Tourism Budgetary Review and Recommendations Report

Tourism

17 October 2018
Chairperson: Mr L Makhubela-Mashele (ANC)
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Meeting Summary

2018 Budget Review & Recommendations Reports – BRRR

The Committee discussed and adopted the Draft Tourism Budgetary Review and Recommendations Report (BRRR) with amendments.

The Committee Content Adviser took the Committee through the Draft BRRR and touched on the financials and performance of the National Department of Tourism (NDT) and of SA Tourism. The Committee’s Key Findings and Recommendations were highlighted as this was the crux of the Draft BRRR. Recommendations made by the Committee were categorised in terms of those made to the Minister of Finance, to the Auditor General’s Office and to the Minister of Tourism. The Chairperson urged members to make changes or additions to the recommendations where they deemed it necessary.

On the recommendation that the Minister of Finance develop a funding model for local government Members suggested an addition that there be a link to local economic development budgets. There was also a need to work with the Department of Cooperative Governance and Traditional Affairs (DCOGTA) around the matter of unutilised tourism sites. The sites could be brought into the fold through Public-Private Partnerships (PPP). On black economic empowerment, Members felt that previously disadvantaged communities could be brought on board on the expansion of opportunities. Members suggested that an addition be made to the recommendation which spoke to the further clarification of the newly announced visa related reforms in that e-visas be expanded to key economic source markets. Committee section was asked to add the matter of affordability under recommendations on governance and leadership. Members felt that dual pricing needed to be a policy statement on the part of the National Department of Tourism (NDT). Members proposed that a study be conducted on dual pricing. On the recommendation that the SA Tourism Board explore possibilities of enhancing the remuneration package of its Chief Marketing Officer (CMO) members proposed that the recommendation be extended to include that all salaries of the Board be market related. Members on airlift recommended that SA Tourism on air access develop initiatives at hubs in all provinces. A plan was needed for each province. Members observed that on recommendations around the Tourism Amendment Bill nothing was said about regulating Airbnb. The concern was that many establishments were registering with Airbnb to get around regulatory and grading requirements. Members pointed out that conversion was needed from business tourism to leisure tourism. Members felt that all municipalities should be required to ring-fence funds for tourism. Members raised concern about Department of Labour (DoL) officials forcing smaller tourism businesses in rural areas to pay its staff members the minimum wage of R3 500 per month when they could not afford to do so. Tourism businesses in rural areas were not doing as well as their counterparts in the urban areas and were even closing down. Members observed that transformation in the tourism sector was slow. Members were concerned about persons in rural areas not being able to access funds from the Transformation Fund by virtue of its requirements being too difficult to comply with. Mr J Vos (DA) was not in favour of the recommendations which called for a feasibility study to be done on the possibility of introducing a Tourism Tax as well as on holding a Tourism Tax referendum. He was however in favour of the recommendation to conduct a policy review of the Tourism Marketing SA (TOMSA) Levy from being voluntary to being a compulsory contribution. The Chairperson pointed out that recommendations included in the Draft BRRR were in fact recommendations that had come out of Committee deliberations with the NDT, SA Tourism and the Auditor General’s Office. Mr Vos’ non-support for certain recommendations did not mean that the recommendations would not be reflected in the Draft BRRR. They were Committee recommendations after all and had come from deliberations. The recommendation about the consideration of a Tourism Tax had come about due to the need perhaps to raise additional funds. All that the recommendation was saying was that an impact assessment/ feasibility study would be done to consider the Tourism Tax. Recommendations would come out from the study on whether a Tourism Tax was feasible. The fact that the TOMSA Levy was voluntary did not help as many in the industry chose not to pay it. It was a matter of considering the TOMSA Levy versus the possible imposition of a Tourism Tax. Perhaps something could be provided for in the Tourism Amendment Bill. Mr Vos wished it to be placed on record that the DA did not support the adoption of the Draft BRRR if the feasibility study on a Tourism Tax was a recommendation contained in the Draft BRRR.  He accepted all recommendations made in the Draft BRRR with the exception of those which spoke to a feasibility study/research being done on the possibility of a Tourism Tax or any other recommendations which made reference to the Tourism Tax.

Meeting report

Tourism Budgetary Review and Recommendations Report
The Chairperson noted that it was the final time that the Committee would be making recommendations in a BRRR as the Committee’s term was nearing its end. The Draft BRRR contained recommendations made to the Minister of Finance, to the Auditor General’s Office and to the Minister of Tourism.  
 
The Chairperson said that she had asked Committee support staff in compiling the Draft BRRR to include all recommendations made over the past four years. She asked the Committee Content Adviser Dr Sibusiso Khuzwayo to present the Draft BRRR to the Committee.
 
