ATC160422: Report of the Portfolio Committee on Tourism for Budget Vote No. 33: Tourism, dated 21 April 2016

Tourism

Report of the Portfolio Committee on Tourism for Budget Vote No. 33: Tourism, dated 21 April 2016

 

The Portfolio Committee on Tourism, having considered Budget Vote No. 33: Tourism, together with the Strategic Plans and Annual Performance Plans of the National Department of Tourism (NDT) and the South African Tourism (SAT), reports as follows:

 

1. Introduction

The Constitution of South Africa (Act No. 8 of 1996) recognises that Parliament has a significant role to play in overseeing the performance of government departments and public entities. In terms of section 10 (c) of the Money Bills Amendment Procedure and Related Matters Act (Act No. 9 of 2009), strategic plans must be tabled in Parliament after the adoption of the fiscal framework. This being the second year of the implementation of 2014 - 2019 Medium Term Strategic Framework (MTSF), the Department and South African Tourism tabled their five-year strategic plans and annual performance plans for 2016/17. The Department of Tourism therefore complied with the provision of the Act as the strategic plan and annual performance plan were tabled within the stipulated period. This is commended as it gave the Committee ample time to go through a due process of considering these documents.

It is imperative that the Strategic Plan and Annual Performance Plan of the Department are to government priorities and policies. This is emphasised in the Public Service Commission (PSC) report on evaluation of department annual reports as an accountability mechanism. The PSC stipulates that the emphasis on measurable objectives, which should be part of the strategic plan, is to create a contract between Parliament and the relevant Minister regarding specific deliverables for which the Minister can be held accountable. The strategic objectives of the Department are therefore important to ensure that the budget appropriated for tourism is utilised effectively and efficiently. This accentuates the significance of the process of considering the budget and strategic plan in the calendar of Parliament, and the necessity for departments to table these instruments on time to ensure Parliament is provided with information required for its oversight work.

In line with the oversight mandate of the Committee, this report provides the scrutiny of the Strategic Plans; Annual Performance Plans; and budgets of both the National Department of  Tourism and South African Tourism with regard to their alignment to government priorities and the National Development Plan.  

 

1. The Committee process

The purpose of Vote No. 33 - Tourism is to promote and support the growth and development of an equitable, competitive and sustainable tourism sector, and enhancing its contribution to national priorities.  

The national budget with the Estimates of National Expenditure (ENE) detailing the appropriated budget for Vote 33-Tourism was tabled in February 2016.  This was followed by the Department and South African Tourism tabling their Strategic Plans and Annual Performance Plans, which provides specific deliverables and targets for 2016/17 on the 10th March 2016. These oversight instruments were subsequently referred to the Committee for consideration and report on 16 March 2016. The extended briefing sessions were scheduled for the National Department of Tourism and the South African Tourism to proffer to them an opportunity of presenting their strategic plans, annual performance plans and budgets respectively. 

Prior these engagements, as part of the review process, the Committee had an opportunity to engage the Office of the Auditor-General (AGSA). This meeting was aimed at providing the Committee with audit insights on the interim review of the Department’s draft annual performance (APP) in order to add value and enhance the oversight work.

The Committee then extensively engaged the South African Tourism, later referred to as SAT, on the 8th April 2016, and the National Department of Tourism, later referred to as the Department, on the 14th April 2016, on their strategic plans and annual performance plans. The Committee engagements simultaneously reviewed the past performances and interrogated plans for future implementation.

 

1. The National Department of Tourism

The Department aims to promote and support the growth and development of an equitable, competitive, and sustainable tourism sector in order to enhance the Department’s contribution to national priorities.

1. The policy environment

In the State of the Nation Address (SoNA) 2016, a continued emphasis was placed on active monitoring and accountability measures on infrastructural projects and marketing of South Africa as a preferred destination. This is a welcome development as the Department had also struggled in the past to effectively monitor infrastructural projects implemented as part of the Expanded Public Works Programme under the Social Responsibility Implementation (SRI) Programme. More intense oversight on these projects would greatly assist the Department in ensuring that projects are completed within the given framework, and has the desired impact in terms of job creation. Challenges in the past included amongst others: incomplete projects; poor workmanship and poor project management which resulted in criminal charges filed with the South African Police Service (SAPS). The pronouncement on the importance of monitoring and accountability measures on infrastructural projects will further insure that recommendations of forensic reports are taken into consideration and fully implemented.

It is noteworthy that a portion of the seven billion earmarked for new port facilities will also be highly beneficial to cruise tourism and has a potential to increase tourism revenue generation. Oversight visits undertaken by the Committee has consistently outlined the lack of infrastructure in some provinces as the biggest hurdle towards ensuring that the country’s tourism potential is realised. 

The policy uncertainty with regard to immigration regulations has also negatively affected the tourism sector. A progressive policy shift in this regard is welcomed by the Committee whereby the Inter-ministerial committee on Visa regulations has made notable concessions such as:

• Capturing of biometrics at ports of entry, starting with a pilot at OR Tambo, King Shaka and Cape Town airports;
• Introduction of an Accredited Tourism Company Programme (ATCP) for countries like China, India and Russia;
• Consideration of a long-term Multiple Entry Visa for a period exceeding three months, up to three years, for frequent travellers (for business meetings), business people and academics;
• Letters issued by principals confirming permission for children to travel on school tours; and
• Extension of the validity of the parental consent affidavits to six months.

 

The Department has identified key priorities in line with the New Growth Path (NGP), the current SoNA, and the National Development Plan (NDP). Since tourism is one of the priority sectors in the NGP and the NDP, the Department is implementing interventions that seek to ensure that their activities are well aligned and lead to desired outcomes.

3.2        Strategic goals

The strategic goals over the medium term as identified by the Department are as follows:

• Ensure economic, efficient and effective use of departmental resources.
• Enhance understanding and awareness of the value of tourism and its opportunities.
• Create an enabling legislative and regulatory environment for tourism development and growth.
• Contribute to the economic transformation in South Africa
• Accelerate the transformation of the tourism sector
• Facilitate tourism capacity-building programmes.
• Diversify and enhance the tourism offerings.
• Provide knowledge services to inform policy, planning and decision-making.
• Develop new source markets.
• Enhance regional tourism integration.

