South African Tourism Quarter 2 & 3 performance

Meeting report

Minister of Tourism Mr Derek Hanekom and Deputy Minister of Tourism Ms Elizabeth Thabethe extended apologies for not being able to attend the meeting. Mr Sisa Ntshona Chief Executive Officer (CEO) of SA Tourism was abroad and also extended his apologies.

Opening remarks by Chairperson of the SA Tourism Board
Dr Tanya Abrahamse explained that on domestic tourism the Board had observed that family trips were growing but that general trips was not. The Board was thankful for the additional funding that National Treasury had allocated towards domestic tourism. Domestic tourism was the backbone of any tourism economy. SA Tourism needed to do an audit of levers that it used to bring about transformation. Transformation should be present when it came to branding and procurement. Targets needed to be set to provide direction. Tourists came to SA to enjoy the South African experience. SA was unique in many ways. On a business events strategy SA Tourism had consulted with provincial tourism departments. The idea was to have a National Events Strategy which provinces and local government had to be part of. There was no doubt that the water crisis in SA had an impact on the South African brand. There was also the intention in 2018 to develop a case for tourism on how other government departments impacted upon tourism. Some of the Departments were Home Affairs, Police and Transport. Tourism had a major role to play. It was a lever for growth and a job provider. Another challenge was to address the issue of getting correct statistical information. One source of statistics was Statistics SA.

Briefing by SA Tourism on its 2ND AND 3RD Quarter Performance Reports for 2017/18
The delegation comprised of Ms Sthembiso Dlamini, Acting Chief Executive Officer (CEO), Mr Tom Bouwer, Chief Financial Officer (CEO) and Ms Bashni Muthaya Chief Strategy Officer (CSO). The National Department of Tourism (NDT) was represented by amongst others Ms Nomzamo Bhengu, Chief Director: Strategy and Systems and Ms Petra van Niekerk, Parliamentary Liaison Officer.

The briefing was kicked off by Ms Muthaya who spoke to SA Tourism’s organisational performance with the financials being presented by Mr Bouwer. Ms Muthaya in the interests of time said that she would mainly highlight Key Performance Indicators (KPIs) that SA Tourism had not achieved.

Programme 3: Leisure Tourism Marketing
On the number of total domestic trips achieved for Quarter 3 the target was set at 4.5m. Actual performance sat at 2.7m. There was a 39% decline in total domestic trips which was driven by a 48% decrease in Visiting Family and Friends (VFR) trips. Affordability was the biggest barrier to travel.
On the number of domestic holiday trips achieved the target for Quarter 3 was 525 391. Actual performance only sat at 405 000. Affordability and the economic conditions in SA were reasons given why targets were not met.

On total domestic direct spend the Quarter 3 target was set at R4.5bn. Actual performance only sat at R2.9bn. The reason for the shortfall was that there was a decrease in the volume of total domestic trips. The good news was however that there was an increase in the average spend per trip.
On domestic holiday revenue the target for Quarter 3 was set at R2.1bn. Only 0.7bn was achieved. Poor economic conditions were to blame for the low figure. Whilst there was an increase in domestic holiday trips, there was a decrease in the average spend and length of stay per trip.

Programme 4: Business Events
On the number of bids supported for international and regional business events the Quarter 3 target was to have 14. The number actually achieved was only 9. However overall the South African National Convention Bureau (SANCB) had already met its target set for the financial year.

Programme 5: Tourist Experience
On the number of graded accommodation establishments the target for Quarter 3 was set at 1 517 however actual performance only sat at 1 218. Some of the reasons for the shortfall were changing environments, small businesses closing down and businesses registering on AirBnB.

Mr Bouwer continued with detail on SA Tourism’s financial performance. For Quarter 2 actual revenue sat at R965, 892m whilst expenditure sat at R764, 964m. For Quarter 3 actual revenue sat at R1, 170,383bn whilst expenditure sat at R1, 070,992bn. The Committee was assured that SA Tourism’s finances were on track and by year end all funds would be spent.

SA Tourism’s vacancy rate sat at 15% with only 85% of posts being filled.

