South African Tourism 2022/23 Annual Report; with Minister

Meeting report

South African Tourism Annual Report 2022/23
Ms Nomasonto Ndlovu, Chief Operating Officer, took the Committee through the organisational performance. During the 2022/23 fiscal year, South Africa observed an increase in international tourist, with arrivals peaking at 6.8 million. This represented a year-on-year growth of 132.2% over the previous financial year. The Africa region maintained the most substantial share, holding 74.0% of the total arrivals. South Africa welcomed a diverse array of international travellers, with the largest segment hailing from the Africa region, accounting for an impressive five million arrivals. Total domestic overnight trips amounted to 36.6 million in 2022/23, a 99.2% increase compared to 2021/22. The total number of domestic overnight holiday trips reached 9.9 million, representing a 27.0% share of all domestic overnight trips taken during 2022/23. The domestic revenue for 2022/23 was R103.8 billion, increasing by 84.3% over 2021/22. The average overnight domestic spend was R2 837, which was a decrease of 7.5% compared to 2021/22.

Ms Ndlovu reported that South African Tourism achieved 20 of its 33 planned annual targets. This meant an achievement of 61% performance. For seven of the 13 annual targets that were not achieved, it was noted these targets were delivered, but were recorded as underperformance due to non-compliance with the Technical Indicator Descriptions (TIDs) for each of these targets and indicators.

On the corporate support programme, the business processes were outdated and were mapped in 2019. The scoping and implementation of the business processes had to be revised, leading to a delay in automation. The target for employment of persons with disabilities declined during the year due to resignations and a lack of disclosure. The staff engagement survey was not undertaken for the financial year of 2021/22. This was attributed to instability at executive leadership level, decreased productivity, increased employee turnover, loss of scarce skills affecting succession planning, and an increase in absence from work due to illness.

The 2023/24 financial year would focus on elevating employee engagement levels and retaining skills and talent in the organisation. This would be facilitated through focus groups and continuous engagement across different forums and platforms in the organisation. The South African Tourism induction programme would be reviewed to align it with the organisation's core values. An organisational development assessment would be undertaken with a view to creating a high-performance culture and becoming an employer of choice. An increased awareness drive would be executed in the new fiscal year to encourage disclosure of disabilities. Partnerships with disability organisations would be a focus to improve this employment equity target.

Concerning the business enablement programme, the target was exceeded on the South African Tourism Corporate Brand Index due to the overall positive scores across the four key pillars of corporate brand: Responsiveness, Support, Partnership, and Formation Communication. The Integrated Digital and Analytics Operating Framework was finalised and approved. The Year-One 1 (2022/23) Roadmap was developed, approved and implemented. The Year 2 (2023/24) Roadmap was developed and approved.

About the leisure tourism programme, she said that the 2022/23 Global Tourism Brand Campaign was developed with seven of ten planned activities implemented. The 2023/24 Global Tourism Brand Campaign Plan was developed and approved. The Three-Year Integrated Destination Brand and Marketing Strategy was developed and approved. The amplified communication around strategic events was implemented, achieving 17 activities against the 16 planned activities. Two global brand activations were implemented. The travel barrier removal communications roadmap was implemented, achieving the 39 planned activities.

An improved operational model would be implemented within the business unit to provide greater support for campaign execution, which would include more stringent management controls. Given that the underperformance relates to compliance with the TID for this target, additional training on performance reporting would be implemented for the business unit as a corrective measure.

Regarding the business events programme, Africa’s Travel Indaba 2022 and Meetings Africa 2023 were hosted. Five national business events were piloted in VTSD. Ninety-five bid submissions were made. The sales activities resulted in additional leads being converted into bid submissions. No underperformance was recorded within this programme.

Pertaining to the visitor experience programme, the grading business model and TGCSA value proposition were revised and implemented. A total of 4 959 properties have been quality assured. South African Tourism would continue to engage in a series of measures to drive the target, including, but not limited to, provincial quality-assurance workshops, stakeholder MoUs, lead-generation programmes and a new pre-approval pilot programme.

