South African Tourism (SAT) Annual Performance Plan


25 April 2018
Chairperson: Ms L Makhubele-Mashele (ANC) (Acting)
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Meeting Summary

South African Tourism briefed the Committee on its Annual Performance Plan. While domestic holiday trips have increased by 12% the total number of domestic trips has decreased. The growth of international tourists is below the global growth rates. The reason for this is due to perceptions of safety and security, the introduction of Visa regulations and Airlift. South African Tourism is working with some of its partners on route development to increase the number of international tourists and work on the geographical spread of tourists in South Africa. South African Tourism noted a positive relationship between marketing campaigns and the number of tourists.

The targets set by South African Tourism are very robust. South African Tourism was targeting 11.2 million international tourists and R81.3 Billion being spent by those tourists. South Africa does not have a problem with seasonality but it does have a problem with the fact that most money being spent by tourists is being spent seasonally. South African Tourism is targeting 25.4 m domestic trips and 3.1 m domestic holiday trips. South African Tourism is targeting R 26.7 Billion being spent by domestic tourists. There has also been a focus on business events and delegates hosted in South Africa. The entity is targeting 153 business events and 86 0006 international delegates.

Government grants make up the largest share of income revenue for South African Tourism at 83%. The total estimated revenue for South African Tourism sits at R 1. 439 Billion for the 2017/2018 financial year. Plans are in place to reduce the large amount of money being spent on consultants. The money being spent on repairs and maintenance may seem like a large amount at R 82 m, but cost containment is in place and some of South African Tourism’s assets are in foreign currencies.

Members of the Committee asked what South African Tourism is doing to promote local and rural tourism. There were also concerns around the lack of plans for safety and security measures which have impacted negatively on international tourist numbers. Members of the Committee also expressed concern that South African Tourism did not provide anything on how it was making tourism more affordable.

A Member raised concern that the time left for South African Tourism to answer questions would not be enough and suggested that the entity submit their full, comprehensive questions to the Committee. The members agreed and the Chairperson allowed it.

Meeting report

Opening remarks
The Chairperson welcomed the delegation from South African Tourism, which included Dr Tanya Abrahamse, Chairperson of the Board, Mr Tom Bouwer, CFO, Ms Sthembiso Dlamini, COO and Acting CEO, Mr Wavela Mthobeli, Head of Analytics, Petra Van Niekerk, Representative from the Director-General and the PLO, and Mr Armstrong Manganye, Deputy Director for Entity Oversight for the Department of Tourism.

The Committee Secretary of the Committee said apologies had been received from the Minister, Mr Derek Hanekom, the Deputy Minister Ms Elizabeth Thabethe.

The Chairperson said an apology had also been received from the CEO of South African Tourism (SAT). She noted the Committee’s disappointment that the CEO did not attend the meeting and it was discomforting that it was the second time in a row. The programme of Parliament has been there and the CEO must have had hindsight of the meetings. He needs to structure his work around the programme that is there. She asked the Delegation to convey the Committee’s discomfort towards his absenteeism.

The Chairperson requested that the Department inform the Committee as to how they are mitigating the negative brand positioning that tourism in South Africa has been dealt with.

Dr Tanya Abrahamse noted an Apology from the CEO of South African Tourism, Mr Sisa Ntshona.


SA Tourism Annual Performance Plans

Part A: Strategic overview
Ms Sthembiso Dlamini, COO and Acting CEO, presented Part A of the Presentation.

Setting the Scene
The Annual Performance Plan (APP) had to be revised in line with changes that have occurred in Government. The entity they went through a robust business planning process and had taken heed of key issues in the State of the Nation Address (SONA).

The first strategic objective speaks to where SAT chose to invest and in which markets.
The second strategic objective speaks to how the entity positioned its destination, South Africa, as a leisure and business events brand.
The third strategic object speaks to who they choose as partners to achieve their objects.
Strategic objective four looks at how SAT can enhance visitor experience which is the most important thing.
The last two strategic objectives speak to SAT as an Agency.
Strategic object five positions SAT as a thought leader around destination marketing, analytics and insights, as well as business events.
Strategic objective six speaks to organisational effectiveness and how SAT drives efficiencies in the business to ensure the entity gets a return on investments.

Ms Dlamini said the next slide depicts how they have taken the 5 in 5 goal and shared it with their Provincial counterparts. SAT analytics informed the provinces of the key source markets for each province so that it could work on experience and product development. Due to tourism being a concurrent function processes had to be set in order to monitor the implementation of 5 in 5. One of those platforms is the CEOs forum for provincial tourism authorities which meet on a quarterly basis to monitor progress.

Although there has been a 12% increase in domestic holiday trips the total number of domestic trips has decreased. This is largely driven by Visual Flight Rules (VFR). The target of 10.9 m international tourists was a stretched target. SAT growth as a destination is below the Global growth.