Dr Khuzwayo proceeded to take the Committee through the Draft BRRR. He said that he would not go through the Draft BRRR page by page but would touch on certain areas and focus on Committee Key Findings and Committee Recommendations. The Committee was at the outset provided with insight into the financial and service delivery performance of the National Department of Tourism (NDT) 2017/18. The NDT had for the most part done well on both accounts. SA Tourism on its 2017/18 financials had overspent on its budget and on its performance had only achieved 63.6% of its targets.  The over spending was a concern and its performance was considered fair.
 
Committee Key Findings included:

  • The Committee observed that tourism in SA remained underfunded. The tourism budget, especially for marketing was far below that of competitor destinations.
  • The Committee also observed that in the past financial years the NDT continued to set targets that were dependant on other stakeholders without proper planning and implementation protocols in place.
  • The Committee observed that the NDT continued to incur delays in the implementation of projects due to poor forward planning, finalisation of terms of reference, stakeholder consultations and contract management etc.
  • Safety and security of tourists was a concern and the Committee observed a growing trend of crimes against tourists. Safety and security was one of the reasons for the decline in tourist arrivals.
  • The Committee was also concerned about the slow pace of exploring electronic visas to facilitate tourist travel to SA. Not enough was also being done on airlift but the Committee acknowledged pockets of excellence on it in Provinces like the Western Cape and KwaZulu-Natal. The Committee furthermore condemned the immigration regulations that had been introduced in 2014 which required children under the age of 18 to travel to SA with an unabridged birth certificate. The Committee also felt that there was a slow response to the introduction of electronic visas.
  • The Committee too was concerned about the delays in introducing the Tourism Amendment Bill to parliament. The delays had caused the tourism sector to lag behind in the emerging technologies like Airbnb and Uber that was causing disruptions in the sector.
  • The Committee acknowledged that the NDT’s introduction of a Transformation Fund and an internet portal for black economic empowerment might contribute towards addressing tourism’s transformation challenges. The reality was that transformation in the tourism sector remained a challenge.
  • The Committee observed that there was a decline in the total number of domestic trips, total number of domestic travellers and domestic travel spend in real terms.
  • On the matter of the Tourism Marketing SA (TOMSA) Levy versus a Tourism Tax the Committee had observed that Levy contributors had not increased. One of the reasons was that contributions were voluntary and that there was no enforcement. Members felt that a review was needed and that the Levy should perhaps be made compulsory. Alternatively, government could also explore the option of introducing a Tourism Tax and whether parliament could lobby for greater budget towards the Tourism Vote.

Committee Recommendations included:

  • The Committee, to the Minister of Finance, recommended that a tourism funding model for local government be developed, that the Tourism Transformation Fund be capitalised and also that parliament be advised about the feasibility of introducing a Tourism Tax.
  • The Committee, to the Auditor General’s Office, recommended that a performance audit for the selected Working for Tourism infrastructure and skills training programmes be done to ascertain if project implementation was effective, efficient and economical in rendering service delivery to targeted communities and beneficiaries.
  • The Minister of Tourism in collaboration with National Treasury to conduct a Tourism Tax referendum and a feasibility study on the nature and scope of the Tourism Tax that could be introduced in SA to ascertain the increase that could be realised to the budget appropriated to the Tourism Vote. 
  • The Minister of Tourism needed to engage the Minister of Home Affairs to further clarify the newly announced visa-related reforms to provide policy certainty to tourism stakeholders, including the international tourism markets and airlines, and to explore the possibility of completely repealing the requirements/ nuances for minors to carry unabridged birth certificates.
  • The Committee also recommended that the Minister of Tourism ensures that the NDT improves on project management with regard to forward planning, contract management, stakeholder consultations, procurement strategy and the signing of relevant agreements with third parties before including intended projects in Annual Performance Plans in order to facilitate effective and efficient implementation of projects.
  • The Minister of Tourism needed to engage with the SA Tourism Board to explore possibilities of enhancing the remuneration package for the Chief Marketing Officer (CMO) position in order to attract, recruit and retain incumbents in the critical position.
  • It had to be ensured that domestic tourism marketing campaigns implemented by SA Tourism were effective through not only showing experiences and attractions people could visit in SA but also including the specific destinations people could visit to have those experiences.
  • The Minister of Tourism had to ensure that SA Tourism develops a comprehensive China Strategy to tap into the growing outbound and high spending Chinese market.
  • The Minister of Tourism should engage the Tourism Business Council of SA about conducting a policy review of the TOMSA Levy from being voluntary to being compulsory as an alternative to parliament introducing a Tourism Tax in the Tourism Amendment Bill.
  • All stakeholders, including airlines, cities and the Airports Company SA (ACSA) should be engaged by the Minister of Tourism to unlock airlift in SA to improve tourist arrivals.