• Create employment opportunities by implementing tourism projects targeted at the unemployed.

 

These key priorities of the Department are aligned with the key national priorities which seeks to significantly reduce the unemployment rate, especially among the young people in South Africa. Through its programmes, the Department also seeks to tackle the triple challenge of poverty, inequality and unemployment.

1. Spending focus during the Medium Term Expenditure Framework (MTEF)

 

The Department carries out its mandate through four programmes, namely, Programme 1: Administration; Programme 2: Policy and Knowledge Services; Programme 3: International Relations; and Programme 4: Domestic Tourism. During the Medium Term Expenditure Framework (MTEF), the Departments’ focus will be on encouraging domestic tourism and stimulating transformation. It will develop new tourist attractions, and support rural enterprises to grow tourism. The budget is expected to grow at a moderate rate over the MTEF period reaching R2.1 billion. SAT’s budget is also expected to increase by an additional R105 million allocation for 2016/17 for the improvement of domestic marketing programmes. The expected increase in domestic trips is 359 thousand from 2.7 million in 2015/16 to 3.05 million in 2016/17. This is a cause for concern as during the 2013/14 financial year domestic tourism trips reached 3.1 million without the R105 million cash injection.  It is therefore expected that the Entity would perform better than preceding years in domestic trips.  International tourist arrivals will be expected to increase from 8.9 million in 2015/16 to 9.05 million in 2016/17. It is expected that the increase in tourist arrivals will positively contribute towards the broader objective of growing the GDP and creating jobs.

 

The Tourism Incentive Programme (TIP) has been created as a sub-programme under the Policy and Knowledge Services, the Programme will receive a budget allocation of R575.7 million over the MTEF, and this allocation is earmarked for the facilitation of market access for local tour operators and tourism businesses in recognised local and overseas exhibitions. Some of the projects for the TIP will include assistance towards the grading of tourism establishments and retrofitting renewable energy initiatives for sustainable tourism. The SRI Programme is expected to support the creation of 3 488 full time equivalent jobs in 2016/17, a mere 480 full time equivalent jobs increase when compared to 2015/16. This, however, is not adequate seeing that funding for this sub-programme has increased from R253 million in 2015/16 to R386 million in 2016/17. Table 1 shows the programme allocation for the Department of Tourism’s budget.

 

Table 1: Programme allocation

Programme	Budget		Nominal Increase / Decrease in 2016/17	Real Increase / Decrease in 2016/17	Nominal Percent change in 2016/17	Real Percent change in 2016/17
R million	2015/16	2016/17
1 Administration	233.7	237.5	3.8	-  10.9	1.63 per cent	-4.67 per cent
2 Policy and knowledge Services	1 181.2	1 272.6	91.4	12.6	7.74 per cent	1.07 per cent
3 International Tourism	47.3	54.7	7.4	4.0	15.64 per cent	8.48 per cent
4 Domestic Tourism	307.0	444.7	137.7	110.2	44.85 per cent	35.89 per cent
TOTAL	1 769.2	2 009.5	240.3	115.9	13.6 per cent	6.55 per cent

 

.93 that translates to a mere 3ed nger to some operations within the EntitiesSource: National Treasury (2016) – Vote 33 Tourism

 

1. Programme Analysis

The activities of the Department of Tourism are organised in the following programmes:

1. Programme 1: Administration

The purpose of this programme is to provide strategic leadership, centralised administration, executive support and corporate services. The budget allocation to the Administration Programme is for strategic leadership management and support services to the Department.  The total Administration budget has increased from R233.7 million in 2015/16 to R237.5 million in 2016 as indicated in Table 2. However this represents a nominal increase of 1.6 per cent, a decrease of 4.67 per cent in real terms.  This Programme constitutes 11.82 per cent of the Department’s total budget, most of which will be spent through the Corporate Affairs sub-programme which accounts for 65.9 per cent of the Administration programme, this sub-programme’s role is to enhance management oversight to create an enabling policy and legislative environment. 

Table 2: Budget allocation for Programme 1

Programme	Budget		Nominal Increase / Decrease in 2016/17	Real Increase / Decrease in 2016/17	Nominal Percent change in 2016/17	Real Percent change in 2016/17
R million	2015/16	2016/17
Ministry	36.1	32.4	-  3.7	-  5.7	-10.25 per cent	-15.81 per cent
Management	18.9	19.3	0.4	-  0.8	2.12 per cent	-4.21 per cent
Corporate Affairs	150.2	156.5	6.3	-  3.4	4.19 per cent	-2.26 per cent
Office Accommodation	28.5	29.3	0.8	-  1.0	2.81 per cent	-3.56 per cent
TOTAL	233.7	237.5	3.8	-  10.9	1.6 per cent	-4.67 per cent

 

1o R205 in 2012om R192 was accounted for in salariesSource: National Treasury (2016) – Vote 33 Tourism

The growth in expenditure for the Administration programme is accounted for in compensation of employees which accounts for 54.1 per cent of the programme’s budget. The Sub-programme Ministry has decreased from R36.1 million in 2015/16 to 32.4 million  in 2016/17, the decrease in expenditure will be on goods and services specifically travel and subsistence which has decreased from R27.1 million to R8 million .

1. Programme 2: Policy and Knowledge Services

The budget allocation for Programme 2 is illustrated in Table 3. The purpose of this programme is to support sector policy development and evaluation, research and knowledge management, promotion of transformation, and responsible tourism.  

