SA Tourism briefed the Committee on its Annual Report for 2016/17. SA Tourism had received its sixteenth unqualified audit report for this reporting period. On the performance of SA Tourism for 2016/17 it only managed to achieve six of its fourteen key performance indicators. On the number of international tourist arrivals achieved the planned target was 9 077 995. In terms of financial year reporting period actual performance sat at 9 945 373. The target had been surpassed by 9.6%. On the number of domestic holiday trips achieved the planned target for 2016/17 was 3 059 764. Actual performance for the financial year was 2 950 000. There was underperformance by 3.6%. On the number of graded establishments the planned target was 5 650 the actual achievement was 5 354, an underperformance of 17%. A new key performance indicator for SA Tourism was staff satisfaction score. The planned target was 3.7 the actual performance achieved was 2.9. There was 21.6% underachievement. The briefing continued on the financial performance of SA Tourism. The two main sources of income for SA Tourism were R1.024bn from the NDT and R137.6m from the Tourism Business Council of SA. 74% of SA Tourism’s total expenses were attributed to marketing efforts which came to R914.4m. Employee costs only made up 15% of total expenses. The Committee was informed that from 2017 onwards reporting would be done as per Programme as was required by the Public Finance Management Act (PFMA). Members were informed that SA Tourism was a performance based organisation. It was removing wastage where it could. A new operating model was being implemented. Tangible things were being looked at all the time.
The Committee was disappointed that the Annual Report documentation that had been received from SA Tourism had contained errors. Members were concerned about SA Tourism only meeting six of its fourteen targets as this also impacted upon its financial performance. SA Tourism was asked whether there were any under-spent funds. Perhaps SA Tourism needed to do better benchmarking on its targets. What did the under-performance mean to SA Tourism as an organisation? SA Tourism was asked about its efforts on job creation given that the briefing had been silent about it. Members also asked why there was no progress on domestic tourism. Members were concerned that domestic tourism figures were not up to par. How did SA Tourism intend to convince the middle class South African to travel more locally? SA Tourism was asked whether it was working with tour operators to package cheaper deals. Members asked what SA Tourism’s return on investment on domestic tourism efforts was. Were funds being spent when it alternatively could have been better utilised elsewhere. It was after all taxpayers’ funds that were being spent. Perhaps a change in strategy was needed as no return on investment was being seen. The reality was that the majority of South Africans did not have the disposable levels of income to undertake domestic trips. Members were however surprised that figures showed that even though the number of domestic trips had decreased, total direct domestic spend had increased. What the figures were saying was that even though less people were taking trips more money was being spent. The Committee appreciated the growing numbers of international tourists coming to SA but asked besides the weak rand what other efforts SA Tourism had to attract tourists. Members observed that perhaps the increase in tourist arrivals from 2015 to 2016 was anomalous given that it was based on a low base. The increase in figures perhaps merely reflected that there had been a catch up process from the negative effects that the visa regulations and Ebola virus issues had had in 2015. Over the two year period in question the growth rate was still below international average. SA was not doing as well as it should be doing. Members appreciated the efforts of SA Tourism in areas like the Nordic Region but would like to see a clear way in which the impact of the efforts could be measured. What was the return on investment on the 74% of budget that SA Tourism was spending on marketing? Members were concerned that the 74% marketing spend was huge but yet the status quo in the industry remained. There were no new entrants into the industry. The same people in the tourism industry were benefitting. Members felt that big players in the industry was leveraging off the 74% of budget that SA Tourism was spending. Perhaps it was time to relook at the mandate of SA Tourism. The mandate as it stood would not allow the tourism industry to be transformed. Given that SA found itself in a digital environment members suggested that SA Tourism develop its own mobile phone application that could provide information on specials, grading’s basket of benefits etc. There was a need to digitalise the tourism space. SA Tourism was asked to provide the Committee with specific data on grading. The Committee needed information on new entrants, existing members as well as on numbers of those that have reapplied to stay under the fold of grading. The Chairperson addressing Minister Xasa asked that the lack of road signage at the Nelson Mandela capture site near Howick in Kwa-Zulu Natal be brought to the attention of the Inter Ministerial Committee. Members were concerned about plans by South African Airways (SAA) to cut out certain domestic and international routes. What strategies were in place to deal with the matter? The concern was that if it did materialise then it would be a huge inconvenience to travellers.
