South African Tourism on 2015/16 2nd & 3rd Quarter performance


19 February 2016
Chairperson: Ms B Ngcobo (ANC)
Share this page:

Meeting Summary

The Chairperson, in her introductory remarks, commented that it seemed that SA Tourism had already used 95% of its budget, yet had not met the targets for either quarter 2 or quarter 3 of the 2015/16 financial year. If SA Tourism was reporting that it had budget shortfalls, then the Committee could not in all conscience recommend increases without these requests being substantiated and without other concerns being addressed. The Committee was concerned about the reporting, noted that financial year and not calendar year reporting was needed and wondered if there was time for SA Tourism to meet the targets. She noted a drop in figures in domestic travel; domestic trips and domestic traveller spend, as well as international figures that were affected by factors such as the Ebola scare, since SA Tourism had not adequately convinced the work that the Ebola scare was in West and not South Africa.  There was concern about establishments cancelling their grading, and the tourism levy would need to be considered, and possibly legislative review should be proposed.

SA Tourism firstly addressed some of the comments of the Chairperson and noted that the appointment of a new Chief Executive Officer should take place shortly. It was emphasised that SA Tourism was operating in a difficult global macro environment, and currency fluctuations had a serious effect. The business case was based on the current state of world tourism, and SA Tourism was working hard on improving its documents. A briefing was then given on the performance in quarter 2 and quarter 3, although the presenters did not go through every figure. General challenges in both quarters included  visa processing capacity constraints, lack of clarity on visa legislation requirements in certain markets. Fewer forward bookings were coming from a number of markets and there were lingering health concerns, terrorist security concerns, and economic issues in Brazil, Russia and Angola. Domestic challenges included South Africa's own slow economic growth impacting on GDP growth, the depreciation of the rand and rising interest rates that led to lower disposable income, coupled with service delivery protests and industrial action in some sectors. Internal challenges included the fact that Stats SA had changed its methodology and reporting, which meant that SA Tourism had to revise its targets. The continuous challenge of currency exposure meant that the operating model had to be reviewed, in order to try to keep within the budget. A reduction in operating and marketing costs was achieved through hubs, virtual offices and global marketing. There had been better relationships with Stats SA and National Department of Tourism. There was a general decline in tourism arrivals of 6.8%, although the change of reporting by Stats SA meant that transit passengers were not considered. There had been a general 7.6% decline from January to June, with fewer forward bookings and problems in understanding visas. Although the year to date targets for domestic travel had improved, there had been a decline compared to the previous year. It was true that graded accommodation targets were not achieved because institutions were cancelling, but more new establishments were tending to join. The trends were fairly similar for quarter 3. The National Convention Bureau had branched in Durban, Cape Town and Johannesburg and offices in other centres, and had delivered trade shows, public relations, media and advertising. It had supported 12 and 11 bids in quarters 2 and 3 respectively. Finally, the SA Tourism noted that it had spent 60% and 70% of the budget by the end of each of these quarters, which was more or less on track. Overall, the effect of currency fluctuations was emphasised.

Members  asked whether the visa regulations were still affecting the numbers of visitors coming to SA, and SA Tourism was asked to explain the drop in grading target numbers, and whether grading should be  compulsory or voluntary, whether fees were affordable, or if it should be a free service, and the benefits viable and attractive enough. The Chairperson repeated that a legislative review would shed light on these issues. Members observed that the perceptions of SA abroad were poor, with misunderstandings regarding Ebola, the visa requirements, and security issues and wondered firstly if SA Tourism was working hard enough to correct perceptions and if it had engaged with National Treasury on challenges of budget fluctuations and the possible need to increase the budget. They enquired if there was a relationship with SA Local Government Association, and suggested engagement on the revival of small town economies. All Members agreed that work on domestic tourism had to be intensified, with particular focus on affordability and geographic spread. Members felt that a dual pricing system should seriously be considered and made a number of suggestions, and also would like to hear from the National Department of Tourism and Tourism Business Council on the issue. Members pointed out that  business tourism was just as important as leisure tourism, urged SA Tourism to take advantage of the missions abroad, and asked that  SA Tourism provide the Committee with a year on year analysis of performance. Members queried why SA Tourism’s country office budget figures for certain regions or countries differed so much, and asked that in future it must convert and compare all figures in rands and explain the discrepancies.

