Tourism Sector Transformation: B-BBEE Charter Council briefing

Meeting report

Briefing by the Broad-Based Black Economic Empowerment (B-BBEE) Charter Council

Dr Vuyo Mahlati, Chairperson, Tourism B-BBEE Charter Council,provided some background on the Council and spoke to what its mandate was.

Mr Blacky Komani, Council Member, provided detail on the methodology of the study that was done.

Dr Mahlati continued with specifics on the results of the study. She was concerned about the snail’s pace of transformation in the sector. The lack of transformation in the sector was reflected in the results of the study that was done.

Black Ownership - Figures on black ownership showed some improvement but there were concerns around black female ownership. For instance on black female ownership figures on new black entrants sat at 2%, 5% and 5% across accommodation, hospitality and travel subsectors. This was against a target set at 10%.

Management Control – The figures for advancement of black women in management control were identified as a critical area. In executive director positions against target of 30% black women figures were 8%, 11% and 6% across accommodation, hospitality and travel subsectors. On black executive directors per province the Limpopo Province faired the best with the Western Cape Province the worst.

Skills Development - Of huge concern was the learnership absorption rate. Against a target of 100% the actual figures fell short by far at 6%, 1% and 3% across accommodation, hospitality and travel subsectors. On skills development expenditure per province the KwaZulu-Natal Province faired the best with the Eastern Cape Province being the worst.

Enterprise and Supplier Development - Of all the areas this was considered to be the worst in terms of transformation. On enterprise and supplier development targets achieved by large enterprises against a target of 40%, procurement spend on 51% black owned enterprises was a shocking 0%, 0% and 0% across accommodation, hospitality and travel subsectors. The figures for qualifying small enterprises were not as bad but were not far off. Against a target of 30% procurement spend on 51% black owned enterprises the figures were 1%, 1% and 0% across accommodation, hospitality and travel subsectors.

Socio-Economic Development - Tourism Marketing SA (TOMSA) levy collector registrations were equitably spread between the subsectors of accommodation, hospitality and travel at 38%, 27% and 38% respectively. Almost 50% of accommodation and travel subsectors had achieved the annual value of all qualifying socio-economic development expenditure that exceeds 1% of NPAT.

Compliance Acceleration - Ms Gaile Westphal, Council Member, on the perceived benefits of Black Economic Empowerment, said that the best perceived benefits was improved business image at 48% and attracted new customers at 43%. However 72% of respondents did not agree that Black Economic Empowerment attracted new investors.

Dr Mahlati concluded the briefing. Some of the biggest problems in the sector were a lack of accessibility and lack of financial support. On financial support the NDT had launched the Transformation Fund which provided R360m over three years. There was also a lack of partnership collaboration, willingness and trust between enterprises and key stakeholders to promote procurement opportunities for Small, Medium and Micro Enterprises (SMMEs) and entrepreneurs. The sector needed to come to the party. The Tourism Business Council of SA (TBCSA) and industry needed to come up with a business plan. There was also a lack marketing efforts to promote new and existing SMMEs. There should be more SMME expos and more business linkages should be created. On what could be done to improve matters, for one partnerships between government and the private sector needed to be strengthened. There was also a need to establish and promote a supplier development programme for previously disadvantaged people to have shared opportunities within the value chain. There was a need to come up with the ESD Fund. Every corporate had an ESD responsibility. The tourism sector not only cut across all sectors but also across all value chains of suppliers. A suggestion was perhaps that 3% after tax contribution towards the ESD Fund could be made.

Discussion

The Chairperson noted how dim things looked on transformation in the tourism sector. She felt that Council Members themselves as stakeholders needed to drive transformation in the sector. Business needed to leverage on what government put in place. On the perception of B-BBEE, it was concerning that 72% of respondents did not see the benefits of B-BBEE. The figure spoke volumes about demographics. Government did put policies in place to address transformation but the patterns were skewed. Those in the industry who had the economic power were not much in favour of allowing new entrants in. They did not see any benefit in doing so. This was a huge challenge. People simply chose not to see the benefits because they were comfortable in maintaining the status quo.

Mr Komani, on industry players sitting on the Council, stated that the billback system was a problem. Consequently a virtual credit card had been created. So there were solutions.

Mr Liebetrau conceded that it was a fact that there were people in the tourism industry that did not wish for new entrants to be part of the industry.

Ms Westphal stated that lack of access was not the only problem. People coming into the industry gave up too easily. Persons attended trade shows because they were paid to do so and then they only spent a certain amount of time there. It was also about people needing to have the right attitude.