Opening remarks by Minister of Tourism
Minister Tokozile Xasa said that the National Department of Tourism (NDT) had heeded the call of the Committee to do monitoring and evaluation over the work of SA Tourism. This function was placed under the Deputy Director General of International Relations within the NDT. There was a dedicated unit which oversaw the work of SA Tourism. Whilst efforts had been made to reach targets, challenges that had arisen also needed to be addressed. On a whole there was an increase in numbers of international tourists and South Africans were still taking local trips. However the economic context in SA did have an impact on the numbers. The NDT together with SA Tourism pushed for numbers to increase in both international tourists and domestic tourism. The challenge was that on reporting there were two sets of statistics that had to be worked with. The issue was however being addressed by SA Tourism. SA Tourism did operate under the mandate of the NDT. SA Tourism needed to show the NDT how it contributed towards creating jobs.
Briefing by SA Tourism on its Annual Report 2016/17
The delegation from SA Tourism comprised of amongst others Mr Sisa Ntshona Chief Executive Officer (CEO) and Mr Tom Bouwer Chief Financial Officer (CFO). Mr Thebe Ikalafeng Deputy Chairperson of the SA Tourism Board and fellow board member Mr Colin Bell were also in attendance.
Mr Sisa Ntshona, Chief Executive Officer (CEO), SA Tourism, said that the entity had received its sixteenth unqualified audit report in 2016/17. SA Tourism’s performance was reported in terms of calendar year ie January to December as was done by the United Nations World Tourism Organisation (UNWTO) instead of financial year ie April to March as was required by the Public Finance Management Act (PFMA). The matter was being addressed and for Quarter 1 of 2017/18 reporting would be done on both calendar and financial years. For 2016 SA witnessed a 12.8% increase in international tourists from 8.9m in 2015 to 10m in 2016. Revenue from international tourism grew by 10.8% from R68.2bn in 2015 to R75.5bn in 2016. On domestic tourism, revenue increased by 12% to R26.5bn in 2016 from R23.6bn in 2015. Domestic tourists in 2016 spent more per trip and more per day than in previous years. Notwithstanding a 12.3% increase in domestic spend in 2016 the total number of trips had declined by 0.7%. On the performance of SA Tourism for 2016/17 it only managed to achieve six of its fourteen key performance indicators. On the number of international tourist arrivals achieved the planned target was 9 077 995. In terms of financial year reporting period actual performance sat at 9 945 373. The target had been surpassed by 9.6%. On the number of domestic holiday trips achieved the planned target for 2016/17 was 3 059 764. Actual performance for the financial year was 2 950 000. There was underperformance by 3.6%. On the number of graded establishments the planned target was 5 650 the actual achievement was 5 354, an underperformance of 17%. A new key performance indicator for SA Tourism was staff satisfaction score. The planned target was 3.7 the actual performance achieved was 2.9. There was 21.6% underachievement.
Mr Tom Bouwer, Chief Financial Officer (CFO), SA Tourism, explained that the two main sources of income for SA Tourism were R1.024bn from the NDT and R137.6m from the Tourism Business Council of SA. 74% of SA Tourism’s total expenses were attributed to marketing efforts which came to R914.4m. Employee costs only made up 15% of total expenses. The Committee was informed that from 2017 onwards reporting would be done as per Programme as was required by the PFMA.
Mr Ntshona stated that SA Tourism was a performance based organisation. It was removing wastage where it could. A new operating model was being implemented. Tangible things were being looked at all the time.
Mr Thebe Ikalafeng, Deputy Chairperson, SA Tourism Board, pointed out that 2016/17 was a big year for SA Tourism. SA Tourism had a new Chief Executive Officer and came up with the Five in Five Strategy. SA Tourism had also launched Project Ignite which spoke to the restructuring of the organisation. He conceded that there were discrepancies on the performance of SA Tourism compared to where it actually was. SA Tourism had a new direction, a new strategy and new leadership. SA Tourism had also just four months earlier launched the “We Do Tourism” Campaign. Grading and hosting of events was also on the agenda. He noted that Minister Xasa had pushed for transformation in the industry. Rural areas, hidden gems and the broader African continent was a focus. SA Tourism took governance seriously and ensured that there was compliance. On job creation tourism’s contribution for 2016 was 1.5m jobs. It also contributed 9.3% to SA’s Gross Domestic Product (GDP). An integrated approach was needed with stakeholders. He apologised for the errors contained in the Annual Report submitted to the Committee.
The Chairperson stated that the SA Tourism documentation that members had received contained some errors. The Annual Report spoke about huge sums of money being spent but nothing was said about job creation. What did SA Tourism mean when it said that tourism was a job driver? She asked SA Tourism to explain what the irregular expenditure was about. Why was there no progress on domestic tourism? Perhaps the Committee would see an improvement in domestic tourism in SA Tourism’s next annual report. It would seem that SA was seeing a growing number of tourists. Besides the cheap rand that was attracting tourists what other efforts did SA Tourism have to attract tourists? She suggested that innovation was needed to enhance SA as a destination.