Table 3: Budget allocation for Programme 2

Policy and Knowledge Services	Budget		Nominal Increase / Decrease in 2016/17	Real Increase / Decrease in 2016/17	Nominal Percent change in 2016/17	Real Percent change in 2016/17
R million	2015/16	2016/17
Policy and Knowledge Services Management	6.8	4.7	-  2.1	-  2.4	-30.88 per cent	-35.16 per cent
Policy Development and Evaluation	21.3	27.7	6.4	4.7	30.05 per cent	22.00 per cent
Research and Knowledge Management	29.9	26.4	-  3.5	- 5.1	-11.71 per cent	-17.17 per cent
South African Tourism	977.7	1 024.8	47.1	-  16.3	4.82 per cent	-1.67 per cent
Tourism Incentive Programme	170.5	188.9	18.4	6.7	10.79 per cent	3.93 per cent
TOTAL	1 206.2	1 272.5	66.3	-  12.5	5.5 per cent	-1.04 per cent

Source: National Treasury (2016) – Vote 33 Tourism

The budget allocation for the Policy and Knowledge Services Programme, which has received the largest allocation in the budget representing 63.3 per cent of the total Departmental budget decreased by 1.04 per cent in real terms compared to the 2015/16 financial year. This Programme is entrusted with ensuring strategic policy development, monitoring and evaluation, and research and knowledge management services. The South African Tourism (SAT) sub-programme, which is tasked with responsibility of stimulating sustainable international and domestic demand for South African tourist experiences, consumes 80.53 per cent of the Programme’s budget.  The South African Tourism Budget will grow at an average growth rate of 5.2 per cent over the MTEF.

Another noteworthy sub-programme growth is the Tourism Incentive Programme (TIP), and this sub-programme has experienced an increase of 5.72 per cent in real terms. This programme experienced under expenditure during the 2015/16 financial year of R10 million as a result of unspent funds due to the delay experienced in the appointment of technical advisors for the Robben Island renewable energy retrofitting project. It is not the first time that the Department lost funds from TIP as during the 2014/15 financial year the Department lost R78 million from the same programme, which was redirected to Eskom. The Programme was introduced during 2014/15, however, the programme did not deliver on the set mandate to help SMMEs and established businesses to grow through improved market access. Towards the end of 2014/15 financial year, TIP was moved to the Policy and Knowledge services sub-programme and it became fully operational during the 2015/16 financial year. This is worrisome as the purpose of this particular programme is not in line with the TIP, it is however better placed within the Domestic Tourism Programme. It is stated that the programme will support tourism attractions to enhance destination competitiveness, however the Estimates of National Expenditure (ENE) highlights that the Department will develop new tourism attractions. Furthermore underutilised and unutilised public recreational facilities and resorts will be redeveloped as tourists’ attractions.

1. Programme 3: International Tourism

The budget allocation for Programme 3 is presented in Table 4. The purpose of this programme is to provide strategic and policy direction for the development of South Africa’s tourism potential throughout various regions of the world.

Table 4: Budget allocation for Programme 3

Programme	Budget		Nominal Increase / Decrease in 2016/17	Real Increase / Decrease in 2016/17	Nominal Percent change in 2016/17	Real Percent change in 2016/17
R million	2015/16	2016/17
International Tourism management	3.5	4.6	1.1	0.8	31.43 per cent	23.29 per cent
Americas and Western Europe	17.3	20.0	2.7	1.5	15.61 per cent	8.45 per cent
Africa and Middle East	14.4	16.3	1.9	0.9	13.19 per cent	6.19 per cent
Asia, Australasia and Eastern Europe	12.1	13.8	1.7	0.8	14.05 per cent	6.99 per cent
TOTAL	47.3	54.7	7.4	4.0	15.6 per cent	8.48 per cent

National Treasury (2016) – Vote 33 Tourism

The International Tourism Growth Programme is responsible for the development and support of South Africa’s tourism potential throughout the various regions of the world. This Programme increased by a noticeable 15.6 per cent in nominal terms from R47.3 million in 2015/16 to R54.7 million in 2016/17. A significant amount of the International Tourism budget will be focused on the Americas and Western Europe sub-programme, as it will account for 36.6 percent of the total programme budget. The majority of the Programmes budget will be allocated for compensation of employees at 70.5 per cent as well as travel and subsistence at 9.3 per cent for trips taken to analyse international tourism markets and attend multilateral fora. The foreign governments and international organisations (which is the Regional Tourism Organisation of Southern Africa and the United Nations World Tourism Organisation) will account for 11.5 per cent of the Programmes budget.  This Programme will also focus its spending on training South African missions abroad.

1. Programme 4: Domestic Tourism

The purpose of the Domestic Tourism Programme is to provide policy and strategic direction for the development and growth of sustainable domestic tourism throughout the South Africa.

Table 5: Budget allocation for Programme 4

Programme	Budget		Nominal Increase / Decrease in 2016/17	Real Increase / Decrease in 2016/17	Nominal Percent change in 2016/17	Real Percent change in 2016/17
R million	2015/16	2016/17
Domestic Tourism management	10.5	13.8	3.3	2.4	31.43 per cent	23.29 per cent
Domestic Tourism management Southern Region	12.1	14.0	1.9	1.0	15.70 per cent	8.54 per cent
Domestic Tourism management Northern Region	17.3	15.3	-2.0	-2.9	-11.56 per cent	-17.04 per cent
Social Responsibility implementation	253.6	386.1	132.5	108.6	52.25 per cent	42.82 per cent
TOTAL	307.0	444.7	137.7	110.2	44.9 per cent	35.89 per cent

 

0.17 in the 2015/16 fuinancial year the transfer to South African Tourism will be reduced by 40.7 millionernal audit cost. the Source: National Treasury (2016) – Vote 33 Tourism

The Department’s budget allocation for the Domestic Tourism Programme has increased by 35.89 per cent in real terms from R307.0 million in 2015/16 to R444.7 million in 2016/17 as indicated in Table 5. This programme is responsible for the promotion, development, and growth of sustainable domestic tourism throughout South Africa. The spending focus will mostly be on the Social Responsibility Implementation (SRI) sub-programme, which focuses on infrastructure projects under the EPWP programme targeting the youth, disabled, women, and SMMEs. This sub-programme accounts for 82.6 per cent of the Programme. The expected increase to this Programme will be highly influenced by the increase in the allocation for the SRI sub-programme, an increase in the transfers to the Strategic Partners in Tourism and training and development. The expected jobs to be created through the SRI programme will be 3448 for the 2016/17 financial year.

 

1. South African Tourism

In terms of the Tourism Act (Act No. 3 of 2014), South African Tourism is mandated to market South Africa internationally and domestically as preferred tourism destination and to ensure that tourist facilities and services are of the highest standard. The organisation is also required to monitor and evaluate the performance of the tourism sector.

1. Strategic Objectives

The strategic objectives for 2016 – 2021 were summarised as follows:

1. Contribute to the South African economy by increasing the number of travellers

to and within South Africa.

