Department of Tourism 2021/22 Quarter 1 & 2 Performance


01 February 2022
Chairperson: Ms L Makhubela-Mashele (ANC) (Acting)
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Meeting Summary


In a virtual meeting, the Portfolio Committee was briefed by the Department of Tourism on its performance in the first and second quarter of the 2021/2022 financial year.

The Deputy Minister highlighted that the Department had not done very well overall in the first and second quarter but there were some programmes which had done very well. The Department had faced challenges in implementing its recovery plan and its Annual Performance Plan (APP) due to the Covid 19 variants.

The Department had achieved 71.64% of the targets in the period. 11.94% of the targets had not been achieved but had still registered significant work done. 16.42% of their targets had not been achieved and required interventions.

Members asked the Department about the recurring nature of wasteful and fruitless expenditure; the consistent underspending across its programmes; the progress of the policy review document; the timeline for completion of its policy review; and if the Department had engaged AfriForum and Solidarity to find a way forward after the court interdicts against the Covid-19 Tourism Relief Fund and the Tourism Equity Fund.

Meeting report

The Acting Chairperson noted the apology from the Chairperson who was on sick leave and from the Minister who was attending a cabinet meeting. The Department had not performed well in the t quarters due to delays in the implementation of planned projects which led to under expenditure by the various programs within the Department. In the second quarter the Department had only spent over 800 million of its 2.4 billion for the financial year which was only 36% of its budget. The Department had fruitless and wasteful expenditure amounting to R12,000 while also registering irregular expenditure in the awarding of tenders and quotes. The meeting was therefore an opportunity for the Department to address the issues regarding their performance.

Deputy Minister’s Remarks
Deputy Minister, Amos Fish Mahlalela, highlighted that at the start of 2021/22 the Department was operating under the strict conditions and adjusted strategies as part of the process of managing the Covid-19 pandemic. Upon passing the budget, the Department faced various restrictions and lockdowns which made their work challenging due to the new Covid variants. The Department faced challenges in its service delivery as it implemented its recovery plan and the Annual Performance Plan (APP). The recovery plan had been used as the basis for the APP. The Department had not done very well in the first and second quarter but there were some programmes in which it had been doing very well.  The Department was going to explain the reasons for the failure and the remedial actions it was undertaking.  

Department of Tourism (DOT) 2021/22 Quarter One and Two Performance
Mr Victor Tharage, DOT Director-General, said the Deputy Directors General would present the performance of each of their programmes, and the CFO would take the Committee through the financial performance. Mr Tharage presented the Department's service delivery environment and overall performance. DOT  had achieved 71.64% of the targets in that period. 11.94% of the targets had not been achieved but had still registered significant work done. 16.42% of their targets had not been achieved and required interventions.

Programme performance was presented by Ms Anemé Malan, Deputy Director General (DDG): Tourism Research, Policy and International Relations; Ms Lerato Theko, Parliamentary Liaison Officer for the Deputy Minister’s Office presented in the stead of Ms Shamilla Chettiar, DDG: Destination Development; Ms Mmaditonki Setwaba, DDG: Tourism Sector Support Services, Ms Rhulani Ngwenya,  DDG: Corporate Management and DOT Acting CFO, Mr Mohith Maharaj, gave the financial report (see document).

The Acting Chairperson welcomed the presentation and noted that the Department was reporting that they had operated in an environment that had negatively impacted performance during the two quarters due to occurrences such as the Covid 19. The adverse environment made it hard to operate and achieve some of the service delivery objectives.

Mr P Moteka (EFF) asked if the wasteful and fruitless expenditure was unavoidable due to its recurring nature. Why did DOT  waste the resources and on what were the resources used fruitlessly?  How did DOT  plan on stopping the recurrence of such? He recalled that when he had joined the Committee, irregular expenditure was at R94 000. It seemed to always recur. Until they dealt with laziness, corruption, and wastefulness, the people of South Africa were still going to suffer.

Ms H Winkler (DA) asked about the progress of the policy review. How far was the panel and how did they managed to catch up on the reported delays. What had the Minister done to engage the sector. For instance, to find out how DOT  could assist businesses after the July 2021 riots in KZN. Had the Minister engaged the MECs in MINMEC and for which provinces? Why was underspending a consistent finding in most of the programmes and how would it ensure it was adequately spending the budget to achieve the targets. Had DOT  engaged with AfriForum and Solidarity to avoid recurrent court interdicts?

