Joint Marketing Agreements (JMAs) for international and domestic work: South African Tourism briefing

Tourism

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

SA Tourism on briefed the Committee on the Joint Marketing Agreements (JMAs) for international and domestic work.

In its audit of the entity, the Auditor-General of South Africa had raised two concerns in relation to the Agreements. The first was on the process by SA Tourism in choosing its partners for JMAs. The second was around SA Tourism being able to see delivery benefits from the JMAs entered into. Given the concerns of the Auditor General SA Tourism had placed a moratorium on JMAs. SA Tourism was in the process of putting interventions in place to deal with the two aspects. The budget at present on JMAs was around R40m. JMAs were just one of the levers used by SA Tourism to achieve what it needed to.

A JMA was a legal contract used to govern instances where two or more companies collaborate on marketing and promotional efforts. This allowed SA Tourism to get a larger return on their investment of time and money. JMAs were often used to promote a product, event, or specific content. Objectives of JMAs included seeking to minimise the impact of perceived barriers like safety and security concerns and cumbersome visa processes etc. The Committee was provided with a comprehensive overview of JMAs that SA Tourism had entered into in 2017/18 with partners in countries like China, India, Germany, USA and Nigeria etc.

Members asked whether it was a wise move by SA Tourism to redeploy two staff members from India and China to head office given their vast experience in those countries. A Tourism was also asked whether its Key Performance Indicators (KPIs) were in line with international standards. How did SA Tourism choose its partners for JMAs? Members asked whether it was realistic to have JMAs signed for short periods like six or nine months. Members also asked what the difference between a JMA and a Memorandum of Understanding (MOU) was. SA Tourism was further asked whether the fact that tourism was a concurrent function hampered its work. Was the budget for JMAs sufficient and was value for money obtained? Why was there no JMA with the United Arab Emirates (UAE)? SA Tourism was asked how it responded to incidents involving tourists as well as to incidents involving South African tourists abroad. Members mentioned the incident of the two Chinese tourists that were attacked as well as a South African student who had been killed in China. Members observed on the JMAs presented that on African countries there were no exchanges of funds in respect to JMAs but with for instance with countries from Europe there were. Why were things different with African countries? SA Tourism was asked why its investment on JMAs in China only totalled R1.7m when China had a population of 1.2bn people. China was one of the biggest markets for SA. Inbound tourism from China was increasing by leaps and bounds. Members appreciated the ROI figures relating to JMAs as well as figures which spoke to increases in growth and spending. Members asked how SA Tourism measured things. Could it be that figures were increasing due to factors other than the JMAs? What if brand positivity efforts were causing the increases and not the JMAs as SA Tourism believed. SA Tourism was asked how it attributed growth to JMAs. It could be any number of things that caused growth. If R41.25m was spent on JMAs SA Tourism was asked if it had any idea of what returns were made to the fiscus based on the expenditure. SA Tourism was asked whether language was still a barrier for foreign tourists coming into SA. Members asked why brand awareness was still an issue when there were JMAs in place. The Chairperson asked SA Tourism to elaborate on the moratorium that had been placed on JMAs. SA Tourism was asked whether JMAs were linked to the transformation agenda. There needed to be benefit to Small, Medium and Micro Enterprises  in SA. Members reiterated that the Committee needed to know what the criteria for choosing JMA partners were.

Due to time constraints the Committee agreed that unanswered questions should be responded to in writing by SA Tourism and be forwarded to the Committee by Friday, 26 October 2018.

Meeting report

Briefing by SA Tourism on Joint Marketing Agreements (JMAs)
Mr Sisa Ntshona, Chief Executive Officer (CEO), SA Tourism, stated that SA Tourism was proud to have achieved an unqualified audit report for 2017/18 from the Auditor General of SA (AGSA). There were however some concerns raised and one of them was about the JMAs. There were two aspects around JMAs that the Auditor General was interested in. The first was on the process by SA Tourism in choosing its partners for JMAs. The second was around SA Tourism being able to see delivery benefits from the JMAs entered into. Given the concerns of the AGSA, SA Tourism had placed a moratorium on JMAs. SA Tourism was in the process of putting interventions in place to deal with the two aspects. The AGSA had in matter of speaking lifted standards for SA Tourism. There needed to be an understanding of what a JMA was and how it worked. SA Tourism did not have JMAs with provinces but had Memorandums of Understanding (MOUs) with them. SA Tourism had two major events and they were the Tourism Indaba and Meetings Africa. Both were covered by contractual agreements. The budget at present on JMAs was around R40m. JMAs were just one of the levers used by SA Tourism to achieve what they needed to.

