South African Tourism 2017/18 Annual Report

Tourism

11 October 2018
Chairperson: Ms L Makhubela-Mashele (ANC)
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Meeting Summary

Annual Reports 2017/18

South African Tourism presented its 2017/18 Annual Report.

The entity received an unqualified audit, for the period under review. The organisation had a total budget of R1.4 billion, and there were two incidents of irregular expenditure that amounted to R4.1 million.

The AG identified an issue with Joint Marketing Agreements (JMAs) that SA Tourism enters with traders. In the past SA Tourism would enter into an agreement with traders and one of the agreements would be that an X amount of tourists would be sent to the country. However, because of different laws and changing of laws, these organisations can no longer provide names, which is one of the conditions stipulated in the contract, thus making the process hard because SA Tourism cannot verify whether the agencies held their end of the agreement. The entity is working towards finding a long-term solution.

The entity noted the decrease in domestic tourism and indicated its target to attract more than five million arrivals using the 5-in-5 strategy by end of 2021.

One of the biggest concerns regarding travelling to South Africa is the issue of safety and water shortage. The international media has portrayed the country in a bad light and this is making travelling to South Africa an issue which is affecting tourism.

The main concern for Committee Members was the decrease in domestic amount spent on consultants, and why staff and stakeholder satisfaction scores were low.

Committee members felt that the packages for executive members needed to be benchmarked to other successful nations to give it a competitive edge. The international tourism market has increased, but this was at a lower rate than usual. The Committee urged the organisation to ensure that the image of South Africa is rebuilt and able to attract foreign visitors into the country. Members urged the organisation to take advantage of foreign visitors from neighbouring countries who come to South Africa to buy things, and those who come to the country for conferences. The Committee felt that the organisation needs to make visitors stay longer and experience different parts of South Africa. Members were delighted that something is been done with the grading system and that there are strategies created to root out illegal stars.

Meeting report

The Chairperson welcomed all in attendance. Apologies were noted from the Minister and Deputy Minister.

Briefing by SA Tourism

Mr Abbar Omar, Board Member, South African Tourism (SA Tourism) introduced the new board of the organisation that was announce in May 2018.

Mr Sisa Ntshona, Chief Executive Officer (CEO), SA Tourism, introduced the executive team to the Committee and conveyed the apology of Chief Operating Officer (COO) who is in Australia. The position of Chief Marketing Officer (CMO) was vacant.

Mr Ntshona said that South African Tourism received an unqualified audit, which they are delighted about. However, he acknowledged that the organisation has faced a challenge in relation to two incidents of irregular expenditure. The organisation had a total budget of R1.4 billion, and there were two incidents of irregular expenditure that amounted to R4.1 million. The first incident amounts to R1.7 million which is a fraud case committed by staff members. The expert team measures and monitors risk monthly. And as part of the risk strategy they picked up that there are two staff members who were colluding on “codes and embargoes” (not very audible on recording). They have since been suspended and dismissed after the investigation was concluded. The two individuals appealed at the CCMA, and they lost the case. The second incident occurred five years ago and amounts to R2.4 million. The incident was about a tender that was issued on “Scope Creep” and went beyond the 15% parameters that were set. The process took so long to conclude that two of the staff members that were involved no longer worked for SA Tourism. Other staff members who were involved and are still employed by SA Tourism faced disciplinary action.

Mr Ntshona said that together with the board, they took a decision to finalise the matter, and the finances of that case were recorded in the 2017/18 financial report.

Mr Ntshona said that the AG identified an issue with Joint Marketing Agreements (JMAs) that SA Tourism enters with traders. In the past they would enter into an agreement with traders, and one of the agreements would be that an X amount of tourists would be sent to the country. However, because of different laws and changing of laws, these organisations can no longer provide names, which is one of the conditions stipulated in the contract, thus making the process hard because SA Tourism cannot verify whether the agencies held their end of the agreement. He also says they are working towards finding a long-term solution.

Out of the 1.3 billion arrivals internationally dated in 2017, Africa has a share of 5% of the market. With regards to South Africa’s performance, the country experienced a 2.4% increase, up from 2016. While countries in Africa and South America show good growth, there are concerns around the biggest source market in the United Kingdom, and the world’s largest source market, Asia, is their key area of interest. One of the biggest concerns regarding travelling to South Africa is the issue of safety and water shortage. International media has portrayed the country in a bad light and this is making travelling to South Africa an issue which is affecting tourism.

