Tourism Budgetary Review and Recommendations Report

Meeting report

Tourism Budgetary Review Recommendations Report

The Chairperson placed the Draft BRRR before the Committee for consideration and stated that of critical importance for members was the Committee’s findings/observations and recommendations. She asked the Committee Content Adviser Dr Sibusiso Khuzwayo to take the Committee through the Draft BRRR.

Mr Khuzwayo referred to page 32 which spoke to service delivery and industry observations which the Committee had made when it had gone on oversight visits. The Committee observed amongst others that on policy, planning and strategic alignment there were some provinces that had developed their Tourism Master Plans whilst others were in the process of developing their Tourism Master Plans whilst the National Tourism Sector Strategy (NTSS) was being reviewed by the National Department of Tourism (NDT). This meant that provinces would have to realign their strategies once the NTSS review process was finalised. It was also observed that some provinces lacked research capacity at both provincial and metro/municipal level which lead to poor market intelligence and tourism trend analysis. Consequently there was a loss of market share due to the poor marketing strategies. The Committee further observed that some provinces and mostly municipalities had not allocated reasonable budgets for tourism. This emanated from tourism not being prioritised and deemed as an unfunded mandate. The constitutional mandate of tourism as a concurrent function was also used as an excuse for not funding tourism. 

Key Findings/Observations

The Committee made a number of observations that were used as the basis for the BRRR. Some of them included:

Technical issues

-The Committee felt that tourism in SA was underfunded. The announcement by SA Tourism (SAT) that it was conducting an econometric study in collaboration with Oxford was welcomed as it would assist with determining the marketing budget needed and would foster greater alignment amongst stakeholders and spheres of government in SA. Despite tourism being one of the six economic pillars in SA it was always excluded from special programmes of government like Operation Phakisa, the National Infrastructure Plan driven by the Presidential Infrastructure Coordinating Commission (PICC) and others. There was therefore a need to lobby National Treasury to include tourism in government special projects in the future. 

-On the setting of pre-determined objectives the NDT continued to set targets that were dependant on other stakeholders without proper planning and implementation protocols in place. The NDT had not conducted adequate ground work to ensure that targets were attainable

Governance and operational issues

-The Committee was satisfied with general governance of both the NDT and SAT with room for improvement of implementation of governance instruments developed including internal controls.

On governance SAT had in its financial statements indicated that it had contingent liabilities in claims for trademark infringements, two claims of substantive and procedural unfair dismissals, two claims of unlawful breach of contracts and other statutory liabilities. These indicated that SAT did not practice good governance. In the future good governance should be practiced to avoid unnecessary liabilities.

- It was also noted that the NDT’s internal audit team did not identify potential risks that may lead to poor performance by the NDT by the end of the financial year. This had happened before where the NDT had set targets that were not achievable. This had not been picked up in planning phases and hence complicated service delivery.

Service delivery performance

The Committee made a number of service delivery observations which had hampered the performance of both the NDT and SAT in the year under review.

-On policy contradictions and its affect on tourism, SAT had in the period under review stated that it had been greatly affected by the introduction of the immigration regulations by the Department of Home Affairs. SAT largely attributed not meeting its targets on international arrivals on the immigration regulations. It did not make good policy sense to designate tourism as one of the six economic pillars of the economy and to enact laws/policies that hampered the growth of the very same industry earmarked for growth.

- On gaps in tourism policy and the Tourism Act the Committee observed that the NDT still relied on the White Paper on Development and Promotion of Tourism in SA from 1996. No regulation and policy analysis had been done to establish whether the policy still served the tourism sector well. The NDT needed to analyse whether the policy and the Tourism Act was still in line with tourism needs or whether new tourism policy was needed.

- On a National Airlift Strategy the issue of airlift remained an inhibiting factor in growing tourism in SA and the Minister of Tourism should robustly engage the Minister of Transport and other ministers in the cluster at cabinet level.

-The Committee observed that it had in its previous BRRR recommended that SAT needed to intensify its programmes to develop and promote domestic tourism. The Committee was concerned that SAT was not making noticeable inroads in influencing South Africans to tour their own country.

- On grading the Committee observed with concern that the number of graded establishments continued to decline in SA. The continued decline in the number of graded establishments affected the quality of the tourism product offering in SA.

-The Committee observed that SAT operated in a number of international markets and was exposed to foreign exchange risk due to currency exposure. SAT had over the past five years suffered currency losses totalling R350m.

-The Committee also observed that SAT received revenue from the Tourism Marketing SA (TOMSA) levy which was a levy collected by tourism businesses with the aim of contributing to the promotion of SA as a preferred destination locally and internationally. The Committee felt that SAT had a duty to engage the private sector, especially the Tourism Business Council of SA to persuade its members to collect the levy. If the issue of the TOMSA Levy was not addressed the Committee would have to look at other alternatives for revenue collection which could include instituting a tourism tax which was the norm in many successful tourism destinations.

-On transformation the Committee observed that the new Broad -Based Black Economic Empowerment (B-BBEE) Sector Codes presented an opportunity for benefits throughout the tourism value chain. There were opportunities for the industry to outsource non core activities such as laundry, security etc to B-BBEE service providers.

-The Committee furthermore observed that there was a need for an integrated approach on tourism between the NDT and other sector departments.