The Welcome Programme was reviewed and implemented. It was approved in the third quarter. The Welcome Programme 2022/23 roadmap was developed and implemented, and it was approved in quarter three. The Welcome Programme and Roadmap were developed and approved three days later than planned due to the additional engagement needed with critical tourism partners to obtain their feedback on the programme.

Ms Ndlovu reported the overall audit outcomes for South African Tourism have remained unchanged as unqualified opinion on the annual financial statements, with findings on compliance with applicable legislation. The Auditor-General (AG) did not identify significant internal control deficiencies in the financial management processes. There were no significant deficiencies in the internal controls in the financial management processes pertaining to information systems. During the 2022/2023 financial year, the AG noted improvements in the IT governance. Improvements were still required in the area of IT systems as highlighted in the IT findings.

During the year ended March 2023, an amount of R 9 907 200 was identified as irregular expenditure by the Auditor-General of South Africa (AGSA). Management referred the matter to the Internal Audit for determination. The AG identified the procurement of the Dome structure as irregular expenditure during the year ended March 2023. Non-compliance with legislation resulted in irregular expenditure of R9 907 200. The irregular expenditure incurred constituted a non-compliance with PFMA regulations.

She stated that fruitless and wasteful expenditure of R1 237 217 was identified because of late payments made to SARS and consequent management not implemented in a timely manner. Concerning vacancies, the Board-approved structure included 202 positions versus the headcount of 176 positions. The vacancy rate remains high due to the moratorium and attrition rate. The vacancy rate is currently standing at 13%.

Ms Ndlovu enlightened the Committee the focus for the 2023/24 financial year would be on continuing to anchor programmes and activities around the Tourism Sector Recovery Plan, with a particular concentration on reigniting demand in our domestic, regional and international source markets. An effective governance and internal control environment, inclusive of risk management and compliance, as well as a compliant and ethical supply chain management, would remain a focus as they elevate their efforts to attain a clean audit outcome.

In addition, through the Corporate Support Programme, South African Tourism would continue to strive to deliver efficiency within the organisation through robust and coordinated planning and optimising organisational and individual performance and reporting. South African Tourism would also consider new income streams and the possible commercialisation of certain services to ensure adequate financial resources are available for core business functions. The SAT would continue to identify innovative and effective marketing platforms and opportunities that would ensure increased affinity from visitors coming from various parts of the world, and ultimately grow arrivals to South Africa.

Further, the Leisure Tourism Marketing Programme would continue to lead and prioritise domestic tourism, followed by regional and international tourism. Key to this would be the revised and revitalised Global Tourism Brand Campaign, which seeks to ensure that South Africa is embedded as a top-of-mind destination for all potential tourists. Through the Global Trade component, South African Tourism would continue participating in various local and international platforms to connect and promote South Africa as a lucrative destination for international airlines.

Finally, she stated that SAT would continue participating in the provincial air access forums to ensure that insights into inbound global markets are made available to support efforts to secure new entrants.

(Tables and graphs were shown to illustrate budget allocation and expenditure and human resource information)

Discussion
The Chairperson remarked that the presentation contradicted what the AG presented to the Committee in the previous meeting because the entity claimed to have achieved 61% for organisational performance while the AG scored it 53%. She went on to say that the AG made a bold finding on cash management, a point that has not been mentioned in the report. She asked which CFO approved the irregular expenditure on the dome during that time because the current acting CEO was busy checking to see who was responsible for that. She then asked when the entity was planning to implement the Summer Campaign; enquired on who the Grading Council was accountable to, and remarked that grading should be free and compulsory.

Further, she noted that the AG stated there was supposed to be a competitive bidding process for the dome. The Committee was of the view that the entity has an agency to procure the infrastructure. The AG said that the prescribed process was not followed, and that it was supposed to be done by the entity. She then wanted to know what the role of the agency was during the procurement process for the dome. To the Minister, she said that the Committee was satisfied with the performance of the Department because the AG report showed improvements, but the same could not be said about the SAT.