One of the things that make travelling to South Africa desirable is the exchange rate with big markets such as the United States of America (USA). Travellers find it more affordable to travel to South Africa. However, South Africans find it costly to travel overseas; hence they would rather stay in the country than visit other countries.

Domestic tourism deceased in 2017 compared to 2016. Mr Ntshona acknowledges that both the staff and stakeholder satisfaction scores are low and hopes that with project ignite things will start turning up.

Mr Tom Bouwer, Chief Financial Officer (CFO), SA Tourism, said that the organisation underspent on some areas, however, it had an agreement with traders and Treasury about contracting services and paying those services in the financial year.

Discussion
Ms P Adams (ANC) asked Mr Ntshona if he is satisfied with the low staff satisfaction score, and since the primary mandate of SA Tourism is markets, would hiring a Chief Marketing Officer soon have an impact on the satisfactory score of staff.

Ms Adams asked about the type of assets that were disposed by SA Tourism.

Ms V Bam-Mugwanya (ANC) said she recognises the presentation. She asked what the nature of the expenditure is, and its effects on the running of the business.

Ms Bam-Mugwanya notes that SA Tourism identified its dependency on consultants, and she is relieved that there is a plan in sight. She asked the executive team to unpack the plan for 2017/18 financial year so that the Committee can applaud the savings gained.

Ms Bam-Mugwanya asked if there is a website where the new grading system is being explained, and if the grading was submitted for the Tourism Amendment Bill for free, but compulsory grading system.

Ms Bam-Mugwanya asked if there has been a follow up on the receipts of the ‘Lilizela awards’ and if there has been an improvement from their side since receiving these awards.

Mr J Vos (DA) referred to the ‘Lilizela awards’ and noted that  the awards recognise individuals from organisations that have contributed significantly to the Tourism Department, however, he wants to know what value skills are given to these recipients. He refers to the Cape Town Tourism as an example that has a separate fund created for individuals who want to be part of the tourism initiative in the city.

Mr Vos said that many of the SA Tourism adverts show places that are not known to the public and does not really speak to specific destinations that South Africans can go to, and what they will experience. He notes that most of the money allocated for the department is used on consultants who generate these expensive adverts. He hopes that since they moved to promoting home-town places, SA Tourism should find ways that will promote places that are relevant and appealing to South Africans with specific destinations that have specific experiences for people to visit.

Mr Vos asked what the plan is for making Congress delegates when they visit South Africa to spend more time and money rather than only attending the conferences and then leave.

Mr Vos asked what is to be done with regards to domestic tourism because when the Committee started, there was a shocking revelation that most South Africans travel around the country because of funerals, and this is a concern that needs to be addressed. He asked what the plan is for getting people to not only travel when there are funerals, but to travel and visit places, and spend time and money in destinations.

Ms Adams asked why stakeholders are not satisfied, and what it is been done to mitigate this because it is an important component of tourism.

Ms Adams pointed to the key issue that affects the performance of SA Tourism. Bullet four on slide 15 states that this point encompasses Bread and Breakfasts (B&B). She asked how sure they are about this because there are a lot of B&B’s in the townships that are under-utilised. The last bullet on slide 15 states that a lack of foreign languages offered is one of the factors affecting the department. She asked if this is not an international matter, and what specific language did the tourist want, and what is SA Tourism doing to mitigate the issue.

The Chairperson said that given previous discussions during quarterly report meetings, she thought the presentation would have encompassed the grading system as it previously came out as one of those challenging programmes. She assumed that there will be a report on strategies that address the quality assurance because it is in line with visitor experience.

The Chairperson said that this meeting should have had programme managers presenting so that they explain the progress on the programmes they manage.

The Chairperson raised concerns around the dependency of the 5-in-5 strategy on convention bureau and said it is the case that most of the revenue for SA Tourism is generated from these events. This means that the organisation is not reaching its target goals. She then highlights that there is a market of neighbouring countries coming into South Africa to buy essentials, and this market can be used for the 5-in-5 strategy. The Chairperson asked what strategies are in place that can be used to ensure that this market is used for tourist arrivals in the country.