Ms P Adams (ANC) said that she wished to make it more personal. The Council Members sitting here before the Committee were big players in the industry. They in a matter of speaking had a foot in the door. She wished Council Members to ask themselves who they were mentoring. Many of them were women so what were they doing to give back? Did they look back from whence they came? The B-BBEE Council’s mandate was monitoring and awareness. Did Council Members live out the mandate? She asked Council Members to ponder about what she had said. She continued that access to finance for new entrants would always be a problem. There was the Department of Small Business Development (DSBD). Did the Council engage with the DSBD? She noted that greater public awareness was needed. On the public’s lack of awareness of opportunities, was the Council conceding that it was not doing enough? Was enough awareness being done on what tourism was all about? Since the inception of the Council in 2015 had there been a growth in awareness? On the targets that were set for the study, how was it done? She asked whether the targets that had been set were realistic. What informed the target setting? She asked why ownership figures for blacks and especially black women (Slide 18 & 19) were so low especially as new entrants to the sector. Was finance a problem? On ownership figures per province (Slide 21) she asked why the figure for Limpopo Province was the highest whilst the Western Cape Province’s was the lowest. It was baffling since the Western Cape Province received the most tourists. She also asked why the figures for the advancement of black women in management control were so low. The picture did not look good. Hospitality figures were however much better than those for travel and accommodation subsectors. Why? She added that the Council had previously presented its 2017/2021 Action Plan to the Committee. How far was the Action Plan?

Dr Mahlati, on mentoring efforts by Council Members, said that there was a great deal that members could share. Efforts had not been spoken about as the Study had to be presented to the Committee. The Small Medium and Micro Enterprises (SMMEs) that had gone to the Tourism Indaba were now in a better shape. This was partly due to the mentoring efforts of Council Members. She explained that the targets were part of the 2015 amendment to the B-BBEE Codes. Engagement had been vigorously done. There was consultation in all provinces to decide on the scorecard that addressed targets. The concern was that the sector was far from reaching transformation targets. There needed to be a will and commitment to transform. She explained that the Council’s strategy on its Action Plan was to look at new entrants as well as pushing established enterprises. Local, provincial and national government needed to come on board. The issue was about how to get things going. Government needed to do its part which included coordination across departments to support new entrants. On ownership targets across provinces, she responded that perhaps the Western Cape Province was good at attracting tourists but was not doing well on transformation. Limpopo Province on the other hand had focussed on the development of black enterprises. When legislation was enacted it was for everyone.

Ms Westphal, on mentoring, said that she had opened up her own company to mentor small businesses. She felt that she had made a difference. Many other people had done the same. She had made a living doing other things but mentoring was what she was passionate about. She noted that she was in charge of the Council’s business plan and it would be completed by the end of 2018. An agreement with the NDT was anticipated.

Ms Ramawela agreed that mentorship and coaching was important. Every Council Member in their personal space did their part. The tourism industry was ready to impart knowledge. Giving back did not only mean in the form of money. On ownership she also agreed that black women were the worst affected in the tourism sector.

Ms V Bam-Mugwanya (ANC) asked what the view of the Council is on the pace and depth of transformation in the tourism sector. In her view, it was difficult for new entrants to come in. What advice could the Council give in this regard? Even if the advice to be given was of a draconian nature members would be open to hear what it was. The lack of finance and start up capital was a problem for new entrants. Sometimes it was difficult for rural persons to meet certain requirements ie to have audited financial statements. Means and ways needed to be devised which would enable entrepreneurs to access finance. On human capital development in the sector, she said that there was a need to have a relook at the courses on offer at tertiary institution. The graduates that entered the sector were not of the quality that it should be. She asked how the Enterprise and Supplier Development (ESD) Fund worked.

Dr Mahlati stated that a great deal was being done on awareness. There was a great deal that needed to be done on the pace of transformation in the sector. Tourism was an environment well suited for women. Many women opened up bed and breakfasts but in the end lost their properties because there was no business. It was a painful exercise.

Ms Westphal, on the pace of transformation, pointed out that the industry did struggle with transformation. It was about setting the pace and how to do it. She explained that in 2015 the B-BBEE codes had changed. People in the industry had just gotten where they needed to be and then they had to retrace their steps. She pointed out that when a business in the tourism sector dealt with international clients one had to abide by international laws. So it was difficult for suppliers to meet these requirements. Sometimes B-BBEE persons did not have insurances in place. It was going to take time for things to fall into place.