1. Build positive awareness of the South African experience.
2. Reposition SA Tourism to be recognised as a tourism and business events industry leader in market intelligence, insights and analytics.
3. Collaborate with stakeholders and partners to deliver on SA Tourism’s mandate.
4. Improve visitor experience in line with the brand promise; and
5. Create an organisational culture of work satisfaction, excellence and innovation to improve effectiveness and operational efficiency.    

 

5.2        Strategies to achieve strategic objectives

 

South African Tourism has developed seven new strategies aimed at achieving the set strategic objectives. The seven strategies and measures are as follows:

 

5.2.1       Invest in selected markets for leisure tourism to deliver volume (travellers) and value (tourism revenue).

5.2.2       Position South Africa among the top 10 long-haul business events destinations by 2025 while collaborating to convert business travellers into leisure tourists.

5.2.3       Revamp the value proposition of tourism grading to inspire partners and stakeholders to deliver on the brand promise and quality visitor experience.

5.2.4       Work with trade partners to leverage resources to deliver travellers to and within South Africa.

5.2.5       Position SA Tourism as the foremost authority in tourism and business events, underpinned by quality assurance.

5.2.6       Collaborate with partners and stakeholders for tourism growth.

5.2.7       Create a culture of excellence and innovation to improve effectiveness and operational efficiency.

5.3       International Tourism Marketing

The world has changed considerably since SA Tourism completed the fifth portfolio review in 2013. SAT’s fifth leisure tourism market portfolio will be revised in 2016/17 in line with the current market insights.  In order to effectively and efficiently deliver on its mandate, SAT’s operating model will be as follows:

• Adoption of a hub approach – this approach involves clustering markets into regional hubs for ease of marketing operations and international trade relations.
• Shift from bricks to mortar to virtual offices – this involves appointing trade relations managers to service “thin” markets so as to exploit the gains arising from such markets; and
• General Marketing Agency – this approach focuses on appointing a marketing agency representative to service markets with high set up costs and lengthy registration processes.

 

5.4        Regional Africa Marketing

The National Tourism Sector Strategy identifies the rest of Africa as the main source of foreign arrivals for South Africa and outlines the tourism goals for continent, and SAT will pursue the following to unlock the regional markets:

• Increasing regional awareness of South Africa as a tourism and leisure destination.
• Improving market presence in key African markets; and
• Implementing regional tourism programmes.

 

5.5        Domestic insights study

SA Tourism commissioned the study on domestic insights to revise the approach to effectively target the domestic market, thereby growing domestic tourism and building a culture of travel within South Africa. In order to grow domestic holiday trips and total domestic direct spend, SAT will:

• Create awareness and travel culture amongst South Africans.
• Motivate the market segments to take more holiday trips by showcasing a variety of desirable experiences through engaging rich informative content.
• Partner with and educate the channel to promote relevant VFM deals with supporting content on activities so that prioritised segments are motivated to book.
• Promote suitable deals and travel packages to improve affordability and seasonality; and
• Maximise use of and leverage on provincial signature events through activations and media engagements.

 

5.6        Working with Trade

SAT will pursue the establishment of a healthy working relationship and collaboration with the trade through working with trade partners to leverage resources that will deliver travellers to and within South Africa. Through partnerships, the South African brand will be built and trade partners will be empowered and enabled to sell South Africa in the following manner:

• Creating awareness and positivity for South Africa as a tourism destination.
• Initiating an integrated approach between SAT and trade.
• Conducting trade mapping in each market.
• Educating the trade to sell South Africa better; and
• Using cooperative agreements.

 

5.7        Business tourism

South African Tourism, through the South African National Convention Bureau (SANCB) will position South Africa in the top ten long-haul business events destinations according to ICCA and Union of International Associations (UIA) ranking. SAT will also collaboratively convince key decision-makers that South Africa can be trusted to deliver memorable experiences and successful business events. This will require:

• Reconfiguring of the SANCB to generate more quality association leads that convert into bids, while focusing on African opportunities.
• Empowering SAT offices abroad to generate leads, offer support and facilitate incentive-driven business leads to achieve a more integrated organisation and optimal return on investment.
• Enhancing delegate-boosting platforms to leverage SA Tourism’s marketing campaigns and expertise, in order to convert the business events delegates into leisure tourists.
• Repositioning the brand to drive awareness, positivity and consideration of South Africa as the leading meetings destination in Africa and an appealing destination for delegates.
• Continuing to explore alternative bid support strategies.
• Generating sales using a sales representation model in some markets and, in others, direct sales using in-house sales teams; and
• Negotiating with and managing the strategic partner for better positioning of the Indaba and Meetings Africa events.  

 

5.8        Quality Assurance

The Tourism Grading Council South Africa’s pursuit of enhancing visitor experience and consumer confidence in the tourism products of South Africa will be achieved by implementing the following:

• Review of policies related to grading. A committee has already been established to undertake the process.
• Drive positive perceptions and the appeal of grading in the industry by refining the grading value proposition in line with the consumer insights and associated communication plans per client category, launching in April 2016.
• Grow the customer base through a targeted sales strategy that emphasises the grading value proposition in consultation with industry associations using grading support funding; and
• Retain the customer base by delivering the grading value proposition through a Customer Relationship Framework.
• Enhance and improve the integrity of the grading criteria and process. A review of the grading criteria was conducted in 2015/16 to be applicable for further three years.
• Implement globally benchmarked capacity-building and knowledge-transfer programmes to improve the integrity of the grading assessors, as well as to ensure optimal transitioning from an outsourced to an in-house assessor model; and
• Partner with tourism quality assurance bodies, universities, the tourism industry and the Culture, Art, Tourism, Hospitality and Sports Sector Education and Training Authority (CATHSSETA) to professionalise tourism quality assurance.

