ATC170201: Report of the Portfolio Committee on Tourism on Quarter 2 Financial and Non-Financual Performance for the 2016/17 Financial Year, dated 1 February 2017

Tourism

 

Report of the Portfolio Committee on Tourism on Quarter 2 Financial and Non-Financual Performance for the 2016/17 Financial Year, dated 1 February 2017

 

The Portfolio Committee on Tourism, having considered the 2nd Quarter Report of the National Department of Tourism on the 18th November 2016 and South African Tourism on the 25th November 2016, reports as follows:

 

1. Introduction

 

The Estimates of National Expenditure outlines the purpose of Vote 33: Tourism as to promote and support the growth and development of an equitable, competitive and sustainable tourism sector, enhancing its contribution to national priorities. The Department of Tourism, later referred to as the Department, continues to pursue this mandate within resources currently available, given the difficult economic conditions experienced in the Republic. The Committee appreciates that the Department always strives to spend the allocated budget, with 99.1 per cent of the 2015/16 adjusted appropriation spent by the end of the previous financial year. The delays reported in the commencement of the implementation of projects in the first quarter of the 2016/17 year however, threaten to disrupt the excellent spending patterns of the Department.

The performance for some indicators in the first six months of 2016/17 was slow and below the targets set. This was due mainly to the delays experienced in the first quarter. There were also a number of delays due to the slow process of procurement of service providers for projects which was not finalised on time. The Department had assured the Committee during the reporting for quarter 1 that all the targets missed in that quarter will be met in quarter 2. It is noted that the Department struggled to fulfil that commitment as performance continued to be a challenge. The Department has however reported that it has been able to make huge progress during quarter 3 in implementing predetermined objectives that were missed in quarter 2.  The Committee will follow up on this assertion in quarter 3 reporting, to determine if the Department is on course to achieve most of its annual targets by the end of the financial year.

 

1. National Department of Tourism

 

The non-financial and financial performance of the Department in Quarter 2 was as follows:

1. Achievement of targets

In the second quarter of 2016/17 the Department had 80 targets and was able to achieve 56 which is a 70 percent performance.  This indicates an overall drop of 4.44 percent when compared to the first quarter where 91 targets were planned and 70 were achieved, totalling 76.44 percent. The Committee in quarter 1 was concerned about Programme 4 performance where 21 targets were planned but only 11 achieved with the overall underperformance of 47.62 percent.  This trend of underperformance continued in Quarter 2 with 24 targets planned but only 9 achieved which is underperformance of 64.3 percent. Table 1 depicts the performance of the Department in quarter 2 (Q2) against the performance in quarter 1 (Q1).

 

Table1: Achievement of targets per Programme

Branch	Number of planned targets		Number achieved		Targets not achieved		Percentage achieved %		Percentage not achieved %
	Q1	Q2	Q1	Q2	Q1	Q2	Q1	Q2	Q1	Q2
Administration	20	21	17	19	3	2	85	90.48	15	9.52
Policy and Knowledge Services	37	25	31	21	6	4	83.78	84	16.22	16
International Tourism Management	13	10	11	7	2	3	84.62	70	15.38	30
Domestic tourism management	21	24	11	9	10	16	52.38	35.7	47.62	64.3
Total	91	80	70	56	21	24	76.4	70	3.56	30

Source: adapted from NDT 2016

 

1. Programme performance

 

The detailed Programme performance with regard to the predetermined objectives is given below:

1. Programme 1: Administration

A total of 21 targets were planned for Programme 1 and 19 were achieved with overall achievement of 90.48 percent. Programme 1 recorded an improvement in the achievement of targets in Quarter 2 when compared to 85 percent achieved in Quarter 1. With regard to number of strategic documents developed and implemented, the first draft Strategic Plan and Annual Performance Plan for 2017/18 were submitted to Department of Planning, Monitoring and Evaluation (DPME) and National Treasury; the annual report for 2015/16 was tabled in Parliament; the first-quarter performance report for 2016/17 was submitted to DPME; and the first-quarter risk mitigation report for 2016/17 was submitted to RMC for adoption.

With regard to the number of public entity oversight reports prepared, the Department was able to prepare the South African Tourism quarterly oversight report as planned. In maintaining the vacancy rate, the target was for the vacancy rate not to exceed 8 percent and the Department was able to maintain a 6.8 percent vacancy rate. With regard to the percentage of women representation in Senior Management Service (SMS), representation for people with disabilities, and black representation, the women representation in SMS were maintained at 50 percent as per target, people with disabilities representation was maintained at 4.9 percent better than the 3 percent target, and Black representation was maintained at 95.1 percent against the target of 91.5 percent.