Meeting report

SA Tourism  Quarter 2 and Quarter 3 2015/16 Performance Results
Chairperson's introductory remarks

The Chairperson, at the outset, pointed out that it looked as if SA Tourism had already used 95% of its budget, so she questioned what was left to spend in the last quarter.  She also noted that both Quarter 2 and 3 had seven targets each. However in Quarter 2, SA Tourism had only achieved one target and in Quarter 3 no targets had been achieved. SA Tourism meantime reported that it had budget shortfalls. She posed the question how the Committee was expected to recommend increases in its budget without having the results of an econometric study to substantiate any such request for increase? Furthermore,  the Committee was concerned about that manner in which SA Tourism did its reporting. The Committee considered performance in financial years and not calendar years. SA Tourism had communicated that it wished to revise some of the targets. Given that there was only about one month of the financial year left, there was not really time for SA Tourism to achieve the targets not achieved to date. SA Tourism used statistics from Statistics SA, and these statistics were produced month after month. There was a drop in figures for domestic travel, domestic trips and domestic traveller spend. International figures had also dropped due to Ebola scares and other issues. SA Tourism had failed to communicate properly, to its counterparts abroad, that the Ebola scare was in West Africa and not in South Africa (SA). She was also concerned about establishments cancelling their grading. The issue of the Tourism Marketing SA (TOMSA) Levy needed to be looked. There was legislation and SA Tourism therefore had an opportunity to propose a legislative review. She suggested that SA Tourism improve on the quality assurance of its documents. Finally, she wanted to know when the post of Chief Executive Officer to be filled?

Ms Judy Nwokedi, Board Member, SA Tourism Board, provided the Committee with the SA Tourism Board perspective. She noted the issues raised by the Chairperson. From an international perspective it was important for SA Tourism to remain on top of challenges. The global macro environment was a difficult one at present. There were many challenges that had to be faced and one of the most obvious was the currency fluctuations. SA Tourism, in its review, had looked at integration issues. The new Board wished to do things differently. The business case for SA Tourism was allied to consideration of where the whole world was in tourism. There were major disruptions in the world in the last two to three years. SA Tourism was well aware of what was happening in the world. For expansion, SA Tourism required good market sources of data. Speaking to the comments on quality assurance of documents she said that SA Tourism would ensure that its documents complied with excellent standards and strove to be the best in the field. She noted that advertisements had been placed to fill the post of CEO of SA Tourism. The closing date was 29 February 2016. There was a panel in place to oversee the appointment so the new incumbent would be in place shortly.

The delegation from SA Tourism then took over the briefing. It consisted of the following:
Ms Stembiso Dlamini, Acting Chief Executive Officer/ Chief Operating Officer, Ms Belu Mabandla, General Manager Operations, Ms Debbie Damant, Country Manager: South Africa, Ms Nombulelo Goliwe, Finance Manager and Ms Ntokoza Langa, Office Manager. : Chief Executive Officer.

The SA Tourism Board was represented by Board Members Ms Nokwedi and Ms Charlotte Maponya and Ms Amritha Mahendranath, Board Secretary. Mr Darryl Erasmus, Chief Quality Assurance Officer, represented the Tourism Grading Council of SA (TGCSA). The National Department of Tourism (NDT) was represented by Mr Armstrong Manganye, Deputy Director: SA Tourism Oversight.

Ms Dlamini, Acting Chief Executive Officer, SA Tourism said that she would deal with the performance. She noted that in the interests of keeping the presentation short, she would refer to parts of the attached presentation but not speak to it all.

Challenges faced globally in Quarter 2 and 3 were visa processing capacity constraints as well as the lack of clarity on visa legislation requirements in certain markets. There was also a lack of forward bookings in markets such as China, Japan, South Korea, Australia, New Zealand, USA, Canada, Italy and Germany. Furthermore there were lingering health concerns regarding communicable diseases such as Ebola and Middle East Respiratory Syndrome (MERS) across all regions. Global security concerns were linked to terrorism such as aircraft hijackings. Brazil, Russia and Angola had economic related issues.

