South African Tourism (SAT) presented on the organisation’s performance for the second and third quarter of the 2018/19 financial year. It reported there had been flat growth (0.1%) in international tourist arrivals to South Africa between April to November 2018 when compared with same period in 2017. Growth had been recorded in arrivals from Africa and the Americas, but the rest of the regions had recorded declines. On domestic trips, SAT had not achieved the targets set for 2018/19, and there was no hope of achieving the target even after the inclusion of the December figures.
The Committee expressed concern over the submission of bids for hosting international events, and wondered what role SAT was playing in the process of bid submissions. The main concern was the exclusion and lack of collaboration between smaller and bigger cities in the bid submissions. The question on bids also raised concerns over the impact of the downgrading of mThatha airport, and the Committee sought solutions to the airlift problems hampering smaller cities’ efforts to boost tourism.
On annual key performance indicator (KPI) targets not due for reporting, the Committee recommended constant monitoring, which could be done through quarterly reports. The expenditure budget was also an issue, where it was felt that the 39% of the budget allocated to media for promoting tourism was not enough for the work done by SAT. The negative perception of the country clouded the tourism industry, and a bigger budget was required in order to attract more international tourists. The SAT “We Do Tourism” initiative was one key communication strategy that had been brought forward to counter the issue of negative perceptions and putting into context the issues of land expropriation and the water crisis.
Other actions by SAT were to encourage family hosting for visitors, to gain first-hand experience on South Africa (SA) as a destination, and not to rely on perception. Visa regulations and capacity challenges continued in various markets, and online visa applications would be introduced. In addition, the National Department of Tourism (NDT) and the Department of Home Affairs continued to engage on visa-related issues. The launch of e-Visas was a positive outcome that had come out of this continuous engagement.
The Committee suggested that SAT should look at the option of making it compulsory for accommodation establishments to meet the grading targets set to improve tourists’ experience. SAT responded that making grading compulsory was a policy issue, and there were other factors to consider, such as enforcement and the costs involved.
South African Tourism (SAT): Quarter 2 & 3 Performance
Ms Kate Rivett-Carnac, Board Member: South African Tourism (SAT), thanked the Committee for the support given to SAT, and said that she would like to see an increase in tourist arrivals. In terms of barriers existing in tourism, she assured the Committee that the Board was looking at how marketing effectiveness could be achieved despite the existing barriers, and added that the work could not stop because some of the barriers were beyond the control of SAT. The Board was currently talking to the management team of SAT to start looking at different avenues for more agile and effective ways to deliver marketing.
Ms Sthembiso Dlamini, Chief Operations Officer (COO), SAT, introduced Ms Neesha Pillay, Head: Strategy, Insights and Analytics team, which was responsible for looking at data for the insights plan. The COO went on to introduce the rest of the delegation from SAT.
The presentation was disrupted by the surprise arrival of Ms Elizabeth Thabete, Deputy Minister of Tourism.
The COO said that SAT was excited that the tourism had been included in the State of the Nation Address (SONA), and that there had been great improvements in collaboration between the National Department of Tourism (NDT) and Treasury. She was also pleased that the collaboration between SAT and NDT had helped in tackling the problem of the lack of forward bookings and resulted in tactical ways to improve tourism. She mentioned the improvement in communication with provincial and local government and the NDT as a vital factor in yielding the desired results of finding solutions to the challenges that hindered the progress of the tourism industry.
Ms Bashni Muthaya, Chief Strategy Officer, SAT, went through the overview of tourism and the figures available in the presentation. She reported that the period focused on was April 2018 to November 2018. International arrivals to South Africa in this period had remained flat, as the growth was 0.1% when compared to the same period in 2017. Africans accounted for a significant amount of arrivals to South Africa, with a growth of 1.1%. In addition to growth in arrivals from Africa, growth was also recorded from the North, Central, and South Americas. In all other regions the international arrivals to South Africa showed a decline of 3.1%. The required target for growth in this period had been 6.5%, and the growth of 0.1% was significantly below the target.
The latest statistics for December were not as expected, and growth for the 2018 calendar year had been 1.8%. This growth was still below the required target, and December had not yielded the expected results in terms of international arrivals. The overall tourist arrivals and domestic holiday trips showed growth, but did not meet the targeted growth for the period. The revenue indicator was looking better for both domestic holiday trips and international arrivals.
She moved on grading and quality assurance, and said that in the period ending in December 2018, there has been an improvement of 4% from the previous period. The target for 2018 had been set without considering the numbers for the previous year, and therefore SAT was pleased with this turnaround and positive performance.
