourist guides is part of the legislation that is going to be debated in the near future, he then suggested that the Committee conduct public hearings on the subject so that they can hear from those in the industry what the issues are directly from them, it would be a useful exercise. Under 9.14 the inclusion of other government stakeholders, he believed they should also ask municipalities to contribute where there are visitor information centres because when the visitor information centres functioned well they would provide a wealth of information to the people visiting that particular visitor information centre, so people would be able to ask about the type of services provided by the Department of Tourism and other information, therefore, in the process the visitor information centre is in a position to be able to obtain good statistics from the use of the centre.   

Mr Vos pointed out that one he has seen that was not reflected in the report was the budget accommodation study the former minister of tourism Mr Marthinus Van Schalkwyk commissioned, he would like the Committee to consider that, because accommodation was very expensive across the country and the study may also speaker to the geographical spread and affordability issue. Lastly, the tourism grading council, the Committee should deliberate on the functions and workings of the grading council because now there are other entities that seem to be entering the market without going through the grading council first.
Chief R Cebekhulu alluded to the fact that there are vendors alongside national roads selling products at cheaper prices than those vendors that are in the market; he pointed out that this is a form of exploitation and should be looked into.
Chairperson said that issue was raised with the MEC of Economic Development in KZN and it was important that Tourism worked together with the Department of Arts and Culture.
Ms A Matshobeni (EFF) referred to page 56. The budget must be monitored with regard to programmes and regrouped until they have capacity to spend. On page 55, she said that there was no need to increase the budget; they must first allocate efficiently what they have. She referred to the issue of heritage sites on page 44t; there must be a coordination strategy between the two departments (Tourism and Arts and Culture) in order to avoid duplication of allocation of resources. She also directed members to page 34, under the vacancy rate, there was under-expenditure mainly due to human resources constraints but the report did not capture which positions, and why these vacancies were not filled.
Ms S Xego (ANC), said that the report seemed to cover all the activities of the Committee and also the presentations by the Department and Auditor General. She directed Members to page 58 on the issue of statistics, and pointed out that was her area of concern, but she feared that where it was recommended that other entities outside the spheres of government should be used in conducting the statistics; it should be StatsSA that consults other entities for the conducting of statistics instead of the Department of Tourism because the institution had a constitutional mandate to do so, the DoT should then obtain the stats from StatsSA. The other entities should just be sources to StatsSA.
Mr G Krumbock (DA) referred to page 56. The problem did not end only at national with regard to the SAT, the provincial structures that promote the province are equally in the dark as to the right responsibilities that they must carry out their significant economies of scale, the study needs to be extended as to what the optimal amount is within the provinces in relation to the provincial budget; the provinces must not over or under spend. He also referred to page 57 bullet 9.6 (i), he did not quite understand the point that was made there, he believes that if the Committee writes something it must be written exactly how the Committee wants it to mean. He raised the issues that were prevalent in the oversight visits to the Eastern Cape where projects that were undertaken were not completed and money had already been paid to the service providers or poor work was done not amounting to the value of the money that the Department paid for those projects. Lastly, he pointed out to 9.16 as a query, with regard to levies charged by the grading council whether they were appropriate amounts, and alluded that Mr Vos has gone further to ask if we need a grading council at all, the objective of getting your establishment graded was to ensure that certain expectations were met and not brain-damage the country as whole. So the grading should be made compulsory without the levy, because the amount charged was minimal, so the fee lost should be taken out of the Department’s budget. In this way there is no disincentive for any establishment to be graded because after all there is no fee charged for grading. People often dropped out of the system because they did not want to pay the levy, and did not meet the expectations of the grading council.
The Chairperson alluded that this would certainly also help in restructuring the grading council.
Dr Khuzwayo in response to the issues raised by Mr Krumbock said the grading council is in the Act, and therefore, it would require a policy review in terms of how it is implemented now and a legislative policy review on the grading scheme in South Africa. With regard to the forensic report recommendation, instead of deleting it they should add commissioning new forensic reports for other projects were misappropriation of funds is suspected. Because the report covered what has been done, so they should not delete the first part.
Mr Krumbock spoke to the issue of misappropriation in response to the content advisor, he asked what happens if someone cannot finish the project? The money has been spent already, so does the Department address the white elephant or bite the bullet and spend enough to finish the project. So when projects run out of budget, the Department needs to get around the problem of unfinished projects.
Mr S Bekwa (ANC) directed the Committee to page 57 on 9.7. It was important for the Committee to know all the projects in the country so that when doing oversight visits could contribute towards the proposed interventions.
Dr Khuzwayo noted that he missed a very important point with regard to the recommendations of the Auditor General, because the Auditor General also raised some of the issues raised in the Committee.

 The meeting was adjourned.


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