Ms M Gomba (ANC) asked about the delays due to global logistics. How was DOT  planning to improving the procurement process?  It was important that it considered the previous State of the Nation Addresses (SONAs) if it was to improve. DOT  needed to support South African home-made products and business and ensure they were growing. DOT had to ensure that it adhered to what the President had said so that the global logistics challenge did not affect its service delivery. She expressed her concern on DOT overall spending since it had only spent 36% in the first six months of 2021/22. The new financial year started from 1 April 2022. This showed poor planning in its programmes and targets.

What was the monitoring and evaluation tool DOT  used to check performance throughout the quarters because the tool seemed to be failing it?

Ms Gomba said that the "appointment of service providers" was an excuse that had been recurring in all DOT reports and this often resulted into poor performance at the end of the financial year. If the system was working, why did DOT always experience delays in the appointment of service providers unless there were glitches when it came to the appointment of people. Perhaps there was a misunderstanding among officials as to whom must be the preferred bidder.  She suggested that the Minister uncover why DOT always had delays in service delivery. It was not right that service delivery is delayed due to internal corruption and misunderstanding about the procurement process.

She had heard of the withdrawal of a service provider who had been appointed but had not met Black Economic Empowerment (BEE) requirements. How was the appointment possible in the first place if the service provider did not meet the standards. This indicated there was an irregular appointment process. There were still some corrupt officials in the procurement unit. She asked if DOT ’s failure was because of the shortage of staff since they had not filled the vacancies as planned.  She asked about the performance management system and appraisals to establish if there was value for the money in the government salaries that officials received.

Mr K Sithole (IFP) asked about the unskilled youth that were retrenched. Did DOT  have the figures for the unskilled youth per province or district. How many vacancies did it have per programme? Did the draft policy review discussion document have timelines since DOT  had submitted the document in May 2021 to the Minister for comment yet there was no movement after that. He asked for more information on the development of the new concept document for service providers because there seemed to be contradictions. He asked about the service providers as they had not been appointed in two provinces due to supply chain management challenges.

Mr Sithole commented that the 64% underspending was at the expense of services for the communities. How was DOT  going to fulfil its targets given all that was going on?

Ms P Mpushe (ANC) asked what had been done to mitigate irregular expenditure since their last engagement.  Had the Minister engaged with AfriForum outside the court case.  What was DOT  doing to ensure that managers performed? There had to be measures to ensure work was taking place even in the context of Covid-19. What had been causing the delays in appointment of service providers in the programme for the development of tourism in the villages and townships? What measures were in place to improve SMME processes in DOT? How far was DOT  in appointing its Chief Operations Officer? Were there plans to improve spending in the coming quarter? What were the programme managers doing to ensure programme targets were achieved? Did DOT  have a plans to improve private public partnerships to develop and transform the sector such as upskilling the unemployed youth?

Had DOT sorted out the irregular awarding of tenders? She asked for clarity on the concept document since this had to be done simultaneously with the budget. If DOT  had to develop the concept document later, it meant poor quality control within DOT .

Mr H Gumbi (DA) asked when the policy review was going to be completed. What was DOT  looking at to better the performance of supply chain management managers and senior managers?

Mr H April (ANC) pointed out that the report seemed to bring up the same old issues. Indeed, tourism had been the hardest hit due to the pandemic, but the performance reports were disappointing.  In Programmes One to Four, DOT  seemed to have been underspending. It was an indication of a leadership vacuum, lack of accountability and consequence management. DOT  had only placed 1 064 monitors from the Presidential Stimulus Package.  Why did DOT  not participate meaningfully in that programme? It showed a lack of willingness by DOT  to help with job creation in a sector that had lost so many jobs. Why did DOT  not apply for more jobs than the Basic Education Department which had created over 287 000 jobs? Had DOT  made any reference to the Presidential Employment Stimulus (PES) target in its recovery plan and what was going to be done differently during the PES window. Was DOT  really looking at creating jobs or did it not have the skills required if its applied for the PES. It was either DOT could not spend the money because they did not have the skills, or they did not have the willingness, or was the corruption just so deep that people did not want to move unless it was their people that moved. The Committee had to investigate the matter deeply because the electorate would hold them accountable.