The Department had also set a target of development and 100 percent implementation of Workplace Skills Plan (WSP) during the financial year, and 30 percent Workplace Skills Plan was implemented as per quarter 2 target.  A 100 percent compliance in the management and handling of grievances, misconduct, disputes and collective bargaining was achieved for all labour relations issues in the quarter with performance indicating four cases of misconduct; one arbitration; one matter in court and one appeal. Phase 2 of the Information Communication Technology Strategic Plan (ICTSP) was achieved as planned. The Annual financial statements were compiled and submitted to National Treasury and the Auditor General on the 31st May 2016 as planned. The 30 percent of the annual internal audit plan was also implemented as per set target. The Cabinet and Cluster Coordination protocol was also implemented as per set target.

The Department struggled with achieving the target on 100 percent implementation of quarter 2 requirements of the annual implementation plan of the Department’s Communication Strategy as internal workshops with branches (ODG, Ministry and Deputy Ministry) and presentation to external stakeholders via Tourism Communicators Forum (TCF) and SA Tourism Marketing Forum did not happen. This was due to the Corporate Identity and branding manual which was only approved on 30th August 2016. Failure to reach this target was unnecessary as this depended mainly on securing meetings with internal stakeholders. A 100 percent of tourist complaints were referred to appropriate authorities for resolution within the agreed timeframes as planned. The Department also had a challenge with the target on the Draft Tourism Amendment Bill. Consultation with stakeholders was done but the Draft Framework for review of the Tourism Act, 2014 was not approved as a result of the consultations that had to be undertaken. With regard to the procedure for the lodging of tourist complaints that was to be developed, the stakeholders were consulted and 100 percent of procurement from B-BBEE compliant businesses was achieved as per Q2 targets.

 

1. Programme 2: Policy and Knowledge Services

In quarter 2 of 2016/17 the Department had 25 targets for Programme 2 and was able to achieve 21 which is 84 percent achievement. This is consistent with the 83.78 percent achieved in quarter 1. The Department struggled with achieving the target of developing the 2015 State of Tourism Report (STR). The reason advanced for non-achievement was the delay in the finalisation of procurement process. The Department however reported that all the procurement processes have since been finalised and data collection will now commence.

The target on mobile application (Mobile App) for tourist guides whereby the mobile app functionality was to be developed was also not achieved. This target was not achieved as the development of functionality for mobile apps could not be done as planned due to the delay in the implementation of the project. The Department has indicated that as a corrective measure, the development of the full functional app will be shortened from initial three months to six weeks. The anticipated time for completion of development of the app is mid December 2016.

The Department was also not able to achieve the target of developing the mobile app functionality for Visitor Information Centres. However, the Department reported that the development of the design (wireframes) model for the apps was done. The reason advanced for not achieving this target was the delay in the implementation of the project. A corrective measure to achieve this target, as is the case with the app for tourist guides, involves shortening the implementation timeframe from initial three months to six weeks. The anticipated time for completion of development of the app is mid December 2016.

 

1. Programme 3: International Tourism Management

There were 10 targets set for Programme 3 in quarter 2 of 2016/17 and 7 were achieved with 70 percent aggregate performance. This is a decline from 84.64 percent performance achieved in quarter 1 where 11 targets were achieved from the total of 13. With regard to annual target of cross-border guiding module finalised and consulted on with relevant stakeholders and a quarter 2 target of module content finalised in consultation with Namibia, the Department was not able to meet the target.  The reason for deviation was that relevant Namibian stakeholders were only available for a meeting on 19 October 2016. The target has since been implemented as the stakeholder meeting to consult the draft module was held from 19-21 October 2016 in Windhoek, Namibia.

The Department also failed to achieve Phase 2 of language training in Russian for tourist guides (immersion phase of the training programme in Russia) as planned for quarter 2. However, the selection of participants to attend the training and the procurement of venue and appointment of facilitator were finalised. Training commenced on 12 September 2016, and the launch of the project took place on 21 September 2016. The delays were experienced in the reprioritisation of Mandarin training, moving it from the 2017/18 financial year to the current financial year.  As a corrective measure, a request has been made for approval to deviate on the quarterly targets noting that the annual target will be achieved.

