Enterprise Development: National Department of Tourism briefing

Meeting report

National Department of Tourism (NDT) on its Enterprise Development Programme

The delegation comprised of Ms Morongoe Ramphele, Deputy Director General: Domestic Tourism; and Ms Beulah Mosupye, Chief Director: Northern Region.

Ms Ramphele provided some background. On enterprise development, the NDT had discontinued its partnership with the Tourism Enterprise Partnership (TEP) early in 2016. The NDT had engaged in a competitive bidding process and had partnered with seven service providers. The TEP used to have service providers in provinces that they managed. With the new arrangement resources went directly to Small Medium and Micro Enterprises (SMMEs). The NDT/TEP arrangement had been a 50/50 one but the TEP could not bring their share. The NDT thus embarked on a new approach with the Enterprise Development Programme.

Ms Mosupye undertook the actual briefing. The intention was the creation of an enabling environment for tourism enterprises to grow and contribute to job creation and destination competitiveness. In the past on enterprise development in tourism, the focus had only been on the accommodation sector. Now the focus was also on the organisation of travel, transport, excursions and shopping sectors. The NDT had embarked on a stakeholder analysis to identify role-players that impacted upon the sustainability of tourism businesses. Besides the businesses themselves that the Programme targeted there were suppliers in the supply chain and strategic partners like provinces, municipalities and local tourism associations that had to be taken into consideration.

The Committee was provided with insight into the application of the theory of change on the integrated enterprise development and support programme for tourism. On analysing the theory of action the realisation was made that different levels of development needed different levels of support. For example, suppliers might need guidelines on procurement opportunities and on supplier database. Interventions on enterprise development were the provision of incubation, information portal, market access, supplier development, mentorship & coaching and lastly training & development. These were elaborated upon for the benefit of Members. For example, on incubation an incubator cluster model was adopted. Viable tourism nodes were identified and everybody in the vicinity was involved. The NDT was confident that there was buy-in from most stakeholders. The three spheres of government had to work together. There was a collaborative approach between SMMEs, private sector, public sector, communities and local tourism organisations. What was a “business incubator”? It was an initiative that systematically assisted new entrepreneurs to be successful and usually had a deliberate and effective strategy to incubate and graduate incubates into the industry. Normally new businesses required three-year support. However, the needs of enterprises differed. Some enterprises could leave just after a year of support. The incubation operations process was elaborated upon. There would firstly be a needs analysis for incubates. Thereafter were the development of a business development programme and the implementation of the incubation plan. Once there was roll out of incubation services there would be ongoing monitoring and evaluation to measure impact, business performance and sustainability. Finally, there was the annual review of the programme and the identification of areas of improvement. The NDT was at present busy with the needs analysis. Requirements for admission into incubator included that the enterprise needed to be a member of a local tourism association and that the owner had run the existing business for at least 1 to 2 years. The first node identified was the Pilanesberg Tourism Node. Detail on its core attractions, the tourism market it was aimed at and the institutional arrangements in place were provided. The point was emphasised that there would be continued support of the 100 TEP rural enterprises by way of coaching and mentorship. For the 2016/17 financial year the Programme aimed to reach a total of 442 enterprises with total jobs supported being 1321. Detail was provided on the progress made under sub-categories of enterprises.
The NDT had expanded its reach even though its budget was reduced.

Discussion

Ms P Adams (ANC) was pleased that the NDT was engaged in enterprise development. She suggested that the NDT get buy in from sister departments as tourism did not stand alone. She was aware that the NDT had engagements with its sister departments. When on oversight to the Pilanesberg she said that a taxi operator had informed her that it was difficult to obtain operating licences for the route from OR Tambo International Airport to the Pilanesberg. The observation had also been made that roads to tourist destinations were in a bad state. The NDT needed to address the matter with the Department of Transport.
On slide 4 where reference was made to an acute need for enterprise development, she asked which research institution had done the needs analysis. She felt that enterprise development had always only focused on enterprises that provided accommodation whereas those in transport, supply chain and retail did not get enough attention. Slide 4 also spoke about the need for appropriate funding. How much funding was needed to kick start the Programme? The NDT was asked what it considered to be the enabling environment for the Programme. She pointed out that when cruise ships stopped at SA’s ports there were opportunities when passengers disembarked. In the supply chain of tourism there were many areas that enterprise development could take place. There were cleaning services, laundry and transport, to mention a few.
She asked how the NDT could ensure that small transport operators could compete with the big boys like the Springbok Atlases. In order to qualify for the Programme enterprises had to belong to a local tourism organisation. The NDT was asked whether it had looked at the reports of the Department of Cooperative Governance and Traditional Affairs (COGTA) on whether municipalities had included tourism as part of their local economic development. Were start up enterprises aware of the local tourism organisation requirement.
She asked what type of advocacy the NDT had planned. Seeing that tourism was a concurrent function she asked if there were buy in from the provinces and municipalities on the Programme. This was important since tourism happened at local level.
 Slide 9 made mention of a theory of action. She asked how the NDT intended to put the theory of action into practice. What were the timelines? Of the 100 rural enterprises that the NDT had assisted in its arrangement with the TEP she asked what had been the success rate.