Mr Bradley Brouwer Head: Global Trade, SA Tourism, kicked off the actual briefing on JMAs duly assisted by Ms Sthembiso Dlamini Chief Operations Officer (COO), SA Tourism.

A JMA was a legal contract used to govern instances where two or more companies collaborate on marketing and promotional efforts. This allowed them to get a larger return on their investment of time and money. JMAs were often used to promote a product, event, or specific content. SA Tourism followed the same international practice to support and leverage in-country trade partners who sold SA as a destination. Objectives of JMAs included seeking to minimise the impact of perceived barriers like safety and security concerns and cumbersome visa processes etc. The Committee was provided with a comprehensive overview of JMAs that SA Tourism had entered into in 2017/18 with partners in countries like China, India, Germany, USA and Nigeria etc.

Mr Ntshona in conclusion stated that SA Tourism was competing with other destinations to enter into JMAs with trade partners. SA Tourism was trying to influence and incentivise its trade partners. There was a vested interest for private sector as well and geographic spread had to be taken into consideration. Each JMA depended on the region and the outcome that SA Tourism wished to achieve. It was important to remember that if the numbers of tourists into SA increased then the marketing cost per tourist decreased. The concerns of the AGSA over JMAs were being addressed. 

Discussion
Ms P Adams (ANC) asked if the AGSA had shifted standards, was SA Tourism not informed. She asked whether SA Tourism could not adapt to the standards. On the redeployment of two staff members of SA Tourism from their posts in India and China to Head Office she asked whether it was a wise move. Did those staff members not leave a gap in China and in India given their vast experience in those countries? SA Tourism was asked whether its Key Performance Indicators (KPIs) were in line with international standards. How did SA Tourism choose its partners for Joint Marketing Agreements (JMAs)? She also asked that if there were KPIs in place how JMA’s could be shifted from one country to the next. The briefing document had figures for investments made on JMAs which for the benefit of the Committee had been converted from dollars to rands. One example showed that the exchange rate was one dollar to eleven rands. Was this the exchange rate at the time that the JMA was signed? SA Tourism was also asked whether it was realistic to have JMAs signed for short periods like six or nine months. If SA Tourism had signed Memorandums of Understanding (MOUs) with provincial tourism authorities she asked what the difference between an MOU and a JMA was. She observed that SA Tourism had not signed MOUs with the Northern Cape, Eastern Cape and Western Cape Provinces. SA Tourism was further asked whether the fact that tourism was a concurrent function hampered its work. She asked whether the budget for JMAs was enough and whether value for money was obtained.

Ms Dlamini, on the redeployment of SA Tourism staff from India and China, explained that Mr Brouwer was the staff member that had been brought from China to head up Global Trade at SA Tourism. Given his vast knowledge it was felt that his expertise could be spread to more markets/countries. Ms Hanneli Slabber was redeployed from India to be the SA Tourism Hub Head: Middle East, India, South East Asia. On the timing of JMAs, she explained that most of the work was done in the short term. Awareness was however a long term effort. Conversion on the other hand was short term.

Mr Brouwer explained that a MOU was an agreement of understanding between two parties. For instance SA Tourism had MOUs with provinces. The JMA on the other hand was an agreement of cooperation between parties.  

Ms S Nkomo (IFP) stated, on the differences between an MOU and a JMA, the Committee needed exact information on what made them different. Was it legal things or marketing strategies that differed? Given that the AGSA had queried two issues, she said that perhaps next time these issues/areas would be audited. She was convinced that interactions between the AGSA and SA Tourism to be advanced. The Committee had to be given insight into such information. Members needed to understand how critical the matter was. She asked why there were no JMAs with the United Arab Emirates (UAE). She said that it was important for SA to react to incidences like when two Chinese tourists were attacked. She asked what happens when a South African was attacked in China. A while ago a South African student had been beaten to death in China. SA Tourism was asked how it addressed these types of matters. She added that the Committee needed to understand the financial implications. Why were there no exchanges of money when it came to African countries but there was when it came to European countries? What was different with African countries?

Ms Dlamini said that the two issues that the AGSA had with JMAs was firstly the process to identify JMAs and secondly to determine return on investment. SA Tourism had to look at its work holistically. The UAE market was important to SA Tourism. SA Tourism’s Marketing Investment Framework (MIF) had identified the UAE. There were as yet no trade partnerships with the UAE. At present trade was being educated on the UAE. The UAE was therefore a focus area. For Africa the barriers were visas, airlift and high costs. Travel partners in Africa did not wish to sell SA. They preferred to send their customers to other destinations. African partners felt it difficult to get visas to SA. Yes Africa was important but travel partners refused to sell SA.