Mr Ntshona noted that SA Tourism’s performance could be attributed to the weak rand. However what if the rand strengthened? What then? SA Tourism did not market SA as cheap destination but rather a value for money destination. He conceded that SA’s weaker rand did give SA Tourism momentum. SA was a long haul destination and not an overnight trip destination. The lead time for planned trips to SA was usually six months. Conventions hosted also took years to plan. Perhaps if the rand strengthened then domestic tourism might increase.
Minister Xasa pointed out that SA Tourism had been requested to create jobs on hidden gems and that Small Medium and Micro Enterprises (SMMEs) had to participate in procurement processes.
Mr Bouwer explained that the irregular expenditure related firstly to a decision to change office premises where the rental was cheaper and secondly on supply chain issues ie tenders.
Mr G Krumbock (DA) on slide 13 observed that for 2016 the number of foreign tourist arrivals was 10m. It was a 12.8% increase from 2015. He assumed that the contents of slide 34 corresponded to what was in slide 13. He pointed out that the 12.8% increase was anomalous given that it was based on a low base. The increase in numbers merely reflected that there had been a catch up process from the negative effects that the visa regulation issue and the Ebola virus issue had had in 2015. Over the two year period the growth rate was still below international average. SA was not doing as well as what it should be doing. On slide 15 which spoke to domestic tourism performance for 2016 he commented that domestic tourism was a real challenge. South Africans did not have disposable levels of income for domestic trips. Even though the number of domestic tourist trips had decreased by 0.8% when compared to 2015, total direct domestic spend had increased by 12.3%. What it was saying was that even though there were less people more was being spent. Was the disposable income of people increasing? Were people earning more? He referred to slide 41 which spoke about in-country marketing highlights in Europe. He noted that the Committee had appreciated the econometric study that SA Tourism had undertaken. He was aware of the pilot project that SA Tourism had undertaken in the Nordic region with a budget of around R197m. He wished to see a clear way in which the impact of the efforts in the region could be measured. On the financials of SA Tourism he was glad that 74% of its budget was used for marketing and that only 15% of the budget was for salaries. He asked whether SA Tourism had done a study on the 74% expenditure and its return on investment. For instance spending R50m on marketing in one country as opposed to another country and determining which spend yielded better returns on investment for tourism.
Mr Ntshona, on international tourist arrivals from 2015/16, said that there was 13% year on year growth. It might not be spectacular figures but SA Tourism celebrated the small victories. International arrival figures totalled 1.2bn. SA Tourism’s Five in Five Strategy would outline growth. 8.9% year on year growth was needed. He explained that the high end luxury market in SA was doing well but the bottom end was not doing well. The intention was to activate the bottom end market. Technically speaking SA was out of a recession which rebounded with 2.5% growth for the second quarter of the year. This growth could mainly be attributed to the agricultural sector. SA Tourism prior to embarking on its pilot in the Nordic region did have some activity in the area. He said that the cost of acquisition of a tourist from a particular country had to be looked at. The cost varied from country to country. Cost of acquisition gave SA Tourism a sense of how effective its spend was. Another factor to consider was portfolio management.Tourism was a volume and volume trade.
Ms L Makhubele-Mashele (ANC), on domestic tourism, said that there was a persistent issue of the market being rigid as South Africans were simply not travelling. She asked what the return on investment on efforts in domestic tourism in SA was. Funds had even been ring-fenced for domestic tourism. Was money being spent where it alternatively could have been better utilised elsewhere. It was after all tax payers’ funds that were being spent. Perhaps a change in strategy was needed as no return on investment was being seen. She pointed out that marketing spend being 74% of SA Tourism’s budget was huge. She felt that a huge amount of funds was being spent but yet the status quo in the industry remained. There seemed to be no new entrants. The same people in the tourism industry were benefitting. How was the 74% spent on assisting new entrants struggling to come into the industry? She noted that perhaps it was time to relook at the mandate of SA Tourism. The current mandate currently would not allow the tourism industry to be transformed. She said that the “We Do Tourism” Campaign had a positive image that could be seen. She commended SA Tourism on its efforts. She did point out that SA found itself in a digital environment and suggested that SA Tourism have its own application that could be used on android mobile phones. South Africans liked to have things at hand and did not perhaps wish to make the effort of going onto the internet to see what was on offer. The mobile application could provide information on specials, grading’s basket of benefits etc. There was a need to digitalise the space. She appreciated the fact that there was closer cooperation between the industry and SA Tourism.