 

5.9        Stakeholder Engagement    

Stakeholder engagement is one of the weaknesses revealed by the SAT Review Report commissioned by the Minister of Tourism in 2015/16. SAT will strive to strengthen its stakeholder engagement and innovatively align strategies for tourism growth through:  

• The organisation implementing the organisational Stakeholder Management Plan that will have defined and measurable outcomes.
• SAT together with NDT collaborating with trade on key projects focused on branding (PR and messaging), marketing, market access, business tourism and transformation.
• Building a case for tourism as a key pillar for accelerated economic growth and job creation, both in the short-term and in the long-term.
• SA Tourism continuing to collaborate with provincial and city tourism agencies on initiatives to improve the seasonality and geographic spread of travel, drive domestic tourism.
• SA Tourism and the provinces continuing to leverage on Joint Marketing Agreements (JMAs) and market access platforms both locally and international markets to find synergies, eliminating duplications and creating efficiencies in how government funding is spent.  

 

5.10      Energising and empowering people to innovate for excellence

Tourism is an ever changing sector that requires SAT to be a highly innovative organisation with motivated staff that keep up with international trends. To achieve innovation:

• The organisations’ staff complement will remain the cornerstone of its success. The management and the Board will continue to create an environment conducive to high performance and excellence.
• SA Tourism will implement a human resources strategy that is aligned to its overall business strategy.
• As part of building an inspiring and energised organisation, SAT will implement the Leadership Development Programme underpinned by an executive mentoring and coaching programme.
• Culture Alignment Programmes will form part of the full Brand Ambassador Programme, including training, orientation and re-orientation as well as new-leader on boarding.
• The implementation of the Brand Ambassador will create a commonly shared organisation DNA / culture for the effective delivery of strategies.
• SA Tourism will reconfigure itself to deliver on strategy by conducting capacity assessment, organisational development and resource placement.
• Implementing an Integrated Talent Management Plan and a Succession Planning Programme, including a revision of the organisation’s remuneration philosophy. This will be underpinned by workforce planning, staff retention and work skills planning; and
• The focus of all the programmes will be based on the strategic thrust of re-establishing the organisation as a high performance and innovative environment and defending SAT as a research-led destination marketing organisation, while energising and empowering its people and partners to innovate for excellence and tourism growth.

 

5.11      Positioning SAT as the foremost authority in tourism and business events

To deliver the strategy that positions South Africa as a preferred destination for leisure and business events, SAT will perform the following activities:

• Rebrand, expand and resource its strategic research function to market intelligence, insights and analytics. Market intelligence and insights will be taken into account in strategic planning and decision-making.
• Partnerships with tourism-related and other industries, such as airlines and airports, will also be forged to ensure that new data feeds are utilised.
• Expand the partnership with Statistics South Africa to include domestic surveys; and
• Invest in online and offline platforms for the packaging and sharing of integrated market intelligence, insights, data reports and analytics for leisure, business and events and grading. 

 

5.12      Organisational Risk Management

At the time of finalising the Strategic Plan, SA Tourism was embarking on a risk assessment to identify risks that might have a negative impact on the achievement of its strategic objectives. This process was concluded by the end of March 2016. The top three risks identified are as follows:

• Currency loss and increased costs of doing business abroad;
• Possible decline in tourism industry performance; and
• Lack of assurance over tourism statistical data.

 

5.13      Sources of revenue for South African Tourism

The total budget for SAT in the 2016/17 financial year is R1 221 835 billion. The budget is drawn from the following sources:

• Government Grant is R1 024 847 billion
• TOMSA Levy is R99 450 million.
• Indaba and Meetings Africa R54 506 million.
• Grading Fees is R20 098 million.
• Sundry revenue is R 22 934 million   

 

1. Committee observations

The Committee synthesised all the presentations received from the Auditor-General, National department of Tourism into observations that will form the basis of its oversight programme in the 2016/17 financial year. The observations outlined below are categorised into service delivery and budget related matters. Observations are also categorised according to the work of the Department and activities of South African Tourism.

1. Observations on the National Department of Tourism

The observations made in relation to the Department are as follows:

1. Service delivery related observations

The service delivery observations are based on the non-financial factors that contribute to the poor performance of the sector. These include internal factors under the purview of the Department and external factors beyond its control that should however be coordinated by the Department.

1.   Cooperative governance

The Committee observed that despite good programmes presented to the Committee from time to time, there were still challenges with regard to cooperative governance and implementation of programmes at a local constituency level. These pertain to programmes that should have been implemented, but there was no progress due to lack of cooperative governance amongst stakeholders.  This mostly affects attractions such as the Mandela Capture Site in KwaZulu-Natal where a project was implemented by the Department of Cooperative Governance and Traditional Affairs in KZN but there is no signage from the N3 to the site. This was a matter also identified by the Committee when undertaking an oversight visit to KwaZulu-Natal in the 2015/16 financial year. The Committee acknowledges that there is an interdepartmental committee that addresses these issues, but the concern is that there are no tangible outcomes on the ground.  A call was made to the departmental to address this challenge through the coordination of activities at a professional level through recognised structures such as the Forum of South African Director-Generals (FOSAD).

1.   Handling of tourism complaints

The Committee observed that in the past financial year the Department received thirty four complaints and that a bulk of these were related to issues of refund between the service providers and the complainants. Some complaints related to consumer dissatisfaction with the experience related to breach of product promise when the experience was purchased. The Committee sees this as a far reaching matter in terms of the mandate and services provided by the Tourism Grading Council with regard to establishments complying with offering standards at an appropriate grading status. The Committee therefore urges the Department and the Tourism Grading Council to work closely with the trade associations to ensure that their members ethically deliver on the brand and product promise to meet consumer expectations.

1.   Capacity building in rural communities

The Committee observed that some rural areas have a potential for tourism development, particularly those adjacent to busy tourism attractions. However, communities in these areas are observers and not participants in the local tourism economy as if they are off the beaten track to tourists. The Department is urged to look into possibilities of introducing capacity building programmes to involve local communities, including converting their homesteads to homestays. It is acknowledged that the Department has undertaken a benchmarking study tour to Malaysia in this regard and some communities, such as the Moruleng in Pilanesberg, have started reaping the benefits. However, the Department is encouraged to roll out a nationwide programme to reach as many communities as possible.