Discussion
Mr G Krumbock (DA) referred to the figures on slide 20 which spoke about the decline in domestic holiday trips and to figures on slide 23 which spoke to the decline in domestic holiday revenue. Actual performance for domestic holiday revenue was only one third of the target that had been set. He asked why when domestic holiday trips had declined by 39% why was there such a huge decline in domestic holiday revenue by 69%. SA Tourism had explained that even though the number of domestic holiday trips had declined the average spend per trip had increased. He noted that what the figures were saying was that inequality in SA was increasing. The wealthy was spending more whilst the poor could not afford to take trips. He added that a marginal decrease in tourism growth in SA had caused a huge decline in domestic tourism figures. Efforts needed to be made to get domestic growth rates up a bit. SA Tourism was asked whether it expected domestic tourism figures to pick up if the growth rate was to pick up as was expected. He pointed out that SA Tourism had undertaken an econometric study into what the optimum spend for SA Tourism to market SA abroad would be. SA Tourism had undertaken pilot projects and members had been informed that one had commenced in the Nordic region. Why had the Committee not been kept abreast of its progress or of its outcome if completed?
Ms Muthaya stated that the strategy on domestic tourism was being reviewed. A great deal of work had already been done for a long time. The initial analysis that had shown an increase in domestic holiday travel was now changing. Statistics SA pointed out that in the last quarter of 2017 Gross Domestic Product (GDP) had improved. SA Tourism was yet to see the impact of this improvement. One had to consider the choices consumers had on spending their money. Travel was high on the agenda of the French. It was part of their culture. Research done had shown that South Africans wished to know where to go to and what was on offer. The issue of affordability also came into play. It was about having the choice to do things when you wished to do them. Yes there was an increase in holiday travel figures but she felt that the figures could be better. It was a huge challenge to measure these types of things. SA Tourism had a working relationship with Statistics SA for almost ten years. How could one improve on the measurement of domestic tourism?

Ms Dlamini on the Nordic pilot study conceded that SA Tourism did not have the figures at hand. Preliminary results for 2017 would be forwarded to the Committee.

The Acting Chairperson noted that the econometric study should give an indication of how much funding SA Tourism optimally needed to market SA.

Ms Dlamini said that SA Tourism had received additional funding from National Treasury to do the pilot studies. The Nordic pilot had been done. There were figures for December 2017.
The Acting Chairperson also asked that the Committee be provided with information on how the 5 in 5 Strategy was doing.

Ms S Xego (ANC) observed that some Board members of SA Tourism did not receive remuneration. She asked for an explanation. Were the Board members in question inactive or were they covering their own costs? SA Tourism was asked whether it had legal fees and consultant expenses. She asked how well the 5 in 5 Strategy was doing. How would the 2018 Tourism Indaba differ from the one held in 2017. She observed that there were areas that were not due for reporting yet. SA Tourism was asked to give an example of one such area? She stated that it did not make sense to her that Visiting Friends & Family (VFR) trips had decreased more so than holiday trips. She saw huge potential in AirBnB. She was not pleased with SA Tourism’s figures on domestic tourism.

Ms Abrahamse explained that perhaps those Board members who also were not being paid a fee for serving on SA Tourism’s Board were also public servants.

Ms Muthaya stated that 70% of the domestic travel market comprised of VFR. Only 10% - 15% was for holidays. The issue was about how to build on what there was. She explained that having the goals of the 5 in 5 Strategy in place provided SA Tourism with better focus. The pillars of the Strategy made things more effective for SA Tourism. The Strategy had only been running for one year. She conceded that targets had not been met but that growth was seen. The strength of one’s brand was important. It was a core pillar of the 5 in 5 Strategy. The Strategy was also about partnerships in the tourism sector. SA Tourism understood the need for exponential growth in order to achieve. On KPI’s not yet due for reporting she explained that Annual Reports spoke to quarterly and annual targets. Staff satisfaction for instance was not measured quarterly but rather on an annual basis.

Mr Bouwer confirmed that SA Tourism had legal costs to the amount of R1.4bn. There were two cases one was abroad and one was local.

Ms E Masehela (ANC) was pleased that there would not be under spending by SA Tourism. What seemed to be the bottlenecks on domestic tourism in SA? SA Tourism was asked what other countries were doing on domestic tourism that was working for them. She asked how the recent listeriosis outbreak and the water crisis in SA had affected tourist numbers into SA. What progress was being made on grading? SA Tourism was asked where the process on the filling of its vacancies was.