Ms Mosupye stated that there was collaboration with other government departments, including the Department of Transport. Issues were being dealt with. Sister departments had to adopt the tourism mandate. Tourism needed to be incorporated by sister departments. Tourism had to be a permanent feature. Memorandums of Understanding (MOUs) were not good enough. She felt that all departments should have a tourism sub mandate. She could understand how a lack of transportation licences could hamper domestic tourism. Having good roads should be part of the Integrated Development Plan (IDP) process. The role of municipalities in the incubator was important. An enabling environment was needed i.e. licences, roads etc. The issue of signage was also being worked on. She explained that on the identifying of acute needs a research study had been done. The NDT had done a study to consider how Brazil and Singapore supported enterprises. Gaps needed to be identified and closed. On appropriate funding, she noted that the NDT had engaged with development fund institutions. The NDT needed to find ways of breaching gaps. Institutions like the Industrial Development Corporation (IDC) and the National Empowerment Fund (NEF) were looked at. The amount of R150m was the amount estimated that was needed to provide assistance.
Enterprises could obtain support on opportunities that existed when cruise line passengers disembarked. Supplier development was also crucial. The idea was to come up with a top 10 list of goods and services suppliers. These could include laundry and garden services etc.
On giving the one man show a chance to compete with big boys like Springbok Atlas she said that Minister of Tourism Mr Derek Hanekom had established a Tourism Broad-Based Black Economic Empowerment (BBB-EE) Charter Council to look into the issue. In the past the focus had mainly been on tourism arrivals. When a domestic review was done, it was found that small guys were not benefiting. The Charter Council would look at ways of assisting small businesses.
On the requirement of enterprises having to be linked with a local tourism association the message had been communicated. Local media, local government platforms and open public engagements had been used. Engagements had been ongoing. On timelines on the theory of action, the timeline for the incubator was three years. Timelines on other activities depended on the financial year. Long term support would be determined on a year to year basis. Detail could be provided in quarterly reports. The approach of buy in from different provinces and municipalities would differ. Collaboration was needed.    

Ms Ramphele, on intergovernmental relations, said it was still a challenge. She was aware that everything happened at municipal level. The NDT was supposed to contribute to municipal IDPs. Local economic development units in municipalities had to understand that tourism was key. The NDT had done capacity building at municipal level. Councillors and local economic development officials were made to understand the value of tourism.  

Ms E Masehela (ANC) noted that if the NDT intended to assist Small Medium and Micro Enterprises (SMMEs) if they made contributions, and asked how the NDT would assist those SMMEs who could not afford to make contributions. Was the requirement of enterprises participating in the Programme needing to be part of a local tourism association being communicated to municipalities? How many local tourism associations were there? The NDT was asked whether it assisted SMMEs on the major challenge of financial management. On the NDT’s target of wishing to assist 442 enterprises, she asked whether a baseline had been set.

Ms Mosupye said that last year R13m had been used to assist the 100 rural enterprises. For the current year R15m would be used to assist the 442 enterprises. As at the end of Quarter 2 it looked as if there would be over-absorption of the service. Assistance from provinces and other stakeholders was also needed.

Ms S Xego (ANC) said that on oversight visits Members were often shown best cases of projects but never worst cases. Members should also be shown worst cases. She suggested the NDT follow up on its service providers. She was pleased that the NDT was assisting enterprises that belonged to local tourism associations. It meant that the NDT needed to invest in these associations. There was a need to ensure that local tourism associations were transformed. The constitutions of associations needed to be looked at and gender equality had to be ensured. She suggested that when the NDT returned to the Committee to speak on the Programme that Members be provided with figures on the Programme’s performance. The NDT should continue assisting the 100 rural enterprises that had been assisted. If the Programme of assistance runs on a three-year cycle where in the cycle were things currently.

Ms Ramphele stated that local tourism organisations had been there for years but were not transformed. The idea was for associations to guide and mentor enterprises. Enterprises needed to graduate and could not be assisted in perpetuity.

Ms Mosupye conceded that the NDT was well aware of the shortcomings of local tourism associations i.e. lack of transformation. Local tourism associations would be supported. The NDT assisted communities to establish local tourism associations. Some enterprises had experienced problems on forming associations but support would be provided to them.
On the follow up of service providers, she explained that the NDT had service level agreements in place. Regular reporting was done to a committee. Unannounced visits were also useful. On the state of readiness a process was being engaged on. 

Mr T Rawula (EFF) noted that the presentation had not spoken about the strength and dynamics of various provinces in SA. He could already see that the Programme would only see expansion in one or two provinces. He pointed out that the Eastern Cape Province had under the presidency of Mr Thabo Mbeki seen urban renewal programmes. There were business incubators but no expression had been given to tourism. Only business related issues were dealt with. Due to capacity constraints tourism was not included. There needed to be some form of integration of programmes that were of a similar nature. It was more efficient and would save funds. Most SMME activity was around having bed and breakfasts. If enterprises had to at least be in existence for 12 months to qualify for the Programme how would enterprises provide proof? The phenomenon in all sectors was that when persons wished to protect their own interests then they formed associations. This was even a legacy of SA’s Apartheid past where those that were advantaged formed associations to protect their own business interests. These associations had their own membership criteria which were in some instances to exclude certain people. So, the requirement of belonging to an association could be a contradiction in itself. He noted that in townships bed and breakfasts were seen as a tourism activity. They did not consider taxi services and the food industry as being part of tourism. Taxi drivers were very knowledgeable given the nature of their work. Even taverns had lots of tourism potential and there was a need to look beyond what strategies were currently being used. People in Port Elizabeth could not wait to visit the hotspot tavern Mzolis in Gugulethu, Cape Town. Car washes were also very popular in townships.

The Chairperson noted that what Mr Rawula was essentially saying was that township tourism should be looked at in its totality.

Ms Ramphele said the NDT was coming up with guidelines on home-stays. It would be unique for each province. There were basic things that needed to be done and the idea was not to stifle the uniqueness of provinces. 

Ms Mosupye, on the incorporation of transport services and retail etc. into tourism, said it was realised that the entire value chain needed to be considered. It would go a long way to open up the domestic tourism market. The NDT’s footprint on capacity building had given an indication of incubator needs. It was understood that provinces had their own nuances and that a needs analysis would be done. In the Limpopo Province, it showed that there was perhaps a need for an incubator at Phalaborwa. On transforming associations, a paradigm shift was needed. Carwashes, taverns and food services needed to be taken into consideration. Enterprise development had to be underpinned by expansion which would lead to transformation.

Mr S Bekwa (ANC) on enterprises having to be operating for at least 1-2 years in order to qualify for the Programme, felt that greater transformation was needed in the sector.

Mr G Krumbock (DA) asked whether value for money was being received on efforts by the NDT and its entities that were often presented to the Committee. Was there efficiency? Independent studies needed to be done on the value of efforts and the outcomes hoped to be achieved. The return on investment had to be measured.

Ms Mosupye stated that research had been done at the University of SA (UNISA) and at the University of the North West. The NDT also had an internal research team. There was also a monitoring and evaluation framework in place. In a year from now the monitoring and evaluation framework could look at whether value for money had been achieved. The Programme would be monitored on an ongoing basis to check whether things were on track. The Small Enterprise Development Agency (SEDA) had done research. Research had also come out of the domestic tourism review and from an SMME study as well as from other studies.  

Mr J Vos (DA) noted that from what Members were saying it was important for tourism to get into the local economic development space at local government. Tourism did not even feature on the Integrated Development Plans of municipalities. There needed to be beneficiation in the entire value chain of tourism. Taxi drivers could even be trained at tour guides. Local economic development and tourism had to go hand in hand.

Ms Mosupye agreed that local economic development needed to tie in with tourism.

The Chairperson asked what impact the Programme would have on the oceans economy. Were marine parks taken into consideration? She asked regarding the 100 or 101 rural enterprises that had been assisted in the TEP arrangement, what types of businesses were they. Had research been done to determine what the best ways were to do things? Was feedback from communities taken into consideration?

Ms Ramphele responded that in April 2016 and May 2016 the NDT had met with the Department of Environmental Affairs and stakeholders to come up with projects along SA’s coastline. There was a Blue Flags beach programme, in which a total of 200 young people were participating.
On the 101 rural enterprises supported through the TEP, this was NDT’s part of the arrangement. The TEP had covered urban enterprises. A report on the types of businesses that were supported would be forwarded to the Committee.

The Chairperson urged the NDT to visit a project at Mamelodi to see first-hand what was happening. People should be encouraged to visit the Pilanesberg.

The meeting was adjourned.