Discussion
Mr J Vos (DA), on the recommendation to the Minister of Finance around developing a tourism funding model for local government, suggested adding a link to local economic development budgets. He did not support the recommendations which called for a feasibility study to be done on the possibility of introducing a Tourism Tax as well as on holding a Tourism Tax referendum. He was more in favour of the recommendation to conduct a policy review of the Tourism Marketing SA (TOMSA) Levy from being a voluntary to a compulsory collection. How much was collected with the TOMSA Levy? He added that there was a need to work with the Department of Cooperative Governance and Traditional Affairs (DCOGTA) around the matter of underutilised tourism sites. The sites could be brought into the fold through Public-Private Partnerships (PPP). In addition he felt that on black economic empowerment; previously disadvantaged communities could be brought on board in the expansion of opportunities. On the recommendation that Minister of Tourism having to engage the Minister of Home Affairs to further clarify the newly announced visa-related reforms he suggested that it be taken further to expand e-visas to key economic source markets. He wished that under governance and leadership recommendations to the Minister of Tourism that the affordability issue be included. He wished for dual pricing to be a policy statement on the part of the National Department of Tourism (NDT). For citizens dual pricing would allow for free entry or for discounts at tourism places. The NDT could undertake a study on it. Where a recommendation was made that SA Tourism engage its Board to explore the possibilities of enhancing the remuneration package of its Chief Marketing Officer (CMO) he felt that it be extended to include that all salaries of Board members should be market related. The Committee had also recommended that SA Tourism ensure that domestic marketing campaigns implemented should be specific about destinations he however suggested that “places and prices” be included. Cape Town for instance had an offering of “50 things to do under R50”. SA Tourism could engage with the sector to secure cheaper prices on packages. On airlift he suggested that SA Tourism could develop air access initiatives at hubs in all provinces. A plan was needed for each province. On recommendations around the Tourism Amendment Bill he felt that nothing was being done on regulating Airbnb. Many businesses were joining Airbnb to get around regulatory requirements and around grading requirements. If conversion was to convert outbound tourism to domestic tourism he asked what about conversion of business tourism to leisure tourism.
 
Ms E Masehela (ANC) said that all municipalities should be required to ring-fence funds for tourism. It should not be stated that only those with tourist attractions should do so. She felt that tourism was everywhere.
 
Ms V Bam-Mugwanya (ANC) agreed that all municipalities should be active on tourism. The budgets they received should be ring-fenced. On intergovernmental cooperation the NDT needed to liaise with the Department of Labour on the matter of salaries of persons employed by bed and breakfasts in rural areas. In as much as the minimum wage was set at R3 500 per month small tourism businesses in rural areas could not afford to pay this. Department of Labour officials were forcing these small businesses to pay the R3 500 after their employees had lodged complaints. DoL officials needed to be made aware that perhaps in urban areas like Johannesburg employees could demand the R3 500 per month as business was good. Rural areas was a different scenario in that perhaps a bed and breakfast could only afford to pay its staff R2 500 per month as business was not booming. Bed and breakfasts in rural areas were even closing down.  On the Transformation Fund she noted that transformation was taking place at a slow pace. She was concerned that persons could not access funding from the Transformation Fund as it requirements were far too difficult for rural persons to comply with.
 
The Chairperson pointed out that recommendations included in the Draft BRRR were in fact recommendations that had come out of Committee deliberations with the NDT, SA Tourism and the Auditor General’s Office. Mr Vos’ non support for certain recommendations did not mean that the recommendations would not be reflected in the Draft BRRR. They were Committee recommendations after all and had come from deliberations. The recommendation about a consideration of a Tourism Tax had come about due to the need perhaps to raise additional funds. All that the recommendation was saying was that an impact assessment/ feasibility study would be done to consider the Tourism Tax. Recommendations would come out from the study on whether a Tourism Tax was feasible. The fact that the TOMSA Levy was voluntary did not help as many in the industry chose not to pay it. It was a matter of the TOMSA Levy versus the possible imposition of a Tourism Tax. Perhaps something could be provided for in the Tourism Amendment Bill. Inputs made by members would be captured in the Recommendations of the Draft BRRR. The Draft BRRR would be adopted with amendments. She asked the Committee Secretary Mr Jerry Boltina to speak to how inputs by members would be captured in the Draft BRRR.
 
Mr Boltina stated that inputs by members were noted. He stated that most of the matters raised by members were already captured in the Draft BRRR and hence it was more a matter of rephrasing recommendations.
 
Mr Vos wished it to be placed on record that the DA did not support the adoption of the Draft BRRR if the feasibility study on a Tourism Tax was a recommendation contained in the Draft BRRR.  He accepted all recommendations made in the Draft BRRR with the exception of those which spoke to a feasibility study/research being done on the possibility of a Tourism Tax or any other recommendations which made reference to the Tourism Tax.
 
The Chairperson placed the Draft BRRR before the Committee for consideration and it was adopted with amendments.
 
The Boltina stated that the necessary amendments would be affected to the Draft BRRR and would be circulated to members.
 
The meeting was adjourned.
 

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