On international tourist arrivals, the jump from 2015 to 2016 is due to the Ebola crises in 2015 when they closed the year, the introduction of new Visa regulations in 2015, and external economic challenges in regions where SAT had invested in.

On growth recorded from most regions, a lot of business sits in North America. SAT believes they could have had more tourists from Europe but the United Kingdom, one of their largest markets, did not grow due to Brexit and the loss of consumer confidence. The Board is pushing towards the Middle East due to it being a high value market. China has driven the decline from Asian tourists due to perceptions of safety and security. Visa processing has been an issue in some places and it has impacted negatively on the numbers.

SAT has been working on route development. Recently, Air Italia returned the route from Rome to Johannesburg which is important in developing the Southern Europe market. British Airways is also increasing flights to KwaZulu-Natal. Singapore Airlines wants to increase flights to South Africa and do a stop-over in Johannesburg which addresses the issue of geographical spread. The slide also shows that introducing Visa regulations drives the number of tourists down. SAT is aware that key markets in Asia are largely driven by perceptions of safety and security and have been working on this issue through improving public relations and the media.

The key issue on slide 12 is that while the total domestic trips decreased from 2016 to 2017, the domestic holiday trips increased in the same period.

SAT is looking into what drives average spending in domestic trips.

On market performance against marketing initiatives, the numbers for 2017 could not be calculated because the Sho’t Left campaign was relaunched towards the end of the year and they will only be able to see the impact in mid-year this year.

In order to understand consumer travel behaviour in domestic travel, SAT has been pulling campaign data to analyse the impact of targets and measurements. SAT is looking at getting multiple aggregators that are going to help conversion rates.

Growth in the number of business events and of international delegates is explained by the increase in the number of bids they can put through.

On international tourist arrivals, one of the things that the Committee asked SAT is to look at issues of grading homestays. SATA was presented the Draft Tourism Amendment Bill which in there speaks to issues around the shared economy. They will look at how they can take homestays into the graded space.

Ms Dlamini said the numbers on slide 19, Graded establishments by type of accommodation across the provinces as at 31 March 2018, and slide 20, graded rooms by type of accommodation across the provinces, have not yet been audited. The number of graded establishments remains important for bids.

SAT tracks progress on transformation and report to the Board on a quarterly basis.

Ms Abrahamse said the CO? went on a very successful media and water roadshow talking to some tour operators about the water crises and what they are doing about it, as the water crises was impacting on tourism numbers. The measures taken to become sustainable excite travellers. In the 11 months when the Minister was not in office an area which was not focused on enough was around information and metrics. That has been revived now. SAT now have meetings with Provincial Chairs of Tourism once a year. After grappling with the transformation agenda, the Board has decided that they want reports that are in their control such as staff development, procurement and visuals. There are other areas of transformation such as the sector training area which has not been in a good state for a number of years. This however is not in the capacity of SAT to do. Another area is banking and finance and access to credit and how banks see tourism as a risk and giving credit to new players which is not in SAT’s capacity to do.

Part B: Programme and Sub-Programme Plans

Annual and Quarterly Targets 2018/19
Mr Wavela Mthobeli presented Part B of the Presentation to the Committee. Before Mr Mthobeli presented to the Committee ?? (See Document)

Programme 1: Corporate Support
The staff satisfaction score is from one to five and the target for 2018/2019 is 3.4. The target for the percentage vacancy rate is below 7%.

Programme 2: Business Enablement
The target for the stakeholder satisfaction score is 4.1.
Mr Mthobeli said they would have liked to track the score on a quarterly basis but given the manner in which the information is collected turns out to be more of an annual measure.

Programme 3: Leisure Tourism Marketing
These targets set are coming out of a very robust econometric model that has been developed by Oxford Economics. They are presenting both the financial year number and the calendar year number.
The target for international tourist arrivals is aimed at a growth of 7% from last year. SAT IS targeting a 7.4% increase in the expenditure from international tourists from last year. The geographical spread indicates the percentage of tourists who visit more than one province. For clarity on the seasonality index, the closer the percentage is to zero the less seasonal it is. The problem that they face is that while tourists visit throughout the year consumption of tourist products like hotels happens during certain periods of the year. there is a trend that domestic tourists tend to travel during the same time as international tourists. This is a problem because pricing of tourist accommodation tends to be much higher and establishments will favour international touristS because they tend to spend more than domestic tourists.


Programme 4: Business Events
The number of delegates hosted in South Africa is targeted to increase by 6.2% to 86 006. There has also been a focus on increasing revenue from Indaba and Meetings Africa to R 67 M.

Programme 5: Tourist Experience
Mr Mthobeli said that the targets on slide 30, tourist experience, are very aggressive targets and they are very stretched.