Minister of Tourism, Ms Patricia De Lille, stated she noted the points raised by the Chairperson. She commended the Committee for giving details about what was being done by the entity and Department. On the Grading Council, she said there were concerns about whether the Department was getting value for money from the Grading Council. The Department was subsidising the Grading Council by up to 90% through the incentive grant given to the SAT. Questions were asked why it could not be done for free. Most of the funding or money goes to the people or company or specialists doing the grading. The Department was not questioning their skills, but a big chunk of the money goes to them. Once the report on the grading system is finalised, it will be submitted to the Committee and would include the discrepancies between their findings and those of the AG.

Ms Nombulelo Guliwe, Acting CEO, on the discrepancies between the AG and entity, said that the AG only audited three programmes: three, four and five. That was how the 54% came about. The SAT report showed the entity's overall performance, including the programmes audited by the AG. That has resulted in 61% achievement of targets. On irregular expenditure, she said that the programme's chief executive was responsible for the approvals of the dome, and the COO was part of the process during that time. The basis for the R9.9m was the contract. The entity was not disputing the findings of the AG.

Ms Debbie Damant, Head of Visitor Experience, SAT, stated that policy changes needed to be effected when it came to the business model on grading. The grading process has been concluded in quarter one to explore a hybrid model. A structure was set up during quarter two because this process has been complex.

Mr M De Freitas (DA) asked if grading could not be made free so that small businesses could enter the sector, because the current grading fee was very expensive. He wanted to know what the SAT was doing with other departments to promote domestic tourism. He asked what the entity meant by ‘prioritising domestic tourism’, and how it could be made a reality.

Ms Guliwe said that Business Tourism was part of Programme Three.

Ms Ndlovu stated that to demonstrate their focus, they have looked at the Shot-Left Campaign which was being run three times a year. The deals dashboard has been improved to ensure they remain aggressive. The Summer Campaign has been rolled out under the banner of Shot Left which is made up of many components. The budget was being realigned to support domestic tourism. The corporates have asked how they could work with the entity on these campaigns.

Ms M Gomba (ANC) recounted that, in the previous financial year, there was a promise that grading would be included in the policy review so that it is free and compulsory. The Committee was still waiting for that to happen. She wanted to understand what the overall performance percentage of the entity was, because there was more spending than work done. She also asked if consequence management would be applied to officials who were not complying with legislation, because the AG found that the audit results of the entity have not changed. This meant that there was no intention to improve results, especially regarding non-compliance with legislation. She enquired what the relation between the organisation and its internal audit committee was, because irregular expenditure amounted to R9m and the internal audit committee was supposed to see all the irregularities before the AG identified them. The finding by the AG on PAYE was identified as fruitless and wasteful expenditure. This meant that the finance department was not doing its work. As a result, the SAT has to pay a penalty. She asked what the reasons were for the money to be paid late to the South African Revenue Service (SARS).

Minister De Lille said she learned about the PAYE matter from the AG report. She said that she enquired from the previous board CFO to find out if the money of board members was taxed before payment or if it was the responsibility of the members to declare to the SARS. Unfortunately, no response was given to her.

Ms Guliwe stated there was no achievement last year on the business model review. It was not finalised. She stated the spike in spending happened during quarter four, and some of the transactions were being investigated around the costs incurred. Pertaining to re-occurrence of findings, she indicated that they have to address first the root causes that were identified before. Some of these were related to capacity challenges within the entity.

Regarding compliance with legislation, she said that the internal audit would subject procurement on a quarterly basis. Action has been taken on any irregularity, when it comes to consequence management. There was an existing relationship between the supply chain management (SCM) and internal audit. The internal audit committee is independent. There were challenges identified in the internal audit and were related to work conditions. The audit and risk committee are responsible for internal audit.

Mr K Sithole (IFP) asked when the matters of acting positions would be finalised, including filling vacancies. He asked if there was a programme that talked to the VTSD; wanted to know if there was any programme that talked to the mission of the entity; asked why only 20 out of 33 targets were achieved; sought clarity on why plans on HR & Development were no implemented and achieved; wanted to establish why the Travel Road Map that was developed was never approved by Exco on quarter one. Lastly, he remarked that there was something behind the statement on the part of the presentation that dealt with the outlook for the 2023/24 financial year and what the AG reported.