Mr Ntshona conceded that Ms Makhubele-Mashele was correct that more money should not be spent if the same result was achieved over and over again. Previous efforts by SA Tourism on domestic tourism were to have a desk with three staff members handling it. The approach now was to have a team on it which reported directly to the Chief Operating Officer (COO). Even joint marketing agreements that had been in place had remained unchanged for the last ten years. The issue was about whether the right agreements were in place. The return on investment impact was important. From a marketing perspective SA Tourism needed to do more conversion. Deals were advertised but the problem was that there was no book button. The domestic tourism legotla would speak to issues of events, packages and hidden gems.SA Tourism was working on a mobile application. The problem SA Tourism was facing was that every province or town was coming up with their own mobile applications. There was a need to create a SA Inc. application. SA Tourism together with the National Department of Tourism was working on Project Amadeus. The idea was for when a tourist landed in SA the individual could download the application. The Department of Trade and Industry (DTI) was also involved on Project Amadeus. SA Tourism as an organisation was evolving. It was moving away from doing things safely. Fresh and new thinking was needed. SA Tourism was a marketing agency. It only had two senior persons but it was in the process of building its capacity.
Mr Ikalafeng understood the concern about the lack of transformation in the tourism industry. It was about the need to bring on board youth, women and culture. It was also about where the money on marketing was being spent. New players had to be brought into the market place. It was the correct thing to do. The Marketing Investment Framework guided SA Tourism in its marketing efforts.
Ms S Xego (ANC) said that the mistakes in the SA Tourism documentation should have been picked up and corrected before it was sent to the Committee. She was concerned that SA Tourism had only met six of its fourteen targets. There was thus underperformance on the part of SA Tourism. She felt that it impacted upon the financial performance of SA Tourism as well. Was there any under-spent funds? SA Tourism after all set its own targets. SA Tourism might have convinced the Committee that things were on track but by not even meeting 50% of its targets it was not convincing others. On the setting of targets she suggested that SA Tourism needed to do better benchmarking. Perhaps SA Tourism’s subsequent Annual Performance Plans (APPs) would give a better picture. She asked SA Tourism to provide the Committee with more specific data on grading. The Committee needed information on new entrants, existing members as well as numbers of those that had reapplied to stay under the fold of grading. What were the benefits of being graded? She pointed out that the briefing had not spoken to jobs created. The non performance by SA Tourism on not meeting its targets should have been foreseen by the Committee as quarterly targets would have alluded to it. What did the underperformance mean to SA Tourism as an organisation? She proposed that SA Tourism read a Committee Report which the Committee Content Adviser Dr Sibusiso Khuzwayo had drafted speaking to insights and observations that he had made. It could assist SA Tourism in identifying where it fell short.
Mr Ntshona responded that the misprints in the documentation were an irritation. SA Tourism was building capacity to plug holes where they occurred. SA Tourism felt that it was doing well but unfortunately the figures did not reflect it. The errors in the documents would be fixed and the corrected version would be placed on SA Tourism’s website for downloading. He agreed that greater movement in grading needed to be seen. On the issue of jobs he said that SA Tourism needed a methodology to monitor it. On the benefits of being graded he said that the basket of benefits that was available could end up paying for the grading fees. However the take up on the basket of benefits was not what it should be. The basket of benefits offered discounts on furniture, linen etc. Perhaps establishments should be allowed to sample the basket of benefits for a period before signing up to grading to see the benefits that they could reap if they were graded. SA Tourism needed to be more commercial in its thinking.
The Chairperson asked what SA Tourism was doing to convince the middle class South Africans to travel within the country. On domestic tourism she asked which market segments had been identified and how were these segments targeted. SA Tourism was asked what the actual jobs of officials dedicated to domestic tourism were. In addition what was SA Tourism officials involved in on the National Conventions Bureau? She asked what SA Tourism was doing with tour operators to package cheaper tours. She suggested that Minister Xasa perhaps could interact with the Minister of Transport.
Mr Ntshona noted that a great deal of thinking had gone into how to get the middle class of SA on board. The issue was about how to package deals on events. Conversions were needed and not only awareness. The “We Do Tourism” Campaign needed to translate into tangibles. All government departments needed to come on board in respect of this campaign. Heritage sites were being vandalised because no activities were taking place at them. On domestic tourism heritage sites and South African National Parks (SANParks) needed to be brought on board. Government owned establishments which fell under provinces had to come on board as well.