Ms S Xego (ANC) hoped that the situation would be better in the third and fourth quarter. After Quarter 1 and 2 there was 36% spending. They were now two months away from the end of the financial year. The zero spending on the Tourism Equity Fund was very concerning because they had experienced 28 years of democracy and the Department was interdicted for implementing South Africa's own BEE policy. The political leadership had to do something about that so communities and fund beneficiaries were updated.

She asked if there was an improvement in the appointment of service providers now that the lockdown level had eased.  She asked for an update on the employment of a permanent CFO.

She pointed out although the irregular expenditure was from previous years, DOT was trying to be cautious to avoid repeat finding by the Auditor-General. The Committee had received DOT audit action plan and appreciated it. She advised that DOT  implement the plan. She advised that something had to be done since DOT  still had the money in their hands that was meant to help tourism people negatively affected by Covid.

The Acting Chairperson asked if it was possible to quantify the jobs forgone due to the non-implementation of the Expanded Public Works Programme (EPWP). She advised that DOT should reach a middle ground with AfriForum and those that had interdicted the implementation of the Tourism Fund. Political heads and the Department had to speak to AfriForum to bring them back to the table with the guidance of the legal team. This was to avoid reporting again on zero implementation of such an important fund that sought to ensure the tourism sector was transformed.  The Fund was to fast-track some aspects of transformation.

DOT response
The Director General, Mr Tharage, responded that the Fund was a policy related matter for the Deputy Minister to address. There was an approved scheme from the policy on how the situation was to unfold. The Department was going to take further guidance from its political principals.

On the quantification of jobs forgone, it was important to note that the half-year target for job opportunities created had been achieved.  The bulk of the job opportunities had been taken care off in the first quarter.

On the recruitment of the Chief Financial Officer, the process was underway and they had received CVs in response to the job advertisement.  They would be proceeding with the process.

On the bids, it was important to note that the report was only for the first six months and that period ended on 30 September 2021. By then, the bid committees were processing bids. From October 2021 to January 2022, several things that had taken place.  For instance, the money transfer to Small Enterprise Finance Agency (SEFA) for the Tourism Equity Fund had been transferred. The Committee would only get to see those achievements in the 2021/22 Quarter 3 and 4 reports.

During the Medium-Term Budget Policy Statement (MTBPS), a budget adjustment was made to provide for the capital projects to be run by Development Bank of Southern Africa (DBSA). After that DOT  was able to provide the funding. There was need for caution when going through the procurement process and one of the controls was to ensure the Department did not incur unnecessary irregularities. Once the bid process had been completed, those deemed as successful bidders would be verified in terms of BEE and tax clearance. If the BEE and tax documents are no longer valid, the process does not continue and sometimes DOT would have to start again to avoid irregularities.

On the Presidential Employment Stimulus, DOT  had received approximately R20 million. The money was provided during the MTBPS for the last six months of 2021/22, and it was not part of the Quarter 1 and 2 period.  It was part of the Quarter 3 and 4 period DOT  was yet to report on. There were specific standards set on how much should be used for stipends and so forth. The money received was to be linked directly to the work that was going to be done and the people that it could acquire. There were some constraints on how much they could do with the money therefore they had to ensure that their commitments were items that could be done successfully.  The resources received was what guided the amount of work that could be done.

The policy review document was not received by the Minister as earlier reported. There was a meeting in October that highlighted the issues identified and that it would be sent to the Minister. The meeting identified challenges in what was not feasible as DOT had begun to go into areas it  had no mandate over according to the Constitution. For instance, DOT  could not have the private sector as part of the decision-making structure, MINMEC. That was one issue that DOT  was dealing with. There were also other items that the review committee wanted to further consult on. The review committee had requested an extension from the Minister to deal with those matters. The extension had ended the previous day on 31 January 2022.

On policy review consultation, the review committee had planned it and were doing their own. Government consultation would only have begun having received the policy review document therefore it would be open to all South Africans. DOT  would then receive the submissions from everyone.