Mr Liebetrau stated that it had to be borne in mind that hospitality was a very practical sector. He had served on many university committees. The reality was that the curriculum of institutions did not keep track with changes in the industry. There were many places like hotels schools out there where people paid exorbitant fees to study. When these individuals entered the sector they lacked the necessary knowledge. Greater emphasis needed to be placed on practicals.

Ms S Xego (ANC) stated that the briefing had shed light on what the situation in the sector was. Transformation was not happening as it should. New entrants into the sector and particular women found it difficult to gain entry. Besides the National Department of Tourism there were other role players.

The tourism sector did not exist on its own. The Council was asked whether the introduction of legislation and policies would change things. She suggested that the youth be represented on the Council. Youth understood one another. She also felt that the DSBD had an important role to play. Was there perhaps a monopoly in the tourism sector? How would SA as a nation address such a situation? She also asked how the Committee could ensure that other departments prioritised tourism. The teaching of tourism needed to start at a young age. This was where the Department of Basic Education had a role to play.

Dr Mahlati agreed that youth was important. A youth delegation had met with the Council. The youth delegation had proposed that youth be represented on the Council. The youth delegation had written to both the Council and the Minister of Tourism.

Mr Komani said that efforts were made to expose young people to the tourism industry. The problem was that young people did not see tourism as a career. When all else failed then they turned to tourism. So there was a level of resistance but things were improving. The tourism sector was not an easy one. You had to start from the bottom which many young people were not willing to do.

Mr Liebetrau agreed that the youth held huge potential. There was a need for forums where the youth could give its voice.

Ms E Masehela (ANC) was concerned that absorption figures on learnerships was almost zero (Slide 31). What could be done to ensure that there was absorption. What advice could the Council give to government to have a radical turnaround in tourism? She was hugely concerned that procurement spend on 51% black owned companies was zero (Slide 37). Was this correct?

Mr Komani, on absorption from learnerships, explained that even if you had interns as part of a one-year learnership after that year they were still unemployable. If the internship was for three years then they were more employable. The focus should be on the quality of the learnership and not on the number. It had to be ensured that learners did proper jobs and added value.

The Chairperson said that the Enterprise Development Fund was a proposed funding model for enterprises. There was also the Tourism Transformation Fund. What was the ESD Fund? She asked for an explanation so that members could go back to their political party caucuses and discuss it. She stated that when the immigration regulations had been introduced it had unintended consequences. Tourism businesses complained that it affected their businesses. She pointed out that Mr J Vos (DA) had championed the use of e-visas to make it easy for people to come to SA. It was this very same tourism sector that refused to transform. There was still preferential procurement. The question that should be asked who it really was that was benefitting from a flourishing tourism sector. How could government come up with policies to deal with the skewed patterns in the sector? If government did then the tourism sector would once again complain that there were unintended consequences. The status quo remained. The picture on transformation remained gloomy.

Dr Mahlati said that a procurement platform that was aggregated was needed to support small and medium sized businesses. On the ESD Fund the Council worked with private sector and the NDT to frame it conceptually. The matter of the ESD Fund had been raised at the Leadership Forum which the Minister of Tourism had hosted on the 21 May 2018. The Council was not yet ready to provide the Committee with detail on it. At the right time the Committee would be provided with detail.

Mr Komani, on who benefitted from tourism, said that the industry itself needed to look at it.

Ms Ramawela said that she wished to elaborate on certain points. Firstly, that the tourism industry needed the support of government as a whole. She pointed out that the tourism value chain impacted all sectors. What could government do on policy formulation? The answer was that government could provide support. Safety and infrastructure that worked needed to be there. She noted that visa issues would remain a stumbling block. SA had stiff competition from countries like Egypt and Morocco. SA was no longer number one in Africa. Secondly, on mainstreaming tourism the entire business community needed to be in sync. The industry together with government as a whole needed to speak with one voice. All other government departments like the Department of Trade and Industry (DTI) needed to come on board. The business landscape in SA needed to speak tourism and it was happening since President Cyril Ramaphosa had spoken to it. Thirdly, on what could be done on deliverables, she said that before government approached private sector government itself could do more. Government could grant more concessions. Assets like South African National Parks (SanParks) could be unlocked by granting for instance ten year leases to start ups. People had to start somewhere. One success story on concessions was the Mafisa Project in Limpopo Province. What she was saying by no means was ducking away from the role that private sector should play. Government expenditure itself in the sector was huge. She said that a two-pronged approach was needed. One firstly had to consider existing opportunities and secondly look for new opportunities.

The Chairperson said that the Committee appreciated the briefing. The issue was about how to address the challenges presented to SA as a country. The situation might not be rosy but it was the reality. Perhaps things would improve in the future.

The meeting was adjourned.