1.   Planning for projects

The Committee observed that the Department operates in a fluid multidisciplinary environment and always plans its projects in partnership with other partners to maximise impact and stretch its budget. Infrastructure related projects go through a 14 days cycle which delays inception and commencement of projects. In other instances, such as implementation of signage in World Heritage Sites, the Department had to go through a lengthy process of signing Memoranda of Agreement that detail responsibilities for various organisations.  The challenge always arises when procurement has to be done by partner organisations whereby delays are experienced, thus affecting the implementation and achieving targets set in the Annual Performance Plan. The Committee is concerned that continued failure to meet time frames in the Memoranda of Agreement would result in failure to meet targets in the Annual Performance Plan thus leading to poor service delivery. The Department is urged to develop checks and balances to ensure proper planning and implementation of projects.

 

1.   Marine and Coastal Tourism

The Committee noted that the Department has introduced the Blue Flag Beaches programme aimed at facilitating the implementation of Blue Flag Beaches across the coastal cities and towns in the country.  This Committee further noted that this is in line with the recommendations made by the Committee when the Department tabled the 2015/16 Annual Performance Plan. The Committee had identified that the Department was missing an opportunity in leveraging on Operation Phakisa as there was nothing on marine tourism. The Committee commends the Department for implementing its recommendations to develop a programme that links to Operation Phakisa by introducing the Blue Flag Programme. However, the Department is urged to develop a comprehensive strategy that will tap into wider marine tourism development opportunities presented by the almost 3000 km coastline of South Africa. The Committee acknowledges that the Department will be embarking on a marine tourism consultation process with a number of stakeholders and urges the Department to facilitate an outcome of a comprehensive and inclusive Marine Tourism Strategy.

The Committee also acknowledges that the global cruise tourism industry has increased and cities such as Durban, Port Elizabeth and Cape Town were planning to increase their participation in the sector through having dedicated cruise terminals. The type of development in cruise terminals such as that in the Cape Town Waterfront was using a mixed model that caters for seasonality as well. It was noted that the Minister admitted that the Department traditionally did not consider cruise tourism a priority, and was aware that cruise tourism was a growing industry. The Committee notes that the Department acknowledges that this is a short term thinking and cruise tourism would be investigated, and if found viable, will be one of the priorities of the departmental strategies.

 

6.1.2     Budget related observations

The Committee made the following budget related observations with regard to the Department:

1.   Controls on the budget transferred to South African Tourism

The Committee noted that 83.3 percent of the budget appropriated to Programme 2 is transferred to South African Tourism. A significant transfer of more than 50 percent of the SAT budget allocation is transferred upfront to deal with issues of currency exposure, which has been a challenge for SAT for a number of years.  The Committee commends the Department and SAT for addressing this issue which has caused SAT to lose more than R350 million of its marketing budget in the past five years.

The Committee recognises that South African Tourism has a new Board that looks poised to delivering on their mandate in terms of both strategy and financial management. However, the Department should have proper controls in place to ensure that the budget allocated to SAT is used appropriately as it takes a large portion of funds appropriated to Vote 33: Tourism.  The Department should also ensure that South African Tourism produces and delivers on marketing strategy that will maximise return on investment from the appropriated budget.

 

1.   Compensation of employees

The Committee observed that as part of cost cutting measures, the Cabinet has approved reductions of R17.5 million in 2017/18 and R26.6 million in 2018/19 to the department’s compensation of employee’s budget as part of its decision to lower the national aggregate expenditure ceiling.  The Department has also been directed to not exceed 530 employees in its establishment. The Committee notes that currently the staff establishment is 550 and the Department has to decide, if posts become vacant, whether to fill or remove them from the establishment. The Committee is concerned that this might lead to the Department failing to fulfil its mandate in future if staffing matters are not handled with care.  The Department is therefore urged to ensure that the critical posts are always filled to effectively and efficiently deliver on its mandate.  The target of maintaining the 8 percent vacancy rate is also highly commended given the high unemployment rate in the country.

1.   Capital assets

It was observed that there was a steep increase in the capital assets of the Department from R6.0 million, which accounted for 0.3 percent of the budget of the Department in 2015/16, to R112.3 million in 2016/17 which accounts for 5.6 percent of the budget. This emanated from the reclassification of the Expanded Public Work Programme under Programme 4: Domestic Tourism as capital assets. The Committee notes that this has settled the matter that has been a concern for the Committee in the past financial years and which led to the Auditor-General giving an ultimatum for compliance by the Department in the 2015/16 or else risk getting a qualified audit. 

 

1. Observations for South African Tourism

The Committee observations with regard to South African Tourism include both the budget considerations and the service delivery environment. The observations are as follows:

 

1. SAT country offices

The Committee observed that the model of operating country offices has been proven to be expensive and not cost-effective. South African Tourism is commended for initiating a process of implementing a hub strategy which will use virtual offices and ensure that one office in the region services a number of markets/ countries. The Committee noted that in the past, country offices have resulted in overhead costs that tended to gradually increase due to currency exposure. The Hub Strategy will lead to closure of some country offices and release the money for the marketing mandate. The Committee urges South African Tourism to implement the hub strategy to cover as many markets as possible to ensure the presence of South Africa globally and address issues in emerging markets, including watch-list markets.

1. Relationship of SAT with foreign missions

South African Tourism is commended for training the Department of International Relations and Cooperation (DIRCO) staff that is sent to the missions abroad. The Committee noted that the DIRCO staff is trained on a similar course that is provided to tour operators, which capacitates them to be tourism ambassadors in their respective embassies.  It was noted that the DIRCO staff is also hosted every year at Indaba and they are trained on how to identify tour operators they can work with, and programmes they can implement with the media. Secondly, the staff is introduced to local products at Indaba so that they can get information that could be used when interacting with tour operators in their own countries.

The SAT had previously briefed the Committee that it was impossible to use tourism attachés in missions abroad. However, the Committee noted that some countries in SADC, such as Mozambique, had tourism attachés stationed at their embassies. The Committee urges South African Tourism to explore the possibility of using tourism attachés to maximise on a partnership already established with DIRCO.

1. Maximising interventions of the South African National Conventions Bureau

South Africa is ranked number one in the African continent with regard to business tourism. The Committee observed that the rating of the South African National Conventions Bureau (SANCB) was linked to the International Congress and Convention Association (ICCA) and that South Africa hosted an average of 120 business events per annum.