On the capacity and system of supply chain, there was a continual process where DOT  looked at the problems identified by internal and external audits.  DOT  went to great lengths to unpack the root causes and address them to strengthen the system.  DOT  also had a continuous system of development and training. It had drawn the head of supply chain management closer through special top management meetings that dealt with the audit and the system wide environment so that he is able to provide his insights.

On avoiding the recurrence of irregular expenditure, this matter had not been concluded. The audit finding deemed certain expenditure irregular, but DOT management had made a submission that there was a process and presented what had occurred.  It was going to take the matter to the Chief Procurement Officer at National Treasury to review the whole deal to see what had transpired. Based on the outcome, DOT  would know the way forward.

On the 36% spending, the figure was for half of the year; 64% was not under expenditure but what had not been spent yet until the financial year ended.

On the global supply chain, there were items that South Africa could only get outside of South Africa. The impact of the global supply chain delays was that those parts and components could not be delivered to the country timeously. Some suppliers due to their ethical considerations would not quote because of the uncertainty of deliveries. 

On monitoring, DOT  had various layers of monitoring from top management meetings to meetings with the Chief Directors. From these meetings, it was able to ensure that it was moving forward in a better way. The other layer outside management was the internal audit and the risk management committee which would go through all its monitoring processes. The committees would identify the root causes and integrate them into action plans for management.  They would then provide combined assurance but sometimes would fail to do so due to various circumstances.

On AfriForum and Solidarity, the first time when DOT  introduced the Tourism Relief Fund, it was taken to court on the grounds that DOT should not have applied BEE to a disaster management environment. The Department’s argument was that it would have rather seen all the money spent on businesses than the people not have any of the money. DOT  had won the first case in the High Court but the matter was appealed in the Supreme Court of Appeal.

A similar legal challenge was being faced about the Tourism Equity Fund. These were some of the aspects that DOT  did not have control over. These were big issues that related to the social compact of South Africa overall. Other departments were also affected such as the Department of Small Business Development.

On corruption, DOT  would always follow through with consequences to maintain the integrity of government. It had evidence that such cases had been dealt with to ensure good clean governance and service delivery.

What had pulled DOT  down to the 71% range of target achievement was the area in which DOT  had achieved only 52%. There were areas in which DOT  had 90 to 100% but the lower marks dragged its average down. It was making sure there were efforts to clear areas which had given challenges. The assumption was that DOT  was doing things it could achieve and some that could not be achieved.

On the fruitless and wasteful expenditure, it was inevitable in running a R2.4 billion operation that there would be a degree of loss. There would be loss from activities such Uber charges for cancelled flights. Those were inevitable and that was why they were always there. Management would follow up to recover the loss of funds due to negligence.  It would be misleading to say that DOT  would not have any fruitless and wasteful expenditure because even though some could be foreseen, some could not. The irregular expenditure was not from this financial year but from previous years.

Ms Mmaditonki Setwaba, DDG: Tourism Sector Support Services, commented that for training to skill the sector, DOT  was guided by the Tourism Human Resource Development Strategy. The capacity building programmes were empowering tourist guides with foreign languages, and it was putting chefs through the recognition of prior learning so they could obtain qualifications. On whether the training programmes were active, the programmes had been active except where service providers were not appointed. In all other instances with service providers, recruitment, selection and induction had happened. The majority of the programmes had learners in class and placements in the workplace had been done after the restrictions had been lifted.

On the terms of reference and the development of the domestic tourism concept paper in Quarter 2, before DOT could embark on the procurement process it had introduced a precursor calling for interested parties with the capacity and expertise to be able to bid. DOT  would develop a concept and terms of reference for approval. The accounting officer would then look at the concept and ensure that there would be value for money.  When the concept was presented in Quarter 1, gaps were identified in the information and the management tools to track the implementation of discounts proposed to incentivise travel in the domestic space.  DOT  had to revise and come up with a new concept that would address the gaps.  In rejuvenating domestic tourism, DOT  was continuing with the campaigns done in Quarter 3 in two provinces. DOT  had scheduled some for Quarter 4. One of the lessons learnt in the development of the concept was one had to link the planning and approval of the concept to the business plan so that the programmes in the APP were already approved and DOT  would then just begin to implement. On quantifying the number of retrenched youth, DOT  would consolidate the numbers and submit them to the Committee.