Mr Brouwer said that the two Chinese tourists had been attacked with sandblasters. It was a vicious attack. Once news of the incident reached China there were immediate cancellations. The fact that Mr Ntshona and Mr Victor Tharage, Director General of the National Department of Tourism (NDT), had visited the attacked tourists in hospital had helped against the negative publicity. China had wished to place a travel advisory against SA but luckily it had not materialised. In China a South African student had been murdered and his body had been found floating in the Yangtze River. The idea was to get tourists into SA so attempts were constantly made to sell the positives of what SA had to offer.

Mr G Krumbock (DA) appreciated the detail that was provided in the briefing. SA Tourism had invested R41.25m in JMAs. Why did the amounts on investment differ in each case? He asked why only R1.7m had been invested in China when it had a population of 1.2bn. China was one of the biggest markets for SA. Inbound tourism from China was increasing by leaps and bounds. The briefing did provide information on Return on Investment (ROI) from the JMAs. Figures were also provided on how growth was increasing and how spending increased. How did SA Tourism measure things? There could be many other reasons why the figures were increasing besides the JMAs. For one brand positivity could be the reason why figures were increasing. How did SA Tourism attribute growth to JMAs? It could be any number of things that had caused the growth. If R41.25m was spent on JMAs, he asked if SA Tourism had any idea of how much money had returned to the fiscus. Was it possible hypothetically speaking that R120m was generated in revenue and that R60m had gone to the fiscus. If it was so this would mean that the budget for JMAs could increase from the R41.25m that it presently was.

Mr Brouwer said that China was still an emerging market for SA. With JMAs in place many companies were coming on board. However it should be borne in mind that China was government run and government endorsed. Government had to endorse everything. SA Tourism did have an approved destination status process. Even the JMAs in China were new. China was not used to JMAs yet. SA Tourism had to teach its Chinese partners how to do JMAs. The same applied to JMAs with Morocco. It all depended on the maturity of the market. He confirmed that the rand exchange rate calculations were done at the time of signing of JMAs. He conceded that ROI calculations were difficult. There were some that were easy to calculate whilst others were difficult. 

Ms E Masehela (ANC) asked what the ROI on the R41.25m that was spent on JMAs was. She asked how lack of awareness could be a barrier of entry if JMAs were to promote a product or event. She also asked whether language was still a barrier for foreign tourists coming to SA. Were tour guides still trained in French and Mandarin?

Ms Dlamini responded that SA Tourism was working with the National Department of Tourism (NDT) on languages. China and Germany were countries which had an issue with language in SA. They wished to send tour guides as interpreters along with their tourists. She noted that media was used to create awareness. There was close relationships with South African missions abroad.

Mr Brouwer, on ROI calculations, said that brand awareness was important. Brand awareness was constantly being done abroad. It was a continuous process to educate foreigners that SA was a safe destination and that it had infrastructure in place. 

The Chairperson said that the Committee needed a deeper explanation of the moratorium that SA Tourism had placed on JMAs. She asked whether JMAs were linked to the transformation agenda. Tourists from abroad needed to be linked with Small, Medium and Micro Enterprises (SMMEs) in SA. It was not only established businesses that should benefit. Tourists should also be linked to hidden gems. The value chain should reflect that upcoming businesses were benefitting. On brand awareness, SA Tourism was asked what efforts were showing the best results. Was there value for money obtained from the JMAs with partners abroad? She also wished to know what the criteria for choosing JMA partners were.  

Ms Dlamini, on the moratorium over JMAs, explained that country teams were instructed to continue with JMAs that they had signed. There was a need to find a suitable transition plan. On the choosing of JMA partners, it differed from market to market. In Northern Europe a request for proposals was done. Business plans were looked at. For instance SA Tourism looked at partners who were wholesalers. There were criteria that were looked at. SA Tourism was considering putting a framework in place. It was difficult to be prescriptive. A hub should have criteria. Ultimately SA Tourism was required to take it to National Treasury to consider. On how to link JMAs with transformation she explained that the issue was about how to educate travel trade.

Mr Brouwer stated that all JMAs were to have an element of transformation in them. SA Tourism monitored JMAs.

The Chairperson, in the interests of time, said that any unanswered questions would have to be responded to in writing by SA Tourism and would have to be submitted to the Committee by Friday, 26 October 2018.

Mr Krumbock asked that ROI information be included.
 
The meeting was adjourned.


 

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