The Committee is however concerned that the SANCB activities are mostly concentrated around the three major cities, namely, Johannesburg, Durban and Cape Town.  The Committee notes that the average size of business events in South Africa was 700 to 800 delegates and that not all cities in the country have the capacity to host such huge events. The Committee will be conducting close oversight on the NCB to monitor whether smaller meetings are hosted in smaller towns or big cities.  This will be done to track the implementation of the commitment made by the NCB that some events in 2016 will be hosted in Mpumalanga and Grahamstown to address geographical spread and seasonality.

1. Improving airlift

The Committee noted that the Western Cape Province had finalised their Airlift Strategy and KwaZulu-Natal was also working on theirs. It is commended that SAT had advised the two provinces on the four core markets being pursued in the marketing strategy, in assisting them to align their airlift strategies with activations in these markets.  The Committee also recognises that direct routes to the destination are important and resuscitating direct flights such as the one that used to exist between Johannesburg and Mumbai would be important for increasing arrivals from India. The SAT and the Department are urged to continuously engage the Department of  Transport on the prospects of developing a national airlift strategy that will assist other provinces and towns in improving international and domestic tourist arrivals. South African Tourism is also encouraged to engage airlines to open more direct routes to South Africa.

1. Addressing challenges in the grading scheme

The Tourism Act (Act No. 3 of 2014) outlines grading as a voluntary scheme. The Committee has observed that there are numerous challenges plaguing the grading scheme and there is a need for a policy review to investigate amongst other things, a possibility of a free but compulsory system. The Committee notes that the Tourism Grading Council of South Africa is currently not fully implementing grading as outlined in the Act as not all tourism services, facilities and products are being graded. Grading is only limited to the accommodation sector and has not been extended to other tourism touch points such as attractions and transportation. The Committee is concerned that the Tourism Grading Council of South Africa (TGCSA) considers the extended mandate of the Tourism Grading Council in Act as unfunded and therefore comprising quality assurance for destination South Africa. The TGCSA is urged to engage the Department on funding constraints with regard to the extended mandate as prescribed in the Act to include all facilities in the tourism value chain in the grading scheme.

1. Improving Indaba as Africa’ prime tourism show

The Committee has over the years raised concerns about the waning impact of Indaba as South Africa’s number one tourism show. This was based, among other things, on the format of the show, quality of buyers, value-for-money for participants and lack of tourism research aspect/ seminars in the show. The Committee is pleased to note that the decision to have a partner that will plan and coordinate Indaba on behalf of South African Tourism has not changed.  The SAT is commended for having started with the tender process which is at advanced state and that the announcement on the successful bidder to plan and coordinate Indaba would be made soon.

1. Prospects for tourism growth in 2016

The tourism industry has been distressed in South Africa due to a number of factors, including the visa regime and Ebola epidemic in West Africa. However, the Committee has observed that the industry has seen an encouraging recovery as tourist arrivals in January 2016 started to increase. The recent statistics released by Stats SA indicate that there were 1 012 641 tourist arrivals which amounts to 15 percent growth compared to January 2015. The growth was observed in all major markets with China growing at 93 percent, Germany improving by 22 percent, United Kingdom growing at 16 percent and America by 11 percent. This was a positive start and the indicators were considered positive for a continued growth in 2016. The Committee notes that the SAT has a forecast of 2 percent growth in the Annual Performance Plan for 2016/17 but the growth is optimistically going to be above 2 percent based on the favourable exchange rate which positions South Africa as an affordable and value-for-money destination for foreign markets.  The Committee is confident that the speedy amendment of the unabridged birth certificates requirement in the immigration regulations as recommended by the Inter-Ministerial Committee will also have a huge positive impact to the increase in tourist arrivals.

1. The role of private sector in marketing South Africa

The Committee noted that South African Tourism has recently signed a three-year Memorandum of Understanding with TOMSA Levy which details how the funds will be utilised. It is noted a 15 percent collaborative fund has been set aside to be implemented by TOMSA Levy. However, all the initiatives implemented using TOMSA Levy are done collaboratively with the Tourism Business Council of South Africa.  The levy is used for two key projects. Firstly, there is a short term project which deals with marketing and promotion in four major markets, namely Germany, UK, US, and China.  The 15 percent collaborative fund will also be used for PR and branding. It is also noted that a global campaign is on the cards for a reputational campaign. Secondly, a domestic campaign called “The Finder’s Keepers” has been implemented in partnership with the Sunday Times. The project highlights the nine provinces and their “Hidden Gems”. The Committee is however concerned that the TOMSA Levy collectors are declining and that many establishments are not contributing to the levy. This might necessitate a policy review with regard to the contributions made by the private sector to the marketing initiatives. The Committee would therefore be commissioning an internal benchmarking research to gain insights on how other countries are dealing with this matter, including possibilities of policy and legislative review proposals for a compulsory tourism tax.

1. Unleashing domestic tourism potential

The Committee welcomes the recommendations of panel review report of South African Tourism commissioned by the Minister. The panel identified a gap in the relationship between the nature-based tourism, SanParks and other provincial agencies in terms of affordability and accessibility of these attractions to the citizens. The Committee notes that the SAT has had discussions with SanParks on domestic tourism discounts, such as using the wild card. This will make nature-based tourism, including game reserves, nature reserves, and botanical gardens affordable to citizens.  Another area that has been neglected is arts and culture and it is noted that the SAT has had discussion with relevant agencies to map out the cultural, arts and heritage strategy to leverage on these aspects of domestic tourism.  The Committee had also identified this missed opportunity and hence initiated and undertook a joint oversight visit with the Portfolio Committees on Arts and Culture and Environment. This was based on the fact that arts and culture is very important for domestic tourism, but is not well developed and marketed.

In the insights provided by the Minister of Tourism, improvement of cultural tourism is based partly on marketing and partly experience, and the combination of both makes cultural tourism attractions.  The cultural villages, for example, need attention to provide a memorable experience. The SAT is currently in the process of finalising domestic consumer insights. The research has come up with findings that the inspirational campaign “My First Time Campaign” aimed at encouraging South Africans to travel was successful. Furthermore, SAT has partnered with organisers of domestic events such as the biking event that takes place in Limpopo to increase domestic tourism. The Minister alluded that they are working with the industry to ensure that domestic tourism is affordable to South Africans. The private sector should come to the table to make domestic tourism accessible and affordable.