Mr J Vos (DA) asked what SA Tourism’s future plans for the Tourism Indaba were. What happened to the service provider that was to be appointed? He had recently attended a meeting in the Cape Winelands District which discussed destination marketing with the use of a mobile application. SA Tourism was asked what support it provided to district municipalities. District municipalities struggled with destination marketing. The Western Cape Investment and Trade Promotion Agency (WESGRO) however did support district municipalities. What was SA Tourism doing about supporting and capacitating districts in SA, especially with the use of mobile applications? He asked what the linkage was between districts and SA Tourism was. The Western Cape Province had remarkable success on its air access strategy. He was pleased that SA Tourism had been involved. Revenue had increased by R4.8bn due to the air access strategy. What were SA Tourism’s efforts on air access in places like Kimberly, Port Elizabeth and Durban for instance? He felt that township tourism needed to be explored more. He also felt that both SA Tourism and the National Department of Tourism (NDT) needed to work on a township tourism strategy. He had for many years had concerns about the affordability of domestic tourism in SA. With the recent increase in Value Added Tax (VAT) things would be worse. A good attempt was made by Cape Town Tourism with its “50 things to do under R50” offerings. Why did SA Tourism not have a similar initiative? AirBnB followed a shared economy approach. Cape Town alone had close to 20 000 registrations. Something more was needed on grading. People should be excited to get graded. He did point out that there were some businesses on AirBnB that were not up to standard. He believed that businesses on AirBnB needed to comply with municipal regulations. SA Tourism was asked what support it provided to businesses on AirBnB. He asked SA Tourism to provide the Committee with an update on the World Travel Market (WTM) which was to take place on 18 April 2018. He understood that SA Tourism would have a stall at the Market.

Ms Dlamini on township tourism explained that SA Tourism was working with provinces. There were Memorandums of Understanding (MOUs) in place. Provinces would coordinate the work of municipalities. Product development was an absolute must. SA Tourism had suggested the use of product databases. Work was being done with provincial tourism authorities. SA Tourism also brought the South African Local Government Association (SALGA) on board. For international tourists township tours were included in their itineraries. SA Tourism would consider coming up with a Township Tourism Strategy. She noted that the previous week a summit on air access had taken place. The success story of the Western Cape Province on air access could act as a blueprint for other provinces. The question to be asked was how improved air access could assist with domestic tourism. SA Tourism partnered with the Airports Company of SA (ACSA). The reintroduction of affordable midnight flights was being considered. Cost of tickets could be an impediment to travel. On AirBnB SA Tourism had brought homestays to the attention of the National Department of Tourism (NDT). SA Tourism had engaged the NDT on how to regularise issues of AirBnB. Homestays should be brought on board. Policy was needed. Perhaps AirBnB could assist with domestic tourism and the issue of affordability. Were there policy issues? She explained that SA Tourism had no partner to assist with the Tourism Indaba. There was however an exhibition management company appointed. The idea was to professionalise the Tourism Indaba.

Ms Abrahamse hoped the 2018 Tourism Indaba is a success.

Ms Dlamini added that SA Tourism hoped to see greater participation of African countries at the 2018 Tourism Indaba. The Indaba had to have a reach into townships as well. Part of the Indaba experience was for SA Tourism to host international media and international trade. Post-Indaba tours were held.

Ms P Adams (ANC) said that diseases and disasters impacted upon tourism the world over. What had been learnt from international best practice to deal with it? Was there a disaster management strategy?
Looking at the figures on the frequency of SA Tourism Board meetings she commented that they seemed to be crammed together. There were six meetings held in eighteen days. SA Tourism was asked how its 15% vacancy rate impacted upon its operations. She asked whether SA Tourism staff were aware of what disciplinary hearings entailed. She asked if 86% of SA Tourism’s budget was spent, was money spent on marketing well spent. Was value for money attained? Were SA Tourism’s marketing strategies in line with international best practises?