Mr Colin Bell, Board Member, SA Tourism, appreciated the comments and questions by members. He had for the past fourteen years been one of the biggest critics of SA Tourism. His skill set was all about marketing. He was brought into the SA Tourism Board to be part of the transformation effort. Over the past ten to fourteen years the industry’s respect for SA Tourism’s Board had gone down that was until recently when the new Board was constituted. The new Board was impressive. He however emphasised that the Committee needed to be aware that tourism marketing did not happen overnight. SA Tourism as an organisation had gone through a turnaround. The organisation used to be toxic. The SA Tourism team now was considered fantastic and the Five In Five Strategy was considered a good effort.
Mr Bell said an interesting statistic was that on average one in every seven South Africans depended upon tourism to put food on their plates. He however felt that tourism could even play a bigger part. SA Tourism however needed the Committee’s support on issues like the visa regulations which had not been properly resolved. The queues at OR Tambo International Airport were another problem which turned tourists away. In the United Kingdom potential tourists were told to rather use other airports than OR Tambo International Airport. This was not good news for SA. If visa restrictions were changed then tourist numbers could also increase. Another area of concern was that accurate tourism statistics was needed. SA Tourism relied upon statistics from Statistics SA. Statistics SA based its statistics on information taken on arrival. In his opinion, the statistics were warped. For instance when 100 people from Lesotho crossed the border a 100 times a year to trade etc this was captured as SA having had 10 000 tourists from Lesotho per annum. The statistics showed that from the United Kingdom SA had 400 000 tourists per annum. SA Tourism did not know whether these 400 000 tourists came from the United Kingdom, Singapore or Dubai. Accurate data was needed. The Committee’s support was needed to convince Statistics SA to collect data on departure as tourists were more honest when they were leaving a country than when they arrived in a country. This was so for various reasons. He informed the Committee that he had for the past fifteen years been working on a land claim in the Eastern Cape which affected 40 000 people. He appreciated the efforts by the Minister and Deputy Minister of Tourism to unlock the matter.
Mr Krumbock felt that Mr Bell needed to address the Committee more often. In the three minutes that Mr Bell had spoken he had learnt more than in five years he was on the Committee. He asked for clarity on the comment about the 100 Lesotho nationals crossing the border 100 times being seen as 10 000 tourists.
Mr Bell reiterated that when 100 people from Lesotho came over to SA to trade a 100 times a year it was captured as 10 000 tourists arriving in SA. Even when a tourist from the USA came through SA to get to Victoria Falls in Zimbabwe, he was counted twice as a tourist. Once when he entered SA on route to Zimbabwe and once when he re-entered SA on route home. He felt that much more information needed to be captured. Where did people stay? How much did they spend?
Mr Ikalafeng stated that statistics was captured in the manner Mr Bell spoke about because the United Nations World Tourism Organisation (UNWTO) did it in that manner. The issue was about how to localise thinking from an African perspective. It was an opportunity for SA Tourism to work harder. He commented that the present discussion even displayed the robustness that SA Tourism Board members challenged each other.
The Chairperson, addressing Minister Xasa, asked that the lack of signage at the Nelson Mandela capture site near Howick in Kwa-Zulu Natal be brought to the Inter-Ministerial Committee’s attention.
Ms Makhubele-Mashele pointed out that South African Airways (SAA) intended to cut out certain domestic and international routes. What strategies did Minister Xasa and SA Tourism have to deal with the matter? If it were to happen it could be a huge inconvenience to travellers.
Minister Xasa commended SA Tourism and its Board on the work that they were doing. As part of radical economic transformation the idea was to achieve inclusive growth. Small Medium and Micro Enterprises (SMMEs) in the industry needed to be prioritised. There were new strategies in place that would make an impact. Partnerships and collaboration in the industry had also improved. She said that she had had a session with the Minister of Transport but that further sessions were needed. The SAA matter was being discussed at the highest level. There were many issues to deal with. A meeting with the Minister of Transport over the issue would take place. The matter of signage was also being discussed and the Committee would be given feedback on it in due course.
The Chairperson asked if the students who had graduated from courses that were offered were absorbed into the industry.
Deputy Minister Elizabeth Thabethe said in total there had been 1500 graduations. 60% of the graduates had been absorbed into the tourism industry. The courses on offer were 70% practical and 30% theory. The courses were considered money well spent. Some students had even been absorbed abroad. One student had worked in the USA for a year and was able to purchase her mother a house in SA.
The meeting was adjourned.
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