From the business events perspective, SAT had supported 49 bids, which was lower than the required target of 53. She was confident that SAT would meet the required target of 105 bids for the year. She reported on the distribution of bids submitted for meetings, and indicated that apart from Cape Town, there had also been smaller cities submitting bids. The submission of bids in the third quarter represented an economic value of R300 million should the bids be won.
Ms Muthaya gave an overview of the organisational performance of SAT. The programmes included corporate support, business enablement, leisure tourism, business events and tourist experience. Four key performance indicator (KPI) targets had been met across all programmes and reported on. The six KPI targets under the leisure tourism marketing programme had not been met due to insufficient data. SAT depended on Statistics SA for the data of the six KPIs not reported.
Ms Muthaya reported on the detailed organisational performance by programme, and said that on the annual targets of key performance indicators for corporate support, SAT was on track. It had achieved the target of an unqualified report for the second and third quarters. For the business enablement programme, SAT was on target to meet the annual target for stakeholder satisfaction. Participation at the tourism leader forum was an engagement that took place, as face-to-face engagements were a key outcome of the previous survey.
She reported on some of the reasons for the negative performance from overseas markets. These had included negative coverage, particularly the water crisis, land expropriation debates, and safety concerns. SAT continually worked with both the travel trade and media in source countries to make sure that people came to SA to experience the destination first hand, and not rely on perception and stories. From a PR and communications perspective, SAT had developed a communication strategy to address the safety issues and putting into context the land expropriation debate, and with this initiative, SAT worked closely with the NDT.
She reported on the geographic spread and seasonality of the international tourists, and said that a marketing initiative from SAT was needed to overcome under-performance. The total domestic holiday revenue target was not met for the second quarter, and data for the third quarter was unavailable. Spending had improved for the second quarter in 2018, compared to same period in 2017. The Sho’t Left Travel Week was one of the efforts made to improve the revenue and there were also good deals offered on domestic holiday trips, which were up to 50% discounts.
Ms Muthaya reported on the compulsory requirement to include small, medium and micro enterprises (SMMEs) in all SAT itineraries, and said they had exceeded the targets for the financial year. SAT was 60% towards reaching the annual target for business events hosted.
She referred to the number of bids for the third quarter not met due to slow submissions in the festive season. In terms of the number of graded accommodations and establishments, SAT was behind on the targets, but in terms of actual performance there had been an increase.
Mr Tom Bouwer, Chief Finance Officer (CFO), SAT, reported on the financial performance up to the end of December 2018.
He started off with the revenue budget, looking at the government grant, and said that SAT had received its funds on time from the NDT. It had received 89% of income in the annual budget for the financial year, and was forecasting to receive more that 100% of the annual budget.
He reported on the expenditure budget as per programme. On corporate support, 76% of the budget had been spent, with a forecast of 138% to be spent due to upfront contracting. Business enablement was not on target as they had spent 63% of the actual budget. On leisure tourism marketing, 82% of the budget had been spent, business events were on target, and visitor experience had not met the target. He stated that the forecast of R856.4 million expenditure of the total budget was due to the commitment by SAT to spend a guaranteed 60% of the budget, and in the total figures SAT had spent 81% of the total budget.
The CFO stated that the current meeting was the entity’s last meeting in the current Parliament.
Deputy Minister Thabete, explained her surprise attendance at the meeting, as she had sent her apologies before the meeting. She had appreciated the presentation. SAT was the only entity of the NDT and was tasked with marketing, but it faced many challenges, especially in terms of the capacity. The NDT was doing more with less due to the budget cuts, and was taking the sector back. She mentioned the water crisis challenge that had had an impact on SA being a destination, and was optimistic about SA still being a destination for tourists. She emphasised the point raised in the SONA that the NDT needed to work in an integrated way with other departments.
The Chairperson thanked the Deputy Minister for her support and the work done by the SAT. She commended work done by SAT in putting tourism on the map.
Ms P Adams (ANC) said that the difficult questions of the Committee drove SAT to constantly improve their work. On the bids submission per city, she asked what the SAT input on bids’ submission was. The reason she asked the question was because there were combinations of Cape Town and Sun City -- could SAT play a role to convince cities to combine with less visited areas? For example, if an event was in Durban, why could the conference people not be airlifted to Umtata? While on the subject of Mthatha, she asked if SAT could measure the effect the Umtata airport downgrade had had on tourism. She was also concerned with airlines, and asked if SA Airlink and SA Express were the only airlines interested to in providing flights to the Mthatha side of the country? Could SAT persuade airlines such as Mango and Khulula to fly there?
She commented on the high-level summary of second and third quarter performance pie chart, and stated that the 56% of the KPIs were reported on an annual basis, and SAT had to look at a way to monitor KPIs for third quarter. She referred to the 39% of media expenditure, and asked the CFO how he measured the value of the money put into media yielding the desirable outcomes. If the numbers were declining, what did the SAT plan on doing?
She commented on the vacancies and acknowledged the challenges that existed, as she was inclined to think that the vacancies influenced SAT’s performance. How did SAT plan to deal with the negative perceptions? The Cape Town water crisis had forced the other regions to consider using their resources effectively, and that had shifted the focus on to how SA responded to crises, and SAT should tap into that.
On the relaxed visa regulations in December, she asked if SAT had assessed the effect this had had on tourism. She also wanted to know if SA could do what other countries were doing to tap into the China-India market.
Ms S Xego (ANC) said she would not raise her concerns, as she noted some of them were covered in the Legacy Report and not all was lost -- the concerns would be taken care of by the 6th Parliament. She commented that the targets on the Expanded Public Works programme (EPWP) recruitment had not been met, and SAT needed to pay attention to that. Even if SAT was not going to report on the fourth quarter, it must keep flying the flag high and continue the good work. She emphasised the point of difficult questions asked by MPs to SAT, and said that those questions pushed it to think out of the box.
Ms S Nkomo (IFP) wanted to know if, despite having fewer international tourist arrivals, SAT was getting more revenue, that this meant it was dismissing the importance of domestic tourism. She wanted an explanation of what SAT was doing to improve domestic tourism. When would it finally release actual figures for black economic empowerment (BEE) targets and make a bold statement on them, because it was important. She asked if the communication strategy reached the ordinary people on the streets, and how the SAT communication strategy could help with the negative perceptions that people had and talked about when it came to SA.
Ms E Masehela (ANC) thanked SAT for the report, and wanted to know if there was a possibility of making the grading of accommodation establishments compulsory. What investigations had SAT done in this regard?
Ms Dlamini said that SAT played a major role in the coordination of bids, and she welcomed Ms Adams’ suggestion to combine with smaller cities. There was a national coordinating forum (NCF) which consisted of a provincial convention, and the encouragement of smaller cities to combine with big cities was an area to explore. SAT was doing capacity building and training smaller cities on issues around dealing with meetings and encouraging them to look at the Meetings, Incentives, Conferences and Exhibitions (MICE) element as a viable business for the cities. One of the initiatives coming from the NCF was to look at national meetings, and SAT was engaging national associations to get the cities to bid among themselves. She gave the example of the Nursing Association meeting in Durban yearly. Instead of going to Durban, SAT wanted to get the Nursing Association to get multiple cities and smaller cities to bid for hosting the meeting instead of always hosting the meeting in Durban.
On the question of the role of SAT in ensuring there was an air service to smaller cities, she said that SAT was part of the Provincial Route Development Committees, and so far SAT sat in the Western Cape, Gauteng and KwaZulu-Natal. It knew that the three big airports would attract new airlines and SAT was encouraging a geographic spread through engagement with the feeder airlines to fly to smaller cities. At the next sitting, there would be a report.
She welcomed the suggestion on KPIs, to report on a quarterly basis even if they were annual targets, as that was good governance.
She said that the 39% of budget allocated to media was not enough, looking at the kind of work SAT did, and she linked that to perception. If one looked at the brand performance and where SAT loses tourists, it was due to people being aware of the negative perceptions of SA as a destination. SA loses 57% of potential visitors due to negative perceptions, and that was where media played an important role. SAT had targets set on brand positivity and brand awareness, and that was how it measured the impact of media expenditure. Currently SAT was at 39% for brand positivity, with a target of 40%, and 79% for brand awareness, with a target of 80%. It was running the last brand checking study in February, and the results would be out in March.
On the issue of vacancies, the COO acknowledged that vacancies had an impact on productivity, and SAT was tracking that all the time. With regard to senior position vacancies, the SAT Board was currently concluding the recruitment process next week, particularly the Chief Marketing Officer position, which is a critical post on issues of perception.
She responded to the question on visa regulations, and said that although the announcement stated that visa regulations had been relaxed in certain markets, SA had battled with the issues of capacity to process the visas and inconsistency in implementing the changes. These issues had been taken back to the NDT to engage with Home Affairs. She was pleased to announce that as part of the engagement with the Chairperson of the Tourism Business Council of South Africa (TBCSA), it had met with the Department of Home Affairs to resolve some of the issues, and that an e-Visa launch would be piloted in April. Issues around unabridged birth certificates had been gazetted. Airlines needed to be educated to be able to implement the reforms so that there could be across the board implementation. Tourism still faced some challenges on visa regulations.
She said that India and China and the continent had made the SONA because of the importance of these markets, and SAT was taking advantage of the Mumbai route for South African Airways (SAA). There were negotiations under way to look at the Guangzhou route, which was going to be an advantage. She gave an example of the Chinese announcement that New Zealand was a destination for 2019, and looked at the issues of signage, availability of language, availability of products, airlift, and tourist guides, that the destination had prepared itself for the Chinese tourists. There was an opportunity to tap into the China market, and SAT was looking at strengthening the sales flag instead of leaving the trade to be responsible for selling. SAT needed to play the facilitation role, identify the products, and know the products on the ground to take to the trade partners. She mentioned that SAT had expended on service providers to provide services in those hubs that had replaced the one-on-one market of China and Germany announced 18 months ago.
She said that the PR partners in the market played an important role. Instead of looking into one country, the PR would look at various countries and focus on the India and China markets. Data and insights played an important role in their lives, and SAT had now strengthened the Siya team to constantly provide data to influence the marketing spend and decisions.
She responded on the question of communication strategy, and said the SAT board had prioritised the ‘We Do Tourism’ as a campaign to educate the people of South Africa about the importance of tourism. Now that tourism had been mentioned in the SONA, SAT got phone calls from people on how they could assist and participate in the tourism industry. The ‘We Do Tourism’ was the communication strategy to improve SA as a destination.
The COO was tempted to take the issue of making grading compulsory up with the Deputy Minister, as that was a policy matter, but it had opened discussions for the next best model for grading.
Ms Muthaya clarified the issue of tourism broadly having an impact on the economy, and said that the spending was the driver. The spending was made up of two parts -- the number people who travel and how much they spend. The volume and value part of the equation were both important to ultimately have an impact on the economy, and she had been misunderstood when the Members thought she was saying one was more important than the other. There was a need for a growing the volume of domestic and international tourist to the right value, and emphasised that the tourists must be spending for tourism to yield the economic benefits. She said that due to the tough economic conditions, people were making trade-offs in terms of the number of trips they were taking and how much they were spending. That was the insight SAT needed to better understand about SA travellers so that it could get people to travel more and spend more. She emphasised it was important for tourism to grow in terms of volume and value in order to get the economic benefits.
Mr Bouwer responded to the BEE question, and said that BEE targets were set quarterly. He said that SAT buys media in bulk, and gets huge discounts by paying up front – in some instances, up to 30%. It had been fortunate that Treasury had given it money up front to mitigate currency exposure. Every year, the money received up front had saved SAT with a weakening currency at the beginning of the year. Executive committee (EXCO) members and senior management had saved a lot of money by flying economy class instead of business class, and said that the CEO was insistent on efficiency.
Ms Nombulelo Guliwe, General Manager: Finance, SAT, provided clarity on some of the responses. On the question of the Mthatha airport, she said that only certain types of aircraft could land there due to its size, so SA Airlink and SA Express are the only airlines that could fly that route.
When considering making grading compulsory, SAT needed to have the capacity to deal with the issues of enforcement – the costs of enforcements, and the overall cost of doing business.
She commented on the issue of visas, and assured the Committee that SAT was continually engaging with Home Affairs. The problem was that Home Affairs had not updated their system to accommodate the changes that had been effected in respect of the travel of minors.
The Chairperson thanked SAT, and humorously stated it was last meeting for some of the Members of the Committee. She said the Committee had learned a lot from SAT and she hopes that SAT has gained insight on what the legislators were thinking and how legislators wanted SAT to implement the changes. She commended the work done by SAT, and said that she had seen growth in the tourism industry, and hoped that SAT had a recovery plan.
She wished CFO a happy retirement and appreciated the efforts made by the CFO to the tourism industry.
Draft Report and Minutes
Ms Xego pointed out that under the apologies, Ms Thabete was indicated as an EFF Member, and that needed to be corrected.
The Chairperson went through the minutes of 21 November 2018. Ms Bekwa moved the adoption of the minutes, and Ms Masehela seconded.
The Chairperson went through the minutes of 13 February 2019. Ms Xego moved the adoption of the minutes, and Ms Masehela seconded.
The Chairperson went through the minutes of 27 February 2019. Ms Masehela moved the adoption, and Ms Adams seconded.
The Committee Secretary said that the draft report was based on what had been presented by the NDT, and he wanted the Committee to adopt the report so that it could be transported to the Legacy Report and carried through to the 6th Parliament.
The Chairperson went through the six recommendations that had been put forward in the Portfolio Committee on Tourism meeting, and Ms Xego moved the adoption of the report. Ms Nkomo seconded.
The meeting was adjourned.