Ms Abrahamse explained that for a large part of 2017 she had been on sabbatical from SA Tourism. The reason for her being only paid travelling costs as a Board member was because she was a public servant. The same applied to fellow Board member Mr Enver Duminy Head of Cape Town Tourism. The SA Tourism Board consisted of many members and hence the costs would be high. To save costs the Board would have meetings over two days. On the first day there would be committee meetings and on the second day the Board itself would meet. In such a way travelling and accommodation costs were kept to a minimum. On SA Tourism’s 15% vacancy rate she conceded that not having filled posts did impact upon an organisation’s performance. Project Ignite was started to get proper capacity and the right skills. Some international senior posts however required ministerial concurrence. From SA Tourism’s Board’s side they did not worry too much about the vacancies. SA Tourism was doing a staff survey to gauge how staff felt about the organisational transformation that SA Tourism had undergone.

Ms Dlamini on how disasters could affect SA Tourism’s brand explained that SA Tourism partnered with trade on positive messaging. Perceptions on safety and security for instance in Northern Europe after Dutch tourists had been attacked did have an impact. Partnering with trade allowed tourists to be educated on what efforts were being made by SA to deal with safety and security. SA Tourism worked with the Department of International Relations and Cooperation (DIRCO) as well. Missions spread the message of positive safety and security. Often expats tend to spread the message of doom and gloom in SA. SA Tourism came up with the “Come home bru” Campaign which encouraged expats in Australia to come back to SA even if just for a visit whilst also to spread a more positive message on safety and security in SA. On disaster management SA Tourism communicated with the Department of Cooperative Governance and Traditional Affairs (DCOGTA) over the matter. Disaster management was discussed across the board. The water crisis was also discussed.

Mr S Bekwa (ANC) said that from the presentation it would seem as though SA Tourism was just ensuring that funds was being spent to keep National Treasury at bay. Even though funds were being spent he did not get a sense of how SA Tourism was fulfilling its mandate. What was SA Tourism doing to correct things that were not right? If domestic tourism was unaffordable how was SA Tourism trying to make it affordable? He asked what was being done for the public. SA Tourism was asked whether its efforts were in line with government policy on radical economic transformation.

Ms Dlamini on the issue of affordability said that during Quarter 2 and 3 SA Tourism had firstly tried to encourage a culture of travel into South Africans by way of its “We Do Tourism” Campaign. All South Africans needed to understand tourism. Secondly, SA Tourism partnered with trade. Trade had to realise that domestic tourism was a viable business. SA Tourism believed that new trade needed to be brought on board. The issue was that SA Tourism did not have a booking facility. Conversion needed to happen. The Sho’t Left Campaign of SA Tourism attempted to place affordable packages on offer. There were for example day trips for as little as R499. SA Tourism used social media as well. SA Tourism had moved beyond showing a pretty picture. A book button was however needed. It was a hard task to set Key Performance Indicators (KPIs) around these types of things. She felt that a comprehensive discussion on domestic tourism needed to take place. She said that in 2017 there were 95 hidden gems. SA Tourism partnered with the NDT. Attempts were made to diversify and drive transformation. In 2018 SA Tourism wished to use the Tourism Indaba to make trade understand that domestic tourism was viable. In total there were 45 Small Micro and Medium Enterprises (SMMEs) that were trained and prepared for the Indaba.

Ms Abrahamse noted the point made about the impact that SA Tourism made. SA Tourism also did not only wish to rely on statistics from Statistics SA and the Airports Company of SA (ACSA).

The Acting Chairperson on domestic tourism asked whether there was value for money attained from the funds being spent versus the outcomes that were achieved. Was it not time to consider other strategies since domestic tourism figures still looked bleak? At one point SA Tourism had even appointed a service provider to drive its domestic tourism strategy. Slide 34 spoke to virements/adjustments that had taken place from other programmes to compensation of employees. This gave the impression that SA Tourism was not planning too well. She was concerned that at times when funds were taken from one programme to supplement another it could amount to irregular expenditure.

Ms Abrahamse replied that from the comments of members on domestic tourism it would seem that perhaps it was time for SA Tourism to change its strategy. SA Tourism was re-looking at its domestic tourism efforts. On the matter of whether marketing efforts were getting value for money she issue was about whether the impact brought real change on the ground.

Mr Bouwer emphasised that SA Tourism had done comprehensive planning on employee costs.SA Tourism was allowed to reallocate funds. As posts were filled money was needed.

The Acting Chairperson was pleased that after each Indaba SA Tourism did an audit. SA Tourism’s governance model was working correctly.

The meeting was adjourned.