Ms Guliwe responded that the entity's mission statement was linked to programmes two, three, four, and five.

Ms L Makhubela-Mashele (ANC) wanted to establish what SAT was going to do to correct repeated findings, because there were re-occurrences on finances. This meant the entity did not correct the findings and that there were no systems in place. She wanted an explanation for overspending yet the targets were not achieved. The performance of the entity was below acceptable standards. She sought clarity on why there was overspending on human capital but there were many vacancies; asked what systems would be put in place to fill the vacancies, because there has been a notice from the National Treasury on the filling of vacancies. She asked the Minister to give the Committee a report on filling key critical positions in the board and entity to avoid instability. She wanted to find out from the DG and Minister about the stage they were at in appointing a fully-fledged board, and to indicate timeframes for the appointment of the board. Lastly, she remarked the acting CEO contested the finding of the AG on the dome. The AG had indicated the channels for procuring the infrastructure were not followed, but did not say the infrastructure was not needed.

Minister De Lille explained that the staff vacancies came from both the previous financial year and current year. The biggest disappointment was the overspending by R50m on the compensation of employees even though the vacancies remained there in the previous financial year. This affected the performance of the organisation. In some cases, the overspending has been over by up to 98%, while performance remained at 60%. This meant there was no value for money gotten. She also stated that the matter of the board has been put on the agenda for the 29 November 2023 cabinet meeting. Interviews have been introduced with the recommended shortlisted candidates. The process was on track. The appointment of senior executives would also be done during November 2023.

Ms Guliwe, on vacancies and over-expenditure, said that savings on programme one were offset by a number of things, including forex losses and amortisation. Over-expenditure on IT software also contributed. She admitted that there were constraints on the internal audit committee because there was a time when there was no Head of Department but an acting incumbent. Regarding the dome, she said there was a competitive bidding process followed during 2020/21. The contract allowed the entity to procure the infrastructure. It would be dealt with through irregular expenditure processing. She said that the matter of performance versus money spent was linked to programmes three and five. The main reason was that Technical Indicator Descriptors (TID) were responsible for non-achievement. The work was done during quarter four, but was not accomplished according to TID.

Mr A Matumba (EFF) commented that it was not acceptable for the Committee to discuss matters of employees related to SARS, because it was an internal matter that the entity could have resolved. He asked the Minister to look into the matter relating to improvements in the IT area. The entity fired the person who improved IT issues without any intent to make improvements, while those who were not making improvements were kept. Black excellence was being purged. He enquired why full information regarding the purchase of the dome was not given to the AG, because there is a cost-containment agency in the entity and it did not consider the price of the dome based on different quotes received. He said that the dome was a necessary infrastructure. He wanted to know if there would be a Summer Campaign this year, because it provided work to students last year. Lastly, he asked what the nature of the investigations and sources of complaints were.

Minister De Lille responded that the AG questioned the R17.6m allocated to the Summer Campaign for December 2022. For this year, the Summer Campaign has been launched in the Eastern Cape. The South African Small Villages and Township Association attended the event. It is supposed to create seasonal jobs for young people. The SAT would never have money for the Summer Campaign because funds have not been released for the entity. This would impact the creation of plus minus 1 000 jobs for young people. She also stated that there was no evidence regarding the purging of black excellence.

Ms Guliwe stated that the report was clear on who was responsible for the SARS matter, and funds would be recovered. Anyone who has been sitting with the contract would have approved the costs regarding the R9.9m dome expenditure because there was value for money. The report on the assessment would detail if there was value for money. She indicated that the internal audit committee was handling investigations. The investigations have to be fair because, when they were being done, there were processes that had been followed before they could be continued with.

Ms P Mpushe (ANC) wanted to establish if the entity intended to refer the findings for improvements when it stated the findings were going to be referred for assessment. She asked if the entity was capable of executing its mandate. She enquired if the Minister was not able to make submissions for prioritised posts in the tourism hubs, especially when looking at the vacancy rate. She wanted to understand how far the process of bringing stability to the entity was; she wanted to find out the Department's role in overseeing the entity's performance. Lastly, she asked how the surplus of the previous financial was overspent during the current year.