Challenges faced domestically for Quarter 2 and 3 included SA’s sluggish economic growth which impacted upon Gross Domestic Product growth. The depreciation of the rand and rising interest rates in Quarter 3, relative to previous years, led to low disposable income. Sporadic local government service delivery led to protests. There was also industrial action in various sectors during the reporting period. Job losses and the unemployment rate continuing to rise exacerbated the non-affordability of travel.

Internal Challenges faced in Quarter 2 and 3 by SA Tourism included the fact that Stats SA had changed its methodology and reporting which led to a revision of SA Tourism’s targets for 2015/16. The continued challenge of currency exposure led to a regular review of SA Tourism’s operating model overseas. SA Tourism had to decide what model worked for it, and that would also keep it within its R1bn budget. The SA Tourism Board called for a reduction in operating and marketing costs. SA Tourism adopted the use of hubs, virtual offices and global marketing agencies. There was, however, a huge improvement in the working relationship with Stats SA. The NDT had a task team that worked with Stats SA.

As of December 2015 there had been a decline in tourist arrivals of 6.8%. The 2015 Performance Report of the United Nations World Tourism Organisation (UNWTO) noted an increase in arrivals globally of 4.7%. She wanted to assure the Committee that SA Tourism would work on the timing of its reporting cycles in line with financial years. SA Tourism would report back to the Committee on what was and what was not possible. Due to the change in Stats SA’s methodology and reporting to exclude transit passengers from tourist arrivals figures SA Tourism had to redo its forecasts, now based on the new data series. The change in tourist arrivals required a change in the Total Tourist Direct Spend (TTDS) by those tourists.

Ms Dlamini then presented specific figures on the 2015/16 performance results for SA Tourism in Quarter 2. On tourist arrivals there had been a -7.6% decline year on year for the period January to June. The lack of forward bookings, visa processing constraints and the lack of understanding of the visa regulations attributed to the decrease. In regard to the number of domestic holiday trips achieved, the year-to-date target had been exceeded by 4.4%, but there had been an overall decline year on year from 14.7m in 2014/15 to 10.3m in 2015/16. The target for  the number of graded accommodation establishments had not been achieved due to cancellations, but there had been a considerable increase in new establishments joining the grading system, with 177 joining in 2015/16 compared to 155 in 2014/15.

She then outlined the Quarter 3 performance results. The number of tourist arrivals showed a -6.9% decline year on year for the period January to September, for very much the same reasons as mentioned in Quarter 2. She noted that she did not have time to go through all the figures if Members wanted to have more time for engagement, so she simply wanted to summarise that  SA Tourism was heavily affected by currency losses.

She noted that the National Convention Bureau (NCB) interacted with players in the tourism industry because it had provincial bureaus in Durban, Cape Town and Johannesburg. In those provinces where there were not provincial bureaus, the NCB had offices to deal with business. Offices were located in provinces like Mpumalanga and the North West. Some of the 2015/16 key deliverables were trade shows, bidding support, public relations, media and advertising.  A total of 12 and 11 bids were supported in Quarter 2 and Quarter 3 respectively, with an economic value of R251  633  200 and R104  751  000.

Dealing with the financial statements, the Committee heard that for Quarter 2 and Quarter 3, SA Tourism had spent 60% and 79% of its budget respectively. In Quarter 1, the spending of the annual budget sat at 40%. It therefore was apparently that, on average, SA Tourism spent 20% of its annual budget per quarter. As previously mentioned, currency fluctuations had a huge impact on SA Tourism. There was less buying power for marketing initiatives in countries, overhead costs increased and marketing spend was reduced. Various strategies had to be reprioritised, such as the hub strategy and virtual offices. There had had to be cuts in marketing projects and Joint Marketing Agreements (JMAs).

Ms E Masehela (ANC) referred to the grading target shortfall of 424 properties, and asked what the reasons were for not meeting the target. She asked whether the visa regulations could still be affecting the numbers of visitors coming into SA.