Ms Rhulani Ngwenya, DDG: Corporate Management, replied that DOT had 57 vacant positions at the beginning of 2021/22. Of those positions only 34 had been prioritized. The 2021/22 financial year was the first year for the implementation of budget cuts by National Treasury. R48 million was cut from the compensation of employees in DOT  therefore 34 positions were no longer fully funded. At the end of September, the spending on employee compensation was at 49% instead of the target of 50%. Budget planning was done for the CFO in the previous year. It was with the understanding that government would not be paying increases. DOT  had to cover the extra from their allocation. During the ENE process Treasury then made R7.7 million available to cover the annual increase and other items. After the ENE process, the process of filling positions was resuscitated in the third quarter. DOT  was fast tracking it to ensure that all the funded positions could be filled.  It intended to finalise its recruitment plan to ensure that funded positions were filled by 1 April 2022.

The capacity within Human Resource was not ideal due to funding constraints; regardless they were still able to carry out their duties. The vacancies at the end of Quarter 2 had been constrained by the changes to the Executive that had been announced in August 2021. The support staff for the former Minister were terminated at the end of September 2021 therefore increasing the vacancy rate. The new appointments were only announced at the beginning of the third quarter. The vacancy rate had decreased from 12.5 % in the second quarter to 10.7% in the third quarter. With the implementation of the recruitment plan, the vacancy rate would be less than 10.5% by the end of the financial year.

On the Performance Management and Development System (PMDS) for value for money in the system, the assessment of employees was part of a collective agreement from Level 12 and below. The assessment took place through a regulated process. At the small, medium and micro enterprise (SMME) level there were specific dimensions that were taken into consideration such as the performance agreement that would be signed on the job description. In the assessment the first level was by the supervisor who would ensure that performance targets were met and ensure improvement plans were made to remedy weaknesses. The second level was the moderation of performance by various moderation committees. Those committees would moderate through three dimensions: performance agreement, organization performance based on the APP and the audit findings of the Auditor-General. The decision on the employee assessment would then be made.

 Ms Aneme Malan, DDG: Tourism Research, Policy and International Relations, stated that the secretariat had confirmed that the report had been completed. It was going to be submitted to the Executive. She confirmed that the Minister had held several engagements with the sector starting off with an engagement that was open to everyone in the sector. The meeting in September was to get a sense of what they were doing and to hear their concerns. In MINMEC the Minister and the Deputy Minister engage with the MECs. The Minster also had targeted meetings on specific matters such as meeting with the relevant embassies that had red-listed SADC countries with due to Omicron that prevented attending the United Nations World Tourism Organization (UNWTO) general assembly.

Mr Maharaj, Acting CFO, replied about the fruitless and wasteful expenditure. These were unavoidable in that the Department would have cancellations and rescheduling of engagements because of external factors. Where the expenditure was due to individual negligence, DOT  would start a process of recovering the funds from officials. So far it had recovered the R12 000 that had been disclosed.

Mr Maharaj explained that some of the bid committee meetings had to be delayed due to some members of the committee falling sick with Covid-19 and some had been in quarantine; hence impacting some of the bid awards.  The situation had improved in Quarter 3 and the process was more streamlined and happening as scheduled.

On the transfer to SEFA, DOT  had obtained a legal opinion and it had transferred the money in Quarter 3. The money could not be transferred by the releasing agent to the beneficiaries because of the court interdict.

Mr Maharaj emphasized that the 36% expenditure was just for the two quarters. The situation had improved significantly in Quarter 3. Programme 1: Administration had moved from 41% to 66% expenditure. Tourism Research and International Policy moved from 46% to 91%. This was largely due to the SEFA transfer. Destination Development moved from 20% to 62% due to the EPWP projects that centred on skills and training which had been delayed. Tourism Sector Support Services moved from 10% to 65% driven by the R180 million transfer to SEFA. There was significant improvement in Quarter 3 and it would improve in Quarter 4 because a lot of the EPWP projects would be on track.  The trajectory showed that they would be able to spend the bulk of their budget.

Mr Tharage, Director-General, commented that the Tourism Incentive Programme (TIP) would realise some savings in market access since the targeted shows did not take place; hence they could not take the tourism businesses to those places.