Minister De Lille said that the report of the entity cited the challenge was, on the affordability for the recruitment of country officers at notch one, because the entity has advertised for specialist to mid-management roles. The Department has written twice to the SAT requesting the updated Hub Head Appointment Policy. That has been the area that needed to be finalised to move forward. Some of the hubs were now operating from the SAT offices in Johannesburg. Furthermore, she informed the Committee she had a meeting with the AG on all the corrective measures that should have been done in the current financial year, even though this is the third quarter of the current financial year. The Department has written to the SAT, wanting to know of timeframes for implementing corrective measures from the AG and if they would be completed by the end of March 2024. Once the AG reports on what has been done on corrective measures, consequence management, etc., has been finalised. The Department would forward it to the Committee. She noted that she has not had enough time to interact with the SAT on the AG report.

Ms Guliwe said that the surplus of the previous year had an impact on the available budget for programme four. Approvals were gotten from National Treasury. She further stated that corrective measures were taken against officials on instances of irregularities, if there has been concrete evidence or proof.

Ms Ndlovu stated that there were huge challenges around the hubs. They were operating with four hub heads. The vacancy rate has been standing at 13% for the Leisure Programme. Recruitment had to be stopped due to the moratorium and lifting of it. The entity has discussed with the Minister on how to move forward with the operating model. Recruitment for the hubs has not been fully opened.

Mr H April (ANC) was concerned the entity disputed the findings of the AG. The Committee was only following the money of SA taxpayers. The SAT was not performing according to its plans. The AG has noted many misstatements on the financial statements submitted by the SAT. He wanted to understand how the entity overspent its budget, but 54 targets were not achieved because it was given a budget of R1.4 billion and it spent R1.5 billion. The very same entity disputes the findings of the AG that looks at what was being done with the money of taxpayers. He enquired if it was the strategy of the entity to keep the Coloureds and Indians out when it stated it is struggling to find them.

Minister De Lille agreed with the contradictions pointed out by Mr April, and she suggested that the Committee indicate how these should be resolved. The matter of employment equity is prescribed in the Tourism Act. It should be noted by the SAT, and remedial targets should be set.

Ms Guliwe reiterated that they were disputing the findings of the AG. The 61% recorded by the entity was for the overall performance of all programmes implemented for the year, while the 53% scored by the AG was only for programmes three, four and five audited.

Minister De Lille noted that they were trying to improve communication between the SAT, Department, the oversight Committee's role, and DG's role as an accounting officer. There was a gap there. She exemplified about the BRICS International Summit held in the country. There was no communication between the SAT and the Department about the event. It was only when the Department requested information that it learnt the entity would contribute R6m towards the event, including a dinner of R1.5m. There was a welcome message for the delegates at the conference. The welcome message was not from the Minister nor the Deputy Minister. Clearly, that showed a lack of communication between the SAT and Department. That problem was being sorted out. She also said that she learned the country would be hosting the AGOA Summit early November 2023. The Department received a letter from the DTIC that the Department of Tourism must set up visits for the guests and show them SA. But the DG of the DTIC wrote to the SAT and asked about the other costs to be incurred. She went to Minister [of DTIC] Ebrahim Patel and told him that, if the DTIC wants more money for support and goods and services for the AGOA event, he should approach the DG of the Department. The DG was not even invited to that meeting. She said that she told the SAT acting-CEO no money would be transferred for the AGOA Summit because it was not budgeted for.

The Chairperson asked who the CFO was at the time of the approval for the dome. She stressed that the AG has complemented the work of Parliament in terms of oversight. If the entity was disputing the AG findings, there were processes to follow. The entity was disputing the 53% score of the AG on the performance of the entity. The audit process of the AG excluded programme one, but it looked at the service delivery. The entity has to account to Parliament on programme one, including all other programmes. She then wanted to understand the thin line between the quote system and competitive bidding process. She indicated that the Committee has asked questions to assist the entity to improve, and it was looking for an honest account.

Ms Guliwe said that she was the CFO at the time of procuring the dome and she relied on the final management report for approval. There was no intention to mislead. Assertions were from the final management report. On the matter of 53% vs 61%, the entity's performance report showed all five programmes, based on what was audited.

Mr Victor Tharage, Director-General, Department of Tourism, explained that competitive bidding involves a purchase or tender above R1m. If it is less than R1m, it goes through the three-quotation process.

Ms Gomba wanted to know if concurrence from National Treasury was after overspending or before overspending. She remarked that the entity did not observe the implementation of Batho Pele principles. The SAT has been engaging with the Committee but has never raised challenges on the risk and internal audit committees. She suggested the Committee should interact with both committees of the entity because there appeared to be no transparency and healthy relationship between them.

Ms Guliwe stated that she referred to the 2021/22 financial year. Usually, they would wait for the audit reports. It happens after the financial year-end. The money is not spent until approval is gotten from National Treasury.

Mr Matumba remarked the purging of black excellence was the resolution of the Committee and Parliament, taken on March 2023. This was not a rumour. The Committee was just seeing chop and cut in the entity. The acting CEO presented a performance report and then presented finances as a CFO. It was not understandable why a CEO with institutional memory on APPs was removed and replaced by another one. People were not happy at the SAT and were not speaking. If there was not this chopping and replacement of people, the Committee was going to get a full report on the Summer Campaign.

Ms Mpushe sought clarity on whether the AG had misled the Committee by presenting an incomplete report. She asked what the Minister meant by her response that the entity would never have money for the Summer Campaign, as the funds were withheld. In her understanding, the unreleased funds have to do with the Committee recommendations that certain conditions had to be met first before funds were made available.

Ms Guliwe said there has been no intention to mislead, but she relayed what happened between May and July 2023.

Mr April remarked that the entity had the audacity to defend what was unacceptable. The Committee only wanted action to be taken against people who were undermining the organisation and Committee.

Ms Makhubela-Mashele requested that the Committee be given detailed information on the IT person who had relevant qualifications but got purged. The Committee should get a full report because this matter was known by one person in the Committee. She further stated that the finance manager of the entity was supposed to know the difference between the competitive bidding process and the quotation system. She suggested that the Committee get a full report on the irregular expenditure even though the AG had indicated SAT had requested a condemnation.

Minister De Lille noted that the AG did not accept the explanation from the SAT. The AG indicated it had investigated the matter and published the findings. She then wanted to know who was doing the investigation for the SAT, and insisted that the matter should be investigated.

Chairperson’s Closing Remarks
In her concluding remarks, the Chairperson stated that the Committee supported the report of the AG on the entity. On the other hand, the entity was refuting the finding of the AG on the irregular expenditure. It has tried to respond to the dome matter and is now trying to gather information internally to strengthen its case. She also indicated the AG highlighted irregular expenditure of R17m on the Summer Campaign, and that was why there have been questions around its continuity. In addition, she stated that the Committee noted R50m expenditure on human capital, even though there has been no performance. The Committee has also taken note of the R123m on fruitless and wasteful expenditure, though there was no sign of consequence management. All of these matters made the Committee think twice about unlocking the held funds. These matters were for the Minister to discuss with the entity.

She expressed that she was surprised to learn the Minister knew nothing about the cost-containment agency within the entity. She emphasised correspondence from other departments to the SAT should be directed to the DG. The Portfolio Committee supported the Minister when she indicated that no funds would be contributed to the AGOA Summit because the Department contributed R6m to the BRICS Summit. Further, she stated that the Portfolio Committee resolved that the entity's risk committee and internal audit committee should engage with the Portfolio Committee, on their challenges, because it appeared there was no positive work relationship between the two. Pertaining to recruiting people with disabilities, Coloureds and Indians, she said that she saw no reason why employment equity targets were not met. She asked the Committee to be sent a detailed report on why the SAT got rid of a professional who assisted the entity in improving on IT matters. Lastly, she stated that the Committee was of the view grading should be free and compulsory.

The Committee then adopted its fourth quarter programme with minor amendments.

The meeting was adjourned.