Mr Erasmus responded that the cancellations were due to the fact that the establishments wanted to see value in being graded. The average grading fee for a small establishment, annually, was R3 300. It was a huge amount for a small establishment since the money could be better utilised elsewhere. Other reasons for cancellations included that businesses closed down, or the properties were sold, or the business had changed. In respect of new applications there were also cancellations, when businesses were informed what the grading fee would be. The Tourism Grading Council of SA (TGCSA) was working with the National Department of Tourism on policy changes regarding the future of grading.

Mr S Bekwa (ANC) commented that the briefing painted a picture of a tourism industry that was not looking well at all. The perceptions of SA abroad were not good, particularly in view of the misunderstandings regarding Ebola, and the requirement to have an unabridged birth certificate for children travelling.

Mr J Vos (DA) asked for the exact definition of what forward bookings were, given the references made to these in the briefing. He asked what was the relationship between SA Tourism and the South African Local Government Association (SALGA). He pointed out that there were two major obstacles to domestic tourism. The first was affordability and the second was geographic spread. He said that SALGA was working on revitalising small town economies, and this was one opportunity that needed to be explored, so he suggested that there must be collaboration. SA Tourism was asked to provide the Committee with greater information on the domestic tourism strategy, such as the  “My First Time” project. He stated that domestic tourism needed to be strengthened. The Sho’t Left Campaign had faced challenges, and so he particularly wondered how the “My First Time” Campaign would be strengthened.

Mr Vos asked whether more affordable packages would be considered. More proactive work was needed to put affordable packages on offer. South Africans should be able to afford to travel. SA Tourism, together with the National Department of Tourism, should approach the industry to have more affordable packages. Government facilities like parks, museums and resorts should be accessible to all South Africans. He suggested that initiatives like offering discounts and having free entrance on public holidays would go a long way. Dual pricing was something that needed serious consideration. Business tourism was just as important as leisure tourism, and provinces and cities should be brought on board.

Mr Vos also suggested that an audit of hotels and conference centres in different provinces needed to be done. This would provide insight on the provincial set up. Reporting was usually done by financial years and by quarters, but he wondered if it was possible to give the Committee a year-on-year analysis. It would be useful to compare one calendar year with another.

Mr Vos commented that around one month ago a travel trade show had been held in Johannesburg. Notifications were posted on social media to say that SA Tourism had not had enough pamphlets and brochures at the show. To make matters worse, SA Tourism only had a photo booth. The State of the Nation Address 2016 had said that there was a need to work more smartly with budgets. For this reason, he suggested that Ms Aneme Malan, Deputy Director General: International Relations at the NDT, needed to work hand in hand with SA Tourism and the Department of International Relations and Cooperation. Advantage must be taken of the fact that SA had many missions all over the world. He was aware that there were protocols in place, but efforts should be made to work together. He was pleased that there were some positives on grading. He felt that the Committee needed to discuss whether grading should be compulsory or voluntary. SA Tourism had to foster closer working relationships with provinces and cities.

Ms Damant spoke to the issues raised on domestic tourism and said that the Sho’t Left Campaign had been critical. There were three main things to look at on domestic tourism. The first was to look at current travellers and to encourage them to take more trips. The second was to look at the industry, provinces and stakeholders, and decide how to meet objectives. She agreed that there needed to be more affordable deals. Key barriers had to be identified, and geographic spread and seasonality had to be considered. The third point was that, over the long term, there was a need to build a culture of travel in SA. It was a gradual process. Hence the Sho’t Left and My Choice Campaigns had been born. She referred to slide 62 and listed some of SA Tourism’s initiatives. These included using television and radio. There was also DJ Tours. Low cost airlines had also been approached for more affordable deals. There were school scholar initiatives and spelling bees.

Ms Dlamini noted the suggestion for the year-on-year reporting. She noted that building a relationship with SALGA was possible. SA Tourism did engage with provincial authorities, and with cities. A marketing forum was used, where all marketing managers convened. SA Tourism was all in favour of infrastructure revitalisation in small towns. Work was being done with the National Department of Tourism and the Department of International Relations and Cooperation. She agreed that SA Tourism could stretch its budget if it worked with the overseas missions. SA Tourism sent a specialist on SA to one overseas mission where there was a new posting, in order to educate people. In relation to forward bookings she noted that SA Tourism had procured a service provider, Forward Keys, to pull multiple data sources. Data included the passenger volume landing in SA. It gave hotels an indication of volumes. She noted that bookings were probably made about twelve months in advance.

