Tourism Sector transformation acceleration

NCOP Trade and Industry, Economic Development, Small Business Development, Tourism, Employment and Labour

21 September 2016
Chairperson: Mr M Rayi (ANC, Eastern Cape) (Acting)
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Meeting Summary

The Committee elected Mr M Rayi (ANC, Eastern Cape) as Acting Chairperson for the meeting in the absence of the Chairperson Mr E Makue (ANC, Gauteng).

At the outset of the meeting discussion ensued on the issue of the restructuring of committees that had taken place due to some Members being redeployed after the 2016 local government elections. Another issue briefly discussed was that there seemed to be standing apologies from the Minister and Deputy Minister of Tourism when it came to the attendance of meetings of the Committee. The challenge identified was that both Cabinet and the Committee sat on Wednesdays. There was thus a clash. The Committee agreed that the aforementioned issues needed to be addressed.

The National Department of Tourism briefed the Committee on interventions to accelerate transformation in the tourism sector.

The Committee was provided with detail on the amended Tourism Broad-Based Black Economic Empowerment (B-BBEE) Sector Code. Members were also given insight into the process on the development of Broad-Based Black Economic Empowerment from the enactment of the B-BBEE Act No 53 in 2013 to the gazetting of the amended Tourism B-BBEE Sector Code in 2015 and the appointment of the new Tourism B-BBEE Charter Council in 2016. The amended Tourism Sector Code, amongst other things, aimed to advance the objectives of the B-BBEE Amendment Act No 46 of 2013 within the tourism sector and to ensure that opportunities and benefits of the tourism sector were extended to black South Africans. The scope of application of the Sector Code was accommodation, hospitality and related services as well as travel and related services. Applicable thresholds for the Sector Code were Exempted Micro Enterprises which had total annual revenue of less than R5m, Qualifying Small Enterprises with total annual revenue between R5m and R45m and Large Enterprises with total revenue of over R45m.

Priority elements identified were Ownership, Skills Development and also Enterprise and Supplier Development Members were provided with insight into the priority elements and the discounting principle as well as on what the compliance parameters were. Empowering supplier criteria and points to note on B-BBEE verification were also highlighted.

Some interventions on transformation other than the amended Sector Code were the State of Transformation study that was initiated in 2011 and completed in 2012, the Study on Procurement Needs across tourism sub-sectors conducted in 2014/14 as well as the Black Women Executive Development Programme, the aim of which was to create a pipeline of women ready to take up executive management and board positions conceptualised. A total of 20 black women started on the Executive Development Programme for Women on the 18 July 2016 at the University of SA Graduate School of Business Leadership. A Tourism Supplier Development Portal was currently being finalised to facilitate matchmaking between Large Enterprises and Qualifying Small Enterprises. A further baseline study to assess the current state of transformation was being commissioned as a follow up to the 2011 study. A B-BBEE Strategy would be developed mapping out a comprehensive set of targeted actions for transforming the sector beyond compliance with the Sector Code. Further interventions were also being conceptualised by the newly appointed Charter Council. 

Concern was raised that where Broad-Based Black Economic Empowerment was taking place it was only benefitting a select few who were already empowered. The rich were getting richer. Assistance to already established enterprises had to cease as new entrants into the sector needed to be assisted. Businesses that had been supported should graduate to make way for a new batch of businesses that were to be supported. Another concern raised was that economic migrants had taken up jobs in the hospitality sector at the expense of local South Africans. Foreign nationals were being employed in hotels and restaurants all over SA.

The National Department of Tourism was asked whether it was doing sufficient monitoring and enforcement when it came to implementing Broad-Based Black Economic Empowerment. Some businesses only complied up until they secured the necessary contracts/bids. How could indigenous people access business opportunities in tourism? In as much as the Committee appreciated the background provided on the process of evolvement of transformation efforts, what the Committee would have liked to see was an evaluation of transformation that had taken place from whence the process had started up until the present. Challenges that had arisen could have been highlighted. Was transformation really taking place? The briefing had highlighted benefits that were there for being compliant but Members asked what sanctions were there for not being compliant. The NDT was asked how it did monitoring. Members asked whether the Department should consider having compliance inspectors as the Department of Labour did. Members felt that the Committee should have been provided with a breakdown of transformation figures across the provinces. The Department was instructed to ensure that briefings in future should cover provincial aspects.

Outstanding minutes were adopted as amended.  

Meeting report

Committee business
The Committee elected Mr M Rayi (ANC, Eastern Cape) as Acting Chairperson for the meeting in the absence of the Chairperson Mr E Makue (ANC, Gauteng).

Mr J Londt (DA, Western Cape) pointed out that certain Members had left the Committee and asked how the Committee Members list looked like.

Mr S Mthimunye (ANC, Mpumalanga), Chief Whip of the Committee, said he had engaged with the Office of the Chief Whips on the matter. He pointed out that it was not the numbers of Members that were of material effect but rather the numbers of provinces.

Mr Londt understood that it was about provinces being represented. He pointed out that in the present meeting there was no Alternate Member for Limpopo Province.

The Acting Chairperson said the matter would be dealt with by the Whippery.

Ms H Mateme (ANC, Limpopo), Chief Whip of the National Council of Provinces (NCOP) informed Members that the restructuring of committees was underway. Political parties informed the Chief Whip’s Office on who they wished to serve on Committees. The 2016 Local Government elections had brought about many permutations.

Mr Victor Tharage, Director General of the National Department of Tourism tendered the apologies of Minister Derek Hanekom and of Deputy Minister Tokozile Xasa to the Committee. There seemed to be standing apologies from the Minister and the Deputy Minister each time there was a meeting with the Committee. Cabinet meetings took place on Wednesdays as well as the Committee’s meetings.

The Acting Chairperson said there could not be such a thing as a standing apology to the Committee as there were not standing apologies to Cabinet. Why could the Minister and Deputy Minister not apologise to Cabinet and attend the Committee’s meetings.

Mr W Faber (DA, Northern Cape) suggested that perhaps the ministerial clusters could alternate when they held their meetings so that Tourism did not always fall on a Wednesday.

The Acting Chairperson said that the matter would be addressed.

Mr Tharage said he did not wish to speak to matters pertaining to Parliament and Cabinet. He merely conveyed the apologies of the Minister and the Deputy Minister to the Committee. He did not wish to give the Committee false expectations. He continued with opening remarks on transformation and the principles underlying it. Redress was the underlying principle. Transformation had to be about the business itself. Once a business implemented the tourism Sector Code then it expanded its own opportunities for business. Businesses had to use transformation as a strategy to make themselves grow. State business was up for the taking by businesses who were complying with the Code. State consumption was huge and it would be in the interest of any business to secure a piece of the pie. To access government business there had to be inclusivity.

National Department of Tourism (NDT) on interventions to accelerate transformation in the tourism sector
The delegation comprised of Mr Tharage as previously mentioned, Mr Thabo Makhubedu, Director: Office of the Director General; Ms Sibongumusa Ngidi, Chief Director: Policy Development and Evaluation; and Ms Petra van Niekerk, Parliamentary Liaison Officer: Office of the Director General.

Ms Ngidi undertook the briefing. The Committee was provided with detail on the amended Tourism Broad-Based Black Economic Empowerment (B-BBEE) Sector Code. Members were also given insight into the process on the development of B-BBEE from the enactment of the B-BBEE Act No 53 in 2013 to the gazetting of the amended Tourism B-BBEE Sector Code in 2015 and the appointment of the new Tourism B-BBEE Charter Council in 2016. The amended Tourism Sector Code amongst other things aimed to advance the objectives of the B-BBEE Amendment Act No 46 of 2013 within the tourism sector and to ensure that opportunities and benefits of the tourism sector were extended to black South Africans. The scope of application of the Sector Code was accommodation, hospitality and related services as well as travel and related services. Applicable thresholds for the Sector Code were Exempted Micro Enterprises (EMEs) which had total annual revenue of less than R5m, Qualifying Small Enterprises (QSEs) with total annual revenue between R5m and R45m and Large Enterprises (LEs) with total revenue of over R45m.

Priority elements identified were Ownership, Skills Development and also Enterprise and Supplier Development (ESD). Members were provided with insight into the priority elements and the discounting principle as well as on what the compliance parameters were. Empowering supplier criteria and points to note on B-BBEE verification were also highlighted. Some interventions on transformation other than the amended Sector Code were the State of Transformation study that was initiated in 2011 and completed in 2012, the Study on Procurement Needs across tourism sub-sectors conducted in 2014/14 as well as the Black Women Executive Development Programme, the aim of which was to create a pipeline of women ready to take up executive management and board positions conceptualised. A total of 20 black women started on the Executive Development Programme for Women on the 18 July 2016 at the University of SA (UNISA) Graduate School of Business Leadership. A Tourism Supplier Development Portal was currently being finalised to facilitate matchmaking between LEs and QSEs. A further baseline study to assess the current state of transformation was being commissioned as a follow up to the 2011 study. A B-BBEE Strategy would be developed mapping out a comprehensive set of targeted actions for transforming the sector beyond compliance with the Sector Code. Further interventions were also being conceptualised by the newly appointed Charter Council.  

Discussion
Mr Faber was greatly concerned that true Broad-Based Black Economic Empowerment (B-BBEE) needed to be in place. There were big companies in the tourism sector which were owned by rich black directors. The issue was now about getting small entrepreneurs to flourish in the sector and to create jobs. With the systems that government had put in place the already empowered blacks were getting richer. Small entrepreneurs did not stand a chance against bigger businesses. Small entrepreneurs needed to be assisted to flourish in the tourism sector.

Mr Tharage, in responding to questions by Members, said he would in some instances fall short where it related to policy matters. It would only be correct to state that the tourism industry was also doing its bit to encourage transformation. There were inter-linkages. In the North West Province, the town of Mogwase had become a Bed and Breakfast (B&B) township. Sun City could not cope with demand for accommodation. People stayed at B&Bs in Mogwase and did day trips to Sun City. There was also a provincial park in the area. The NDT intended to implement its Enterprise Development Support Programme in the area over the next three years. The NDT did support entrepreneurship. He emphasised that the tourism Sector Code was sufficiently diverse. Ownership covered women as well. Where there was enterprise and supplier development, skills development also took place. He did not wish to go into policy issues on the broadness of the Code. It was called B-BBEE. There were interventions by government that the industry had to implement. International examples were also considered on how fast or slow transformation had taken place in the tourism industry. The surrounding environment in which a business operated also needed to be taken into account.

Mr Londt said that when entrepreneurs started businesses it was difficult to compete with big boys. What was the NDT doing to ensure that entrepreneurs were getting support from government? Businesses that had been supported should graduate to make way for a new batch of businesses to be supported.

Mr Tharage added that at Tsitsikamma in the Eastern Cape the NDT was setting up a world economic hub. The NDT was embarking on efforts to ensure that tourism was not the preserve of a few. There were initiatives in place to assist with market access. On enterprise development the NDT also did skills training for tourist guides and tour operators etc. There were many support mechanisms in place. The fluidity of the job market also came into play.

Mr B Nthebe (ANC, North West) asked what the duration of the NDT’s exemptions for businesses with turnover under R5m was. He also asked what the level of enforcement was. He pointed out that 85% of SA’s market was a moving target. Economic migrants were working in the sector instead of South Africans. In restaurants in SA one was mainly helped by Zimbabwean waiters and waitresses.
Referring to the centralised database the difficulty of accessing local suppliers was an issue which needed addressing. He also referred to slide 16 and asked how willingness was determined. The Black Women Executive Development Programme was appreciated but it was asked what the NDT did to ensure that these women received opportunities.

Mr Tharage said that exemptions applied to enterprises with turnover less than R5m. Legislation provided that small micro enterprises were exempted from being verified. They could simply furnish an affidavit. There were checks and balances as these enterprises as they paid taxes. The NDT had consulted National Treasury and Statistics SA on the setting of the ceiling of the R5m turnover.

Ms Ngidi said that the 85% employment of locals’ requirement had arisen due to concerns that there were low levels of locals employed in the tourism sector. An empowering supplier had to employ locals. Large enterprises would only do business with empowering suppliers. She explained that willingness was not an objective test.

Mr Mthimunye agreed that economic migrants dominated SA’s hospitality industry. They were working in most hotels and restaurants. He felt that something needed to be done. He was aware that the issue was a labour matter but felt that the NDT could make an input on it. He asked what the NDT’s involvement in the granting of casino licenses was. He pointed out that some bidders only complied with B-BBEE until such time that they won the bid. In other instances, non-black partners would simply buy out black partners after the bid was secured. There needed to be better monitoring and enforcement. On township and village economies it seemed as if people in villages could not penetrate the tourism market. There seemed to be a select few that were nurtured by government forever. These companies needed to graduate to make way for new entrants. The Committee should have been provided with a breakdown of transformation figures as per province.

Mr Tharage also pointed out that at Tzaneen the NDT was also providing support on market access. In 2015 a total of 86-87 enterprises had been supported. These businesses even managed to get business from abroad. There was therefore not only business that came from government. Big corporate players in the sector also played their part. He noted that concessions had a serious component of transformation in them. Working in the hospitality industry was hard work and took its toll on the individual. It took character to work in the hospitality industry. Some of the leading black entrepreneurs in the industry had emerged from some of the larger groups. These were some of the graduations which the NDT wished to encourage.

Mr J Mthethwa (ANC, KwaZulu-Natal) asked how indigenous people could gain access into the business of tourism.

The Acting Chairperson understood what the purpose of the briefing was but was more interested on the assimilation of transformation. He appreciated the Committee being provided with background on the process on the evolvement of transformation efforts from legislation in 2003 up until the signing of the Tourism Charter in 2005. What the briefing should have shown was an evaluation of transformation that had taken place from 2005 up until the present. Challenges that had arisen back then should have been highlighted. Where were things heading to? He agreed that the briefing should have spoken more to transformation in the provinces. The NDT should also have broken transformation down in each of its subsectors such as accommodation and hospitality. Was transformation really taking place? He would like to have seen that studies like the one done in 2012 were undertaken annually. The 2012 study had shown that most of the targets set had not been met. This could assist with the monitoring of progress. The briefing highlighted the benefits that were there for being compliant but he asked what the sanctions were for not being compliant. He noted that the Department of Labour had compliance inspectors and asked should the NDT have the same. How was the NDT doing monitoring? He was not entirely convinced about certain sectors not being able to access information regarding small suppliers that should be used. There was reluctance by certain sectors. He asked whether the NDT had tourism boards at provincial and municipal level. This was one way of accessing information.

Mr Tharage said there was an existing policy framework for transformation in SA. The NDT applied all penalties in terms of custodian legislation where there were instances of fronting etc. On the issue of benefits when complying with B-BBEE the complying business was entitled to a large portion of the pie. Where there was non-compliance on the other hand there was no access to the pie. Big businesses knew it was in their best interests to comply because if they did not they would lose business which in turn would affect their bottom line. The profit margin was what kept businesses in tow. On enforcement he pointed out that National Treasury looked at procurement of travel and accounting services. A huge part of this was in the Sector Code. The Code was therefore important. Consumption of the state was significant. On the issue of an annual study he said that there could be annual statistics that could show whether there was uptake.

Ms Ngidi stated that in the entire economy several studies had been done up until the present since transformation initiatives had started in 2005. Studies had led to the amendment of the Department of Trade and Industry’s Code in 2013 and also the NDT’s Code not too long ago. More needed to be done now compared to the past. Entities had complained that they would drop 2-3 levels with the new amended sector code. This required them to do more in order to stay on track. This accelerated transformation. If one looked at the allocation of points, 35% of the Tourism Score Card was on enterprise and supplier development. The policy framework was driving big business to do business with small enterprises. She pointed out that doing studies annually might not work as verification was done on an annual basis. It took 2-3 years to see what was happening. The NDT was doing a follow up study to the 2012 study.

The Acting Chairperson reiterated that future briefings by the NDT to the Committee should speak to provincial aspects.

Committee Minutes
Minutes dated the 7 September 2016 were adopted as amended.

The meeting was adjourned.
 

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