Deputy Minister comments
Deputy Minister Mahlalela emphasized that the 36% expenditure was only for the two quarters, and it was only a shortfall of 14% if they were to assume it was straight line spending. Though it was not justifiable, there was an explanation why they found themselves in that position. It was mainly due to the Delta variant that made the system not work due to a lot of restrictions. He emphasized that DOT  was buying local but some of the materials were bought from abroad – hence experiencing the same global market logistics problem. On the wasteful and fruitless expenditure, there were instances that were beyond their control, but they were still doing their best to investigate and recover that loss. The reported irregular expenditure was what had been declared by the Auditor-General in the previous financial year. Upon engaging with the AG, it was agreed that the matter would be taken up with Treasury for it to advise the extent to which it was irregular. Once the determination would be made, then DOT  would investigate what happened and if there was any element of fraud or corruption in the process. Arising from that it would take a decision on what had to be done.  DOT  was doing its best to ensure there was no recurrence.

On the policy review, the process was still ongoing. There had been a briefing to the Ministry and the process was taken to MINMEC. They had given their views, and the review panel was mandated to consult as widely as possible to ensure no stakeholder was left out. While busy with that, there was restructuring of the Cabinet which necessitated that the new Tourism Minister be taken on board and for her to give her view on how the process unfolds.

On the engagement with AfriForum, the matter had started with the Tourism Relief Fund. Engagements with the Minister then took place. There was a consensus on how the matter was being approached. AfriForum however proceeded to challenge DOT  in court. Upon introducing the Tourism Equity Fund, the same process ensued and engagements took place but still AfriForum was not convinced that the BEE requirement was appropriate. DOT  was looking for other solutions since it was a policy position that was taken some years back to transform the industry. Solidarity and AfriForum were opposed to the transformation agenda and they were not only representing stakeholders. DOT  had been battling how to involve them in the transformation agenda. The tool introduced by government was not possible previously because the banks were not willing. DOT  was now trying to find a way to short circuit the process so that they did not keep delaying it since it was now approaching almost a year since the launch. It was imperative to find an alternative. It was a fundamental policy and it had been praised by the international market.  It was a matter that DOT  was determined to ensure that it succeeded.

On the CFO vacancy, he agreed that it was a priority to ensure that there was stability in the DOT financial department and to ensure that the supply chain was managed smoothly to ensure service delivery was fast tracked. The weakness was mainly due to not managing the supply chain process to the level that enabled speedy resolutions of service delivery. On the partnership, they were working on community partnerships and various entities such as fun parks to upskill the industry to have skilled people but at the same time create opportunities for the young people. On the presidential stimulus, there were projects included though the numbers were not equivalent to DOT  of education. There was some work being done related to the stimulus for the creation of jobs in the economic reconstruction and recovery plan. DOT  would provide a more detailed picture of their efforts later in the year.

Ms Gomba asked about the R177 000 expenditure which had not been allocated for anything. The Auditor-General would make a finding of irregular expenditure on that amount. Was there any consequence applied for irregular expenditure of funds? In its performance management, DOT  was supposed to have consequence management for those who did not perform according to their performance agreement. Was there consequence management or was the manager just given an appraisal without any consequences? Were there consequences based on the findings of the Auditor-General?

Ms Ngwenya, DDG: Corporate Management, replied that the Performance Management and Development System (PMDS) was a developmental system. Consequence management would come much later. When the employees had a performance review where performance was not in line with the targets, DOT  would adopt an enhancement plan. Additional support would be provided by the supervisor and the programme which would include measures such as training and mentorship, coaching and exposure to peers. Only when those measures fail, would there be consequence management. It would then be considered as negligence by the individual. Both the assessment and the moderation would take the outcome of the performance information into consideration. Where employees are found to have contributed to the audit findings then it would be considered in the allocation of their final performance score. The matter would then be addressed as consequence management.

Mr Mohith Maharaj, Acting CFO, replied that the R177 000 was a loss that was written off and DOT  did not budget for losses. The losses included paying for vehicle damage where the driver was not found negligent; and for debts where the debtor gave motivation why the debt had to be written off.

The Acting Chairperson thanked DOT  for the engagement.

Minutes of the 25 January 2022 meeting were adopted.

The meeting was adjourned.

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