The Chairperson asked what strategies are proposed to ensure that South Africa is a go-to nation for the Asian market.

The Chairperson said that SA Tourism is the chief marketer of South Africa, there should be strategies put in place to ensure that the image of South Africa on the international platform is good and attract tourists.

The Chairperson suggested that the organisation try to benchmark the remuneration package for the Chief Marketing Officer to other successful countries so that it is competitive.

Mr Bouwer said that the organisation did receive approval to dispose of the assets, and it was done by the book. All approvals are audited. The money does not need to go back to Treasury. Mr Bouwer referred the Committee to page 138 of the 2017/18 Annual Report, there is a narrated explanation of the process. He states that the organisation used an independent evaluator to value the property before selling.

Mr Bouwer said that the corporate support for administration was for the depreciation to disclose that for the assets.

Mr Bouwer said they have cut down on the number of consultants and decided to hire people full-time within the organisation. However, the organisation does use consultants for international duties.

Mr Darryl Erasmus, Chief Quality Assurance Officer, SA Tourism, said that the amendments were sent out to the public for comments, and that process is finished. The Bill is with the Director-General of the Department of Tourism awaiting Ministerial approval. He said the system will be adopted and uploaded online only once Ministerial approval is obtained.

Mr Erasmus said that he manages a team that focuses on brand experience that ensure that the international market finds SA Tourism attractive by making sure that the experience, accommodation, and brand is properly marketed.

Mr Erasmus said that within his team, there is an inbound training for different tourist markets so that it is more accessible to welcome new and prominent markets.

Mr Erasmus said 80% of SA Tourism clients are small businesses. Therefore, the change in the country’s economy has a direct impact on their membership. Most small businesses have changed their business model from B&B’s to full on rentals. However, they are carefully monitoring the change in membership.

Mr Erasmus said that the organisation created a drive that investigates establishments that use stars illegally. He referenced the recent drive of taking the whole team to Eastern Cape to fish out establishments that used stars illegally. He said that this was also a teaching strategy about the importance of grading and the usage of stars and promotes the culture of adhering to practices of SA Tourism.

Mr Erasmus said that they are in a process of bringing new assessors. Most of these assessors come from small towns where there is a need for them.

Mr Erasmus said that the Tourism Incentive program helped businesses that cannot afford grading through the incentive funding. To date, there is a total of 2600 members who received discounted fees that amount to over R9 million.

Ms Amanda Kotze-Nhlapo, Chief Conventions Bureau Officer, SA Tourism, said there is a new plan rolled out for the conventions. This new plan includes bidding on behalf of local associations identified that possess qualities to participate on the international markets for legible candidates. She also said they are trying to get academics to participate in the bidding and, hopes that this will change soon.

Ms Bashini Muthaya, Chief Strategy Officer, SA Tourism, said that there is research being conducted to see what influences South Africans to travel when there is a funeral. She said that some preliminary results suggest that South Africans are inclined to do other activities during time set aside for the funeral. However, she notes that only when the research is concluded will a way forward for the convention be known.

Ms Muthaya said that they have noticed that icons are key in attracting Chinese tourists. However, state travel barriers are still a significant factor that influences the number of Chinese tourist into the country.

Ms Muthaya saif that for as long as issues of safety and security in the country are not resolved, it will prove difficult trying to convince the international market, particularly the Chinese market to visit South Africa.

In response to Ms P Adams about the low scores for staff and stakeholders in the organisation. Ms Muthaya said that this was done for the first time in 2017. This showed areas that need improvements. However, she noted that they will continue working on improving areas that need improvements.

Mr Ntshona said that the issue of consultants is a closely guarded one. No consultant is hired without his knowledge, and before this can happen, there must be a convincing case presented for why the consultant needs to be hired instead of using in-house people.

Ms E Masehela (ANC) asked for clarity on slide 36.

Mr Ntshona gave a response. [The PMG recorder was inaudible and did not capture the response]

The Chairperson thanked the SA Tourism for the presentation. She noted that the presentation was done in a rushed manner, and therefore some issues were left unquestioned. However, she said that the other points will be discussed in the following weeks when the organisation comes to brief the Committee. The Committee is delighted that the organisation received an unqualified audit and encouraged them to continue the good governance.

Meeting adjourned.
 

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