The Committee also observed that there are municipal resorts that are dilapidated and not functioning optimally, and that if these resorts are renovated they could make domestic tourism affordable. However, there is not enough budget to make significant contribution to upgrading municipal resorts. The Committee noted that the Minister also agreed that municipal resorts could be the solution to addressing the affordability of accommodation, and that there needed to be a collaboration with the provinces to address this matter.

1. Improving implementation of Social Responsibility Implementation (SRI) projects

The Committee has observed over the years that there was a challenge in implementing the Expanded Public Works Programme or Social Responsibility Projects (SRI) projects as part of the programmes undertaken by the Department.  It was noted that the Minister also alluded that implementing community projects in rural areas was sometimes difficult and the failure rate was high. The Department had commissioned forensic audits and some cases were served before the courts. The Committee commends the interventions of the Department whereby efforts were being shifted from developing ad hoc community projects towards destination enhancement, which will improve tourist experiences in destination South Africa. The Committee notes that community projects in the future will be carefully selected to enhance product mix, and that products such as cultural villages could also be an option as cultural diversity is part of South Africa’s uniqueness.

1. Ease of travel and accreditation of tour operators abroad

In the update provided by the Minister, the Committee noted that Brazil does not need visas and the Minister of Home Affairs recently announced that Russian citizens who want to travel to South Africa for leisure reasons would be exempted from Visa requirements. This is a new dispensation and will address the difficulty of travelling from Russia, which has been a large visa requiring geographical area. Furthermore, the accreditation of tour operators is no longer a requirement from visa exempt countries for leisure tourists.  In China, the need for in-person application is no longer a challenge as all tour operators are accredited. People wanting to travel to South Africa as leisure tourists can now apply for their Visa through the accredited tour operators. It is noted that the same applies in India, but the outstanding issue in India is the capacity of Home Affairs to process Visa applications. The Committee welcomes the Cabinet announcement that Home Affairs will be exempting travellers from the BRICS countries who hold Visas from countries such as US, UK, Schengen and all other countries who apply stringent visa application processes.  These tourists will be issued a Visa on arrival. The Committee, however, notes that this was only a policy statement at a time and not a decision yet, but it is a matter that will be given serious attention by Cabinet.  The one outstanding matter from the IMC recommendations is the amendment to the Immigration Regulations that deals with the requirement of the unabridged birth certificates, especially from visa exempt countries.

 

1. Conclusion

The Committee recognises that the tourism industry is impacted by a number of internal and external factors. Most of the external factors are fluid and the government has no control over them nor do they fall within the purview of the private sector. The fluidity of the international tourism trends in the sector compel well-coordinated efforts between the state and the private sector. The Department of Tourism and South African Tourism are therefore charged with a demanding task of ensuring that they develop strategies that leverage on favourable factors and mitigate the negative effects to destination South Africa. Some of the favourable factors are exchange controls that have nonetheless not been harnessed to give mileage to the country as a preferred and value-for-money destination.

The Committee commends the Department and South African Tourism for stretching the appropriated budget for tourism through a number of partnerships they have forged with both the public and private sector partners. Tourism thrives in partnerships and the number of partnerships realised in the current financial year epitomises the kind of collaboration that is desirable to grow the sector. The proposed partnerships with regard to heritage, arts and culture organisations in particular, will be tracked by the Committee with keen interest to monitor how the Department unlocks domestic tourism to address affordability and accessibility by the citizens.

The Committee is satisfied with how the Department and South African Tourism will be spending the appropriated budget as outlined in the Annual Performance Plans for the 2016/17 financial year. The Strategic Plan and Annual Performance Plan tabled by South African Tourism has introduced numerous improvements on how the Entity will be conducting its business in the future. This is a welcome improvement as it gives effect to the mandate of South African Tourism to market the country domestically and internationally. The quarterly reports will afford the Committee an opportunity to conduct oversight on regular basis to track expenditure patterns and see if the new plans take the sector to a growing trajectory.

1. Recommendations

The Committee observations led to a number of recommendations that are consolidated in line with the Committee Strategic Plan and Annual Performance Plan for the 2016/17 financial year. These recommendations have both short-term and long-term ramifications. The Committee recommends that:

1. The Minister ensures that the Department devises innovative ways to ensure the implementation of their Human Resources Strategy within the confines of the compensation of employee’s budget approved by the National Treasury, without compromising service delivery and mandate of the Department.

 

1. The Minister ensures that the Department properly plans for projects, and that partner organizations implementing projects on behalf the Department adhere to agreed time-frames to avoid delays in the implementation of projects and achieving targets in the Annual Performance Plan.

 

1. The Minister ensures that the Department works closely with other government departments and agencies through intergovernmental structures and professional fora to unblock hindrances with regard to providing signage to major tourist attractions throughout the country and report to the Committee within six months of adoption of this report on progress made in this regard.

 

1. The Minister persuades colleagues within the Cabinet for a speedy and holistic implementation of the IMC recommendations to resolve all outstanding Visa-related issues, including the requirement for unabridged birth certificates, and Cabinet announcement on Visa exemptions for BRICS countries, to ease travel and increase tourist arrivals to the country and report to the Committee within three months of adoption of this report on progress made.

 

1. The Minister ensures that the South African Tourism finalises the negotiations with the National Treasury and other partners on the final solution to mitigate currency losses and reports to the Committee within six months of the adoption of this report on progress made.

 

1. The Minister ensures that the Grading Council of South Africa conducts a policy review of its mandate as espoused in the Tourism Act (Act no. 3 of 2014) and presents the policy proposals to the Committee during the legislative review process.

 

1. The Minister ensures that  the National Conventions Bureau provides a quarterly breakdown of the 138 meetings planned for 2016/17 and specify the expected number of delegates and revenue to be generated by each meeting; indicate in which provinces, cities, or towns the meetings will be held, and a plan to deal with geographic spread and submit this addendum to the Committee when South African Tourism comes for the first quarter reporting for 2016/17 financial year.  

 

1. The Minister considers a policy review on TOMSA Levy collection and investigates other modalities for private sector funding of tourism in South Africa.

 

 

Report to be considered.