The Committee was in the process of engaging the NDT to revamp its policy and strategic direction. This would require funding and the Committee therefore suggested that the tourism sector be included in government special projects and that National Treasury should consider creating a Tourism Development Fund that could assist the NDT in activating Private Public Partnerships (PPP) as envisaged in the PPP Toolkit for Tourism.

Committee Recommendations to the Minister of Finance

(i)On funding for tourism in SA:

- National Treasury to adjust and increase the budget appropriated to vote 33 in the Estimates of National Expenditure

- National Treasury to facilitate the creation of the Tourism Development Fund to transform the tourism landscape in SA

(ii)Foreign currency exposure

It was recommended that National Treasury assist SAT in finding a lasting solution to losses caused by   foreign currency exposure

Committee Recommendations to the Auditor General of SA (AGSA)

The recommendation was made that the AGSA conduct performance assessments for Social Responsibility Implementation (SRI) projects and other programmes of both the NDT and SAT in the 2016/17 financial year to ascertain if there was value for money and effective service delivery in the programmes and projects delivered to communities. 

Committee Recommendations to the Minister of Tourism

Recommendations pertaining to the NDT included:

- On governance and leadership it was recommended that the Minister expedite the organisational review of the NDT to calibrate its programmes and business units with the mandate of the NDT, trends in the sector and rectify a myriad of issues identified by the Committee.

- It was recommended that the Minister of Tourism make a proposal to cabinet that an Inter-Ministerial Committee be established to deal with cross-cutting issues that affected tourism such as tourism transport interface including airlift, operating licenses and signage, arts and culture and maintenance of tourist attractions etc.

 -The NDT to commission a study in collaboration with universities on how to foster a culture of travel amongst South Africans.

- It was recommended that the Minister increases the monitoring and evaluation of SAT’s performance with regard to interventions and marketing strategies developed to grow and promote domestic tourism.

- The recommendation was made that the NDT strengthen its oversight function over SAT and assign a senior official to do it to ensure that it was done effectively and efficiently.

- It was recommended that the Minister ensures that the NDT and SAT set targets that were specific, measurable, attainable, realistic and time bound aimed at improving organisational performance and growing tourism.

- Despite the positive audit opinion by the AGSA, it was recommended that the Minister ensure that the NDT improved on leadership and implementation of internal controls to ensure that targets set in the Annual Performance Plan were attainable and achieved at the end of the financial year.

- It was also recommended that the Minister hold senior management of the NDT accountable in ensuring that they provided leadership that offered value for money in all projects and programmes implemented by both the NDT and SAT, including SRI projects.

- It was recommended that the NDT revises the White Paper on the Development and Promotion of Tourism in South Africa to address national transformation imperatives and contemporary global trends in the sector.

- The recommendation was also made that the Minister engages the Tourism Business Council of SA on measures to curb the emerging trend of racism in the sector and general safety precautions for both domestic and international tourists.

Recommendations pertaining to the SAT

- On performance it was recommended that SAT improves its performance in line with the targets set in its Annual Performance Plan

- It was also recommended that SAT reviews its policy on the payment of bonuses and only give financial rewards to employees who met targets that had been set in their performance contracts in advancement of improved organisational performance.

-The recommendation was further made that SAT work with the Tourism Business Council of SA to increase TOMSA Levy collection as failure to do so may influence the Committee to consider recommending to the NDT to institute a tourism tax regime for SA.

Discussion

Mr G Krumbock (DA), on the recommendation to address emerging trends of racism in SA’s restaurants, pointed out that it was one of the legacies of SA’s past. It had always been there. He did not wish for it to be reflected as a risk in the BRRR. There were simply high profile incidences of racism of late that the media in SA had highlighted. He suggested that the wording of the recommendation be worded in a manner to state that there were incidences of racism in tourism. It should not be reflected that there was an emerging trend of racism.

Mr R Cebekhulu (IFP), referring to governance and the lack of internal controls, commented on the losses that had been suffered for instance where staff had not booked flights.

Ms E Masehela (ANC) said that incidences of racism in tourism had been contained but had of late reared its head.

Ms S Xego (ANC) appreciated that the issue of greater monitoring of SAT by the NDT was captured in the BRRR.

Mr J Vos (DA) said that the recommendations did cover grading but he felt that the recommendation to the Minister of Tourism and to SAT should have specific recommendations on the Tourism Grading Council of SA (TGCSA) on issues like compulsory versus voluntary grading, grading incentives, more businesses to be graded etc. He also referred to the recommendation on domestic tourism and felt that it did not speak about the relationship between the NDT and local government on municipal resorts. There was a commission that had looked into the issue of municipal resorts. He felt that having budget resorts could strengthen domestic tourism.

The Chairperson responded that issues on grading would be covered when the Tourism Act was to be amended.

Ms P Adams (ANC) noted that every government department had Expanded Public Works Programme (EPWP) projects. Should EPWP projects not be mentioned in the BRRR and more specifically in the Committee’s Recommendations? 

Mr Krumbock suggested that under the recommendations to the Minister of Tourism or those of the Minister of Finance it should be recommended that a cost benefit analysis was needed of SRI projects. There needed to be better oversight on SRI projects. There should be a careful assessment of projects supported and better oversight control over them.

The Chairperson noted that the area of private-public partnerships (PPP) needed to be looked at. There was a PPP Toolkit.

Dr Khuzwayo assisted by other Committee Staff would affect the necessary changes to the BRRR as members had suggested.

The Draft BRRR was adopted as amended. 

The meeting was adjourned.