Mr Tom Bouwer presented on the finances. Referring to the 83% of SATs income that comes from Government, the efficiency cuts from Parliament also resulted in SAT having efficiency cuts of R 8.4 m over the next three years. Also, there was the shifting of domestic funding for domestic tourism facilitation of R 16.7 m back to the Department. On the TOMSA levies, included in that is the 15% which is for the collaborative fund between business and SAT.

Revenue estimates
Mr Bouwer said the average increase over the years is about 5.3%. There is a general increase in the TOMSA levies of 5% every year. Most of this money is coming from the hotel environment. R 21 m of the Money coming from TOMSA is for the collaborative fund.

Breakdown of budget per programme
The budget for corporate support is R 1.39 B, Business enablement is R 81. 29 m, Leisure Tourism marketing is R 1. 26 b, Business Events is at R 1. 29 m, and Visitor experience is at R 65.8 m for the 2017/2018 financial year.

Expenditure by Economic Classification
The biggest expenditure in the consultants’ section is IT consultants. SAT is reducing that amount with the Ignite Programme by employing people. The lease payments refer to their buildings across the world. Although the R 82 million seems a large amount of money for repairs and maintenance, since cost containment was implements in 2013 they have tried to extend the life cycles of all of their assets. Some of these assets are also in Rand value so it will look like large amount in their equivalent Rand value.

Slide 36 shows the currencies used for SAT budgets. National Treasury(NT) only gives the Dollar values. NT advised SATG to go to different banks to get estimated currencies and the numbers presented is the average they have received from various banks.

Mr G Krumbock (DA) referred to slide 9. He asked how the growth from 2014 to 2017 compared to world economic growth, and if we are not matching up to world tourism international arrival growth what would be the reason for that.
On the issue of safety and security when can we expect concrete recommendations from assigned task teams and committees?
Was there any quantifiable evidence as to the effect Visa regulations have had on tourist arrivals? Has there been a study done on Visa regulations?
The evidence on domestic spending and the number of domestic tourist arrivals would suggest that the tourism market is becoming a playground for the rich, why is this the case?
Slide 15 does not actually say what the strategic plans are to improve domestic tourism, why has it taken so long to identify what needs to be done?
He was disappointed that there are still grading fees for establishments. Grading should be compulsory to protect the SAT brand but people should not have to pay for it.

Mr S Bekwa (ANC) thanked the delegation for the presentation. However, he noted his disappointment at the absence of the CEO. On the issue of transformation SAT did not include pro-poor elements in the domestic tourism markets. Why is SAT paying so much to consultants and to whom?

Ms V Bam-Mugwanya (ANC) voiced her concern for the lack of focus from SAT on rural tourism. She asked if the statistics on hotels includes B&Bs as well.

Ms P Adams (ANC) said she was surprised at how small the delegation was. As an outgoing board the Chairperson of the SAT Board could have used the presentation as a baseline for the next Board members of SAT and the future Committee.
She asked what the 1% VAT increase would mean for SAT’s economic viability. From who is SAT doing the leasing? Why are the repair and maintenance costs so high? Is SAT satisfied with the way the 5 in 5 programme is driven in Provinces?
She asked for clarity on slide 8 around domestic holiday trips and the seasonality of it. Was it correct that SAT has have two parallel programmes in “Nothings More Fun than a Sho’t Left…” and “A Million New Experiences are a Sho’t Left Away”? Is the target of 3.4 for staff satisfaction perhaps too high?

Mr J Vos (DA) asked what the relationship is between SAT and tourism authorities in cities. People do not visit provinces they visit destinations and therefore it would make more sense if SAT works with cities instead of going through provincial counterparts.
Visa regulations needs to be worked on in order to increase international tourism numbers.
On slide 11 under safety and security, what does “workstream” mean? What are we doing to convert domestic business travellers into leisure travellers? What is SAT doing to make domestic tourism more affordable? What is SAT doing to convert business delegates into tourists?
He Expressed concern over the TOMSA levy.

Ms E Masehela (ANC) asked what SAT is doing to up domestic tourism numbers. How do you measure domestic tourism trips? On slide 9, why was the % change so low for 2017? Can SAT replace consultants with permanent employers?

The Chairperson referred to slide 10 and said she would have liked a zoom in on the Nordic countries because SAT has been focusing on that region. On slide 28, she asked for a list of SMMEs that SAT took to business events? On slide 19 and 20, why were the numbers not audited?

Mr Krumbock said the questions asked by members of the Committee have been very penetrative. He asked SAT to give the Committee comprehensive answers in the short time left for the meeting. He requested if SAT be allowed to send written responses in detail with numbers.

The Chairperson asked if members of the Committee agreed with Mr Krumbock’s approach. No members objected. The Chairperson requested that the responses be sent to the Committee Secretary by the following Monday afternoon.


The meeting was adjourned.

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