Mr Vos suggested that the next time the Committee had a meeting with SA Tourism there should be a briefing on its Domestic Tourism Strategy. The briefing should also cover affordability, given the SONA 2016's comments on domestic tourism.

The Chairperson stated that the Committee needed to be briefed by both the National Department of Tourism and SA Tourism on their Domestic Tourism Strategies.

Ms Nwokedi urged that the Tourism Business Council of SA also be part of the meeting, as commercial operations determined prices.

Mr G Krumbock (DA) said that affordability encompassed many things. One of these had to do with competitiveness. An analysis of the supply side was also needed. Prices were set by the private sector. If wages increased this countered inflation and the result would be people could afford to travel. He noted that there were structural imbalances, and other issues like poverty and stifling labour laws that had an impact. If the supply side was fixed then affordability would improve.

Ms S Xego (ANC) noted that perceptions abroad did not view SA as one of the safest places in the world. This could be ascribed, for the most part, to negative publicity. She asked then what SA Tourism was doing to counter the negative publicity? She asked whether SA Tourism had a working relationship with the South African Police Services (SAPS), and what was being done to allay the fears of tourists? She was concerned that there were cancellations by establishments to be graded, and this raised the question of whether the basket of benefits on offer was good enough and if the grading fees were affordable.

Mr Erasmus, speaking to the basket of benefits, said that engagements with stakeholders were taking place in order to ensure that what was on offer was relevant. The basket of benefits outweighed the cost of grading.

Ms Dlamini spoke to changing perceptions noted that SA Tourism used influential people like celebrities to try to boost its image. SA Tourism hosted international media and trade.

Mr Krumbock referred to slide 6 of the briefing document and pointed out that the numbers of arrivals to SA from Europe was almost five times the numbers coming from Asia. The UK alone almost made up 30% of the arrivals from Europe. He also referred to slide 77 where information regarding budgets of country offices was shown. Given these figures he asked why the country office budget for India was R164m whereas the country office budget for London was only R3m. SA was spending 55 times more on India than on the UK, although the UK arrival figures were far higher, and when in fact there had also been an 18% decrease in tourists from Asia.

Ms Goliwe referred to slide 77 and said that the amounts referred to were in different currencies. The Indian budget was in rupee, which explained why it looked so much larger and the UK budget was quoted in pounds sterling.  To get a true reflection on comparisons, the amounts had to be converted into rands.

Mr Krumbock responded that the amounts should have been captured in rands. Members did not have the time to do conversions during a meeting.

Ms Nwokedi stated that in the future SA Tourism would provide the Committee with a narrative on why efforts were focussed on specific countries. There were increases in arrivals but also a great deal of opportunities. SA Tourism had to identify inhibitors that prevented huge arrivals.

The Chairperson said that a legislative review would shed light on whether grading should be a paid service or be free. The issue was about what  benefits of grading were, both to establishments and to SA as a country. She asked why events were taking place only in Cape Town, Durban and Pretoria, and what was happening in the smaller towns. She asked if SA Tourism had discussions with National Treasury over funding and the impact that currency fluctuations had. She too asked what SA Tourism was doing to promote domestic tourism. Tourism could assist the economy by creating jobs and generating revenue.
She asked whether checks were done on whether establishments maintained their standards according to their star grading.

Mr Erasmus said that the TGCSA had an annual system and grading standards were checked annually. The intention was to introduce a validation check during the year. Online guest reviews that were integrated into the grading system would assist with grading comparisons.
Ms Maponya noted that SA Tourism had an ongoing discussion between various entities to share plans. These entities included the Department of International Relations and Cooperation, the Department of Trade and Industry and Brand SA. There would be greater impact domestically and internationally. Feedback should be available within the next two quarters.

Ms Nwokedi welcomed the opportunity to engage with the Committee. It allowed SA Tourism to apply its mind. It was proven all over the world that in order to succeed a country must have a vibrant travel market.

The meeting was adjourned. 

Download as PDF

You can download this page as a PDF using your browser's print functionality. Click on the "Print" button below and select the "PDF" option under destinations/printers.

See detailed instructions for your browser here.

Share this page: