State of transformation in the Tourism Sector: Tourism B-BBEE Charter Council briefing; Howick Oversight Report

Tourism

29 October 2019
Chairperson: Mr S Mahumapelo (ANC)
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Meeting Summary

The Tourism Broad-Based Black Economic Empowerment (B-BBEE) Charter Council briefed the Committee on the state of transformation in the tourism sector and in so doing elaborated on the work done by the former Charter Council that had served from 2016 to 2019. The current Charter Council was appointed by the Minister of Tourism in February 2019. Some of its members had sat on the Charter Council before whilst others were new.

Key achievements realised in line with the former Charter Council’s Plan of Action were highlighted. The Plan of Action amongst others called for the effective monitoring of compliance with B-BBEE Codes, the supporting of new entrants into the market and for tourism human resource development. Recommendations made to the new/current Charter Council was also be elaborated upon. These recommendations would be the basis of the new Programme of Action to fast track transformation in the sector. Charter Council work was also done through sub-committees and sub-committees were established to deal with entrepreneur & supplier development; funding; human resource & skills development and also on special projects & communication. The independence and institutionalisation of the Charter Council was of utmost importance. The Charter Council also worked on its presence around SA and wished to co-opt members from townships, rural areas etc to be the voice of the youth, women and disabled persons. The Charter Council noted that many small players in the sector complained that they did not get enough support from government on matters like skills development and capacity building etc. A huge concern was that many small businesses had to also close shop because government was a slow-payer when it came to procurement. This was an indictment on government and had to be addressed.

Members were in agreement that transformation in the tourism sector was not where it should be. The reality was that in the tourism sector ownership and management was not yet transformed. Members observed that there seemed to be resistance to transformation in the sector. Members felt that there needed to be consequences where resistance was encountered. Targets with timeframes had to be set. A more aggressive approach was needed.

Members felt that perhaps the Charter Council would perform better if it was directly funded by government. Members appreciated the planned efforts of the Charter Council but were more interested on what was actually done at grassroots level. Members were concerned that government in procuring goods from Small, Medium and Micro Enterprises (SMMEs) were paying its invoices late. It was a matter which needed attention as many SMMEs had to close shop because of it. Members wished for villages, townships and small dorpies to feature in the plans of the Charter Council.

Members observed that there seemed to be a mismanagement of how regulations and empowerment policies had been set up. To assist SMMEs members felt that costs attached to grading should be scrapped. Members agreed that the Charter Council should be independent and autonomous from the influence of the tourism industry. On the visibility of the Charter Council members asked how it interacted with provinces and with local government. Members pointed out that the Fourth Industrial Revolution posed both threats and opportunities. The Committee for one was concerned about the threat to employment that the Fourth Industrial Revolution held. Job losses were a concern.

The Committee, in the interest of time, asked the Charter Council to in writing provide responses to the questions that members had asked. The Charter Council assured the Committee that it would provide the written responses as requested.

The Draft Howick Oversight Report, September 2019 was adopted unamended.

Meeting report

Opening remarks by the Chairperson
The Chairperson congratulated the Springbok Rugby Team for reaching the semi-finals of the 2019 Rugby World Cup (RWC) in Japan. He recalled that in a previous meeting he had stated it was important for the Springboks to do well how from a branding perspective. SA was now in the RWC Final and was facing off with England, its colonisers of yesteryear. He said that there should be a programme in place to celebrate the Springboks when they returned home. SA was on a journey to prosperity. There was a need to disentangle SA from its challenges of Apartheid and Colonialism. The aim of the present meeting was around transformation. The transformation referred to was the journey of convergence that SA took post- 1994 in creating a new SA. He was realistic about the journey being a difficult and protracted one. He noted that some would be negative about it and say that attempts at transformation should be abandoned. The question was about what impact transformation is making in the tourism sector. Yes, transformation was now relevant in the South African context but in the future it would simply be a concept recorded in history books. Colour would no longer be an issue in the future.

He pointed out that the Committee had decided to focus on three things. The first was transformation in the sector which the Committee would track yearly from September to September.  The second thing was around the vibrancy of tourism in the periphery of tourism. Poverty was mostly found in villages and townships and hence tourism efforts needed to be directed towards them as well as towards small dorpies. The third thing that the Committee would focus on was general oversight over the Executive. It came down to how funds were spent. The Committee would also be establishing community based tourism oversight forums. He noted that transformation was not an easy discussion point but it had to be remembered what SA wished to achieve in the context of the tourism sector. Even the constitution of SA spoke about dealing with the injustices of the past. The intention was not to have polarisation but rather convergence.

Briefing by the Tourism Broad-Based Black Economic Empowerment (B-BBEE) Charter Council
Ms Lindiwe Sangweni-Siddo, Chairperson, Tourism B-BBEE Charter Council, appreciated the heads up given to it by the Chairperson around the Committee monitoring transformation in the sector on an annual basis from September to September each year. The Charter Council would do its best to align its efforts. The Charter Council by no means had all the answers. She also noted the importance of focusing tourism efforts on villages, townships and small dorpies. During World Tourism Day Celebrations in Howick there were already youth programmes that covered rural areas. Many sectors within the tourism industry complained that they were excluded. For instance, disabled persons complained about access and transport.

Tourism made huge contributions towards SA’s Gross Domestic Product (GDP) and was a good driver for job creation.

She pointed out that the current Charter Council was appointed by the Minister of Tourism in February 2019. Some of its members had sat on the Charter Council before whilst others were new. The purpose of the briefing was to speak to the state of transformation in the tourism sector and in so doing elaborate on the work done by the former Charter Council that had served from 2016 to 2019. Charter Council members served a three-year tenure. Key achievements realised in line with the former Charter Council’s Plan of Action would be highlighted. The Plan of Action, amongst others, called for the effective monitoring of compliance with B-BBEE Codes, the supporting of new entrants into the market and for tourism human resource development. Recommendations made to the new/current Charter Council would also be elaborated upon. These recommendations would be the basis of the new Programme of Action to fast track transformation in the sector. She noted that work was also done through sub-committees. The Charter Council decided to focus on where there were gaps and challenges that people on the ground experienced. Sub-committees were established to deal with entrepreneur & supplier development; funding; human resource & skills development and also on special projects & communication. The independence and institutionalisation of the Charter Council was of utmost importance. The Charter Council also worked on its presence around SA and wished to co-opt members from townships, rural areas etc to be the voice of the youth, women and disabled persons.

Ms Sangweni-Siddo noted that many small players in the sector complained that they did not get enough support from government on matters like skills development and capacity building etc. Many small businesses had to also close shop because government was a slow-payer when it came to procurement. This was an indictment on government and had to be addressed. 

Key achievements by the previous Charter Council
- A Tourism Roundtable and Transformation Summit was hosted in October 2017. The Summit brought about recommendations around access to funding; procurement and market access; innovation, training & skills development and lastly on the autonomy of the Charter Council & having more focussed monitoring.
- Undertook research on the State of Transformation in the Tourism Sector.
- The Charter Council together with the National Department of Tourism (NDT) developed the Tourism B-BBEE Portal which was work in progress.
- Developed the Transformation Strategy to transform the sector beyond the targets set by the gazetted B-BBEE Codes.
- Presented the Report on the State of Transformation to the Tourism Leadership Forum, the Tourism Business Council of SA (TBCSA) and to other stakeholders.
- Raised awareness on the Tourism B-BBEE Codes in all nine provinces and distributed simplified guides to demystify B-BBEE.

Recommendations for the New Charter Council included
-On re-organising the Tourism B-BBEE Charter Council as an independent body, the Charter Council should be funded 50/50 jointly by government and the private sector. The NDT should provide support.
- There should be improvement in communicating the work and successes of the Charter Council. This could be done by speaking about transformation at the Tourism Indaba etc.
- To create an enabling environment for the mainstreaming of transformation to help tourism enterprises to embrace the agenda. The Charter Council should engage more with stakeholders at major tourism events like the Tourism Indaba and Travel Africa.
- Given that procurement from small businesses by both private and government entities was still a major concern serious intervention strategies to support Small Medium and Micro Enterprises (SMMEs) should be identified. This could take the form of an Enterprise and Supplier Development Indaba to showcase SMMEs for procurement and matchmaking.
- There was a need to review the Tourism Transformation Fund funding criteria as the current intake was not satisfactory.
- More should be done to review the Enterprise Development Model.

The Committee was provided with an organogram of the proposed organisational structure for the Charter Council. Members were also provided with an overview of the Charter Council’s efforts across provinces on consultation. 

Mr Nesang Maleka, Chairperson: South African Youth in Tourism and Hospitality, Tourism B-BBEE Charter Council, said that the Tourism B-BBEE Sector Codes differed from province to province. He acknowledged that officials at local level did not know the value of tourism. The issue was about what the Codes meant from a local government perspective. What were the consequences for non-compliance? It was something that the Charter Council was looking at. The Charter Council was also considering being innovative when it came to the Codes.

Discussion
Mr M Galo (AIC) emphasised that the poor needed to be empowered, especially in rural areas. Tourism was the best vehicle to achieve this. On the mandate of the Charter Council, he understood that it was funded by the NDT. He asked whether the Committee could lobby Parliament for the Charter Council to be funded directly by National Treasury. He pointed out that the National Development Agency (NDA) was getting direct funding from government. Why could the same not be done for the Charter Council? The NDA and the Charter Council could complement each other’s work as far as alleviating poverty. He felt that the Charter Council would perform better if it got direct funding from government.

Ms Mmatsatsi Ramawela, former Chief Executive Officer (CEO), Tourism Business Council of SA (TBCSA) and entrepreneur, responded that the real issue was around communication and on the viability of the Charter Council. It was also about providing assistance to SMMEs with regard to applying for funding etc. A positive attitude to transformation was needed. It was in the interests of everyone. Redress of the past was needed. There was also a need to have development that was parallel. One could not take from Peter to give to Paul. Perhaps the funding model could be similar to that of the National Student Financial Aid Scheme (NSFAS). She pointed out that the Industrial Development Corporation (IDC) had a great deal of distressed assets. The problem was that the IDC in giving loans charged close to market related interest rates. The challenge was about getting the correct mix for the funding model.

Mr H April (ANC) appreciated that things were being planned but said that what was important was what was actually being done. He was concerned that government paid its small suppliers late. It had unfortunately become the norm. He pointed out that transformation on the ground was at a slow pace. Little had been done to change ownership patterns in the tourism sector over the past 26 years. An aggressive approach was needed to change the imbalances of the past. He did stress that the pressure was mounting from the predominantly black poor.

Ms M Gomba (ANC) appreciated the work of the Charter Council but hoped that villages, townships and small dorpies were included in its plans. Nothing had been mentioned in the presentation. The Committee needed to hear specifics of what was being done. Vibrant tourism should include villages, townships and small dorpies. She felt it of utmost importance for small businesses to be funded. There could be no progress without funding. She was concerned about franchise rules that kept SMMEs out of the market. For instance on procurement, hotel franchise groups required the franchisee only to purchase from them. This limited SMMEs to come on board to supply the franchisee hotel. SMMEs should be given opportunities. She asked why local women could not be used to do the laundry of hotels. How did the Charter Council deal with this? She asked whether the Charter Council had aligned its efforts with President Cyril Ramaphosa’s 2019 State of the Nation Address (SONA) call to reduce unemployment through tourism. The Charter Council was asked whether it was adhering to the Specific, Measurable, Achievable, Reliable and Timely (SMART) Principle.

Ms Gomba asked at what level the Charter Council had forums. She noted that the Committee too had forums at local government level.  She felt that the private sector could do much more on skills development in the sector. Government departments should design mechanisms that could assist in bringing about transformation. She pointed out that online-bookings were becoming the order of the day. Black businesses were automatically excluded when it came to online bookings because they could not afford to have the technology that went along with it.  This affected the equitable share of SMMEs in the sector. 

Mr H Gumbi (DA) observed that there seemed to be a sense of mismanagement of how regulations and empowerment policies had been set up. To assist SMMEs, he felt that the cost attached to grading should be scrapped. He noted that the Tourism Amendment Bill covered the issue of online bookings.
He disagreed with Ms Gomba and felt that online bookings brought greater competition to the market. The Charter Council was asked what some of the more immediate obstacles to new businesses from entering the market were.

Mr G Krumbock (DA) agreed that transformation in the sector was not yet where it should be. He pointed out that a century ago there were thriving black entrepreneurs. This was before the advent of Apartheid. At the turn of the last century blacks were forced off their land and were forced to work in mines. It was a concern that post 1994 there was still something amiss. He had, on an oversight visit, been to a boutique hotel and gone on a game drive and had not seen a single black person. He did however concede that in all probability the R25m business that he had visited was probably white owned. The reality was that in the tourism sector ownership and management was not yet transformed. Yes, there was black participation but it was not where it should be. He suggested the need to quantify the numbers.

Mr Krumbock highlighted that there were surprising facts out there, one of which was that trade unions had the biggest ownership stakes in companies listed on the Johannesburg Stock Exchange (JSE). What level of transformation was there in big companies? What was the percentage of transformation? He also asked why there were not more black investors in medium sized businesses. Why had more businesses not been developed to compete with existing businesses in the sector? He noted that 15 years ago legislation was put in place on preferential procurement. Yes, transformation would be furthered but there was an additional cost of 20%. There were thus trade-offs that had to be considered. Were regulations the answer to further transformation? For instance, if there were 100 small bed & breakfasts, would they use black suppliers and pay the additional 20% or would they go with the most competitive priced products? He suggested that instead of regulating, the base of entrepreneurs could be grown by way of grants like those offered by the NSFAS. It was better to grow the pool of entrepreneurs than to develop existing ones.

Mr P Moteka (EFF) observed that there was resistance to transformation in the tourism sector. On page 22 of the presentation, the figures reflected that black ownership was 43% or less. Black men in management positions was 10% or less. The figures showed the lack of transformation in the sector. On black ownership across the provinces the figure sat at 48% or less for seven of the nine provinces. Only Mpumalanga and Limpopo Provinces had ownership figures above 50%. The figures showed that blacks had greater ownership in the poorer provinces and that in the richer provinces black ownership figures were low. For transformation to work there was a need to be aggressive. A good start was for black people to own the means of production ie own farms. It all came down to money. He suggested that standards be set. The breakdown of funds expenditure in the Transformation Fund needed to be looked at. There needed to be stipulations that X, Y and Z amounts needed to be spent on villages, townships and small dorpies respectively. Transformation needed to be done robustly and radically. There had to be consequences where there was resistance to transformation. There needed to be a deliberate attempt to encourage black industrialists. Targets with timeframes attached had to be set.

Ms T Xego (ANC) said that part of the Charter Council’s mandate was to provide guidance and to share information. She felt it important for the Charter Council to work with the Department of Small Business Development (DSBD). She noted that the Committee had always been concerned about the slow pace of transformation in the sector. One major problem identified was the lack of funding. Another problem was land ownership. Small entrepreneurs did not own land. There needed to be a balance between the lack of funding and the lack of access to land. The development of villages, townships and small dorpies needed to be looked at. There had to be a shift of focus from cities to villages, townships and small dorpies. Some of the issues that the Charter Council had raised were already identified by the Committee. She was tempted to support the Charter Council being funded by government directly. She agreed that the Charter Council should be independent and autonomous from the influence of the tourism industry.

Mr E Myeni (ANC) asked whether what was planned by the Charter Council would be implemented given that the Charter Council’s term was only three years. Could the Charter Council assure the Committee that there was black participation in the sector and what percentage was the participation? On the visibility of the Charter Council he asked how it interacted with provinces and local government.

Mr M de Freitas (DA) said that if it was true that there was resistance by the sector to transform he would like to see research that confirmed it. What were the barriers to transform? How could things be changed? He suspected that there may be a desire to transform but that there were barriers to prevent it from happening. He would also like to see greater research on what government could do to encourage transformation. Government could provide incentives like tax breaks which had worked well internationally.

Mr Z Peter (ANC) agreed that transformation was slow but said that not all was lost. On the lack of marketing efforts to promote new SMMEs, he felt that the 80/20 principle should be turned around and that 40/60 was a better option. Government and its entities had to change its approach on communication. Achievements had to be spoken about. He too felt that the focus should shift to villages, townships and small dorpies since unemployment was highest amongst them. He was concerned about government making late payments to its suppliers. He pointed out that the tourism sector employed a great deal of foreigners as they were a source of cheap labour. He was pleased that there was an industrial approach on SMMEs to be taken on board. Why could the laundry of big hotels not be done by SMMEs? A collective approach was needed.

Mr K Sithole (IFP), on the Charter Council’s proposal that private companies should develop programmes to address skills development and empower black employees, expressed concern about private companies doing things on their own without government’s involvement. The Charter Council had also proposed that government departments should design mechanisms to enforce and fast track transformation. What were private companies doing? He pointed out that the Charter Council had done consultations in the KwaZulu-Natal Province but these were only done in Durban and Pietermaritzburg. What about consultations in rural areas?

Ms L Makhubele-Mashele (ANC) urged members to bear in mind what the mandate of the Charter Council was. Some of the issues that members raised did not necessarily fall within the mandate of the Charter Council. The ones that members needed to speak to was stakeholders who should drive transformation. It was evident to members that much work still needed to be done around transformation. Government, private sector and stakeholders all needed to come on board. It was not the task of the Charter Council.  She observed that members of the Charter Council itself were also part of the tourism sector and asked whether these members and their organisations could be the blockages or hindrances to transformation that was the problem. It was not the private sector’s task alone to drive transformation but also government’s responsibility. Yes, the Fourth Industrial Revolution did pose threats and opportunities. The Committee for one was concerned about the threat to employment that the Fourth Industrial Revolution held. Job losses were a concern. If there were threats she asked what could be done to mitigate it. Gradually less and less people would be needed. The NDT needed to brief the Committee on the threats and opportunities of the Fourth Industrial Revolution. She suggested that a study be done. She stated that there seemed to be no structure to the supply and demand tourism value chain. The issue needed to be looked at. A showcase was needed on who supplied what and on what the demand was. This could take the form of a Supply and Demand Indaba. There was a great deal of potential in the tourism value chain. It was about supply and demand and whether the demand could be met. There had to be network linkages between small and big players. Access to markets for small players was still problematic. Blockages had to be identified. What was the problem for big tour operators to link up with small tour operators in townships? She asked why the big boys could not take the smaller operators on board. The issue was about how to dismantle monopolies. She said that perhaps there were policy gaps and asked the Charter Council to inform the Committee if there were.

The Chairperson, addressing the Charter Council, said that it did not have to respond to everything as much of the issues raised fell beyond the mandate of the Charter Council. Referring to Mr Krumbock’s comments, he was not sure whether blacks were flourishing before Apartheid. He noted that supply and demand had to be looked at from a global perspective. SA did not control the means of production globally. He felt that the Committee needed to meet with the Charter Council at least once a year. On slow or non-payment of suppliers by government, the Committee needed to get specifics. Further, the industrialisation trajectory in tourism had to be looked at. It was about what was consumed in tourism and about potential industries that could emerge. This could be linked to agro-processing. The Committee would engage with Departments of Small Business Development, Public Enterprises and Agriculture. The Committee needed insight into the short term, medium term and long term goal of the Charter Council. Inhibiting factors caused by the regulatory regime had to be looked at. For instance, members of Parliament could not stay at places of accommodation that was below four stars grading even if they themselves chose a lower star graded establishment.

Mr de Freitas, in the interests of time, asked that responses to questions asked by members be provided in writing to the Committee.

The Chairperson agreed that written responses was best and asked the Charter Council to wrap up its briefing with concluding remarks

Ms Sangweni-Siddo was mindful of time constraints but said that there was much that members had said which the Charter Council would want to agree with. The Charter Council and members seemed to be on the same page. A great deal of work lay ahead but due to the Charter Council’s mandate some areas were beyond its area of work. It was crucial for members of the Charter Council to use their networks. On the independence of the Charter Council, she conceded that perhaps it was something which the body had not yet reflected on. She understood members’ concerns that if the Charter Council was privately funded then transformation efforts could be compromised. The Charter Council should be funded in such a way that it was truly independent. She assured members that when the Charter Council put its plan of action together member’s concerns would be taken into consideration. The Charter Council was in the process of planning and setting up its sub-committees. On the empowering of suppliers and the participation of South Africans versus non South Africans the requirement was for 85% to be South African. Of the 85%, 50% had to be black African. On consequences of non-compliance, she said it still remained to be answered.

Mr Jeremiah Mabena Deputy Chairperson, Tourism B-BBEE Charter Council, on technology and enablement, responded that there was a project outside of the Charter Council that was quite transformational.

Mr Black Komani, Deputy Group Chief Executive Officer of Tourvest and Chairperson of the TBCSA, said that he would invite members to speak to Tourvest. On non-payment by government, Tourvest had created a virtual credit card which allowed payment to be made to the small supplier until government paid. Tourvest took the risk not the small supplier.

Ms Morongoe Ramphele, Deputy Director General: Tourism Sector Support Services, NDT, on threats and opportunities’ analysis of the Fourth Industrial Revolution, said that the NDT was planning an innovation conference down the line. In terms of visibility of the Charter Council, she stated that there were learning networks where for instance through the South African Local Government Association (SALGA) municipal officials could be brought on board. It was a platform that the Charter Council could piggyback on.

Ms Sangweni-Siddo assured the Committee that written responses to members’ questions would be provided. She thanked the Committee for its cooperation.

The Chairperson too thanked the Charter Council for its commitment in as much as there were problems of co-option and resistance in the tourism sector.

Consideration and adoption of Draft Howick Oversight Report, September 2019
The Draft Report was adopted unamended.

Committee Minutes
Minutes dated 22 October 2019 was adopted unamended.

The meeting was adjourned.


 

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