There were also challenges with the call for applications for accreditation based on the framework which was not finalised. The Department however indicated that the letters for call for applications for accreditation based on the framework were drafted and signed. Further consultation with the objective to get a buy-in on the prioritised countries for the accreditation of travel companies (ATC) programme were undertaken and letters for call for application for accreditation based on the framework have been finalised and were sent to SA missions.

 

1. Programme 4: Domestic Tourism Management

There were 24 targets planned in Programme 4 and only 9 were achieved with 64.3 percent failure rate.  This is worse than the 52.38 percent achieved in quarter 1 where 11 targets were achieved from the total of 21.

The outcome of the audit review of the 2010/11 Domestic Tourism Growth Strategy was planned to be presented to stakeholders as part of reviewing the Domestic Tourism Growth Strategy. The audit of the 2010/11 Domestic Tourism Growth Strategy was completed but not presented to stakeholders. This was due to the stakeholder meetings that were postponed. The Department will be engaging with stakeholders to solicit their inputs on the outcome of the audit review and the report on the outcome of the audit will be available at the end of the third quarter.

In the facilitation of four social tourism initiatives that promote open access to selected government owned attractions, a social tourism activity was to be facilitated in quarter 2 targeting the elderly. However, the Department decided to swap with the social tourism activity targeting people with disability to coincide with the Universal Accessibility Tourism Month. This was done as the department focused on the theme for Tourism Month (September) which was Universal Accessibility, and decided to implement the target that coincided with the theme (people with disability). The quarter 2 target (the elderly) will then be implemented in quarter 3 to coincide with the theme of October month - being the elderly month. The implementation has already started with the rolling out of the plan for 110 elderly people per province. The swapping of the themes makes sense but could have been conceptualised at a planning stage to avoid changes in the middle of the financial year.

The Department had also planned to support 100 rural enterprises on mentorship, market access, business development and training. However, only 12 enterprises were workshopped on events industry market access programme due to delays in the implementation of the project. The implementers have however, been appointed and will be allocated the work in their respective provinces to provide mentorship, market access, business development and training. The Department had also planned to launch one incubator but this was not done. The reason for variance was also given as a delay in the implementation of the project. The Pilanesberg incubator has since been launched on 28 October 2016. On the recruitment, selection, orientation and placement of the youth on sommelier training course, the Department was not able to achieve the target. This was due to the delay in the implementation of the project in relation to the procurement matters. However, the Terms of Reference were developed and the advert placed and the closing date is 18 November 2016.

The Department also struggled with the recruitment, selection, orientation and placement of the youth for hospitality service training programme. This was due a delay in the implementation of the project in relation to the procurement matters. However, the Recruitment and selection of beneficiaries are currently underway with, for example, 500 learners recruited in Western Cape, 200 learners recruited in Gauteng, and 300 learners recruited in Mpumalanga. A challenge was also encountered with the recruitment, selection, orientation and placement of the youth for food safety assurers’ programme which was not done. The reason was again a delay in the implementation of the project in relation to the procurement matters. The recruitment and selection of beneficiaries are however, currently underway and will be finalised at the end of Q3.

He Department had also planned to conduct workshops in two district municipalities as part of the local government tourism induction programme, with a focus on rural areas with tourism potential in eight municipalities. The workshops in two district municipalities were not conducted as they were rescheduled due to the Local Government elections which did not permit the planning processes to take place. The workshops have since been conducted at Mopani District Municipality in Limpopo on 10-11 November 2016. Workshops for Nkomazi Local Municipality in Mpumalanga was scheduled to take place on 17-18 November 2016, Zululand District Municipality in KwaZulu-Natal on 16-17 November 2016 and ZF Mgcawu District Municipality in Northern Cape 29-30 November 2016. 

The Department also failed to produce a Final Tourism Human Resources Development Strategy (THRD). The deadlines shifted by two months into third quarter and the contract addendum was signed to extend the deadline to November 2016. The final THRD Strategy will be developed in the fourth quarter in line with new delivery timelines. The Department is currently conducting validation workshops with dates already scheduled for all the nine provinces. The last workshop will be held in Mpumalanga on the 24th November 2016. The Institutional mapping workshop was conducted on the 11th November 2016. The Draft THRD Strategy implementation plan with monitoring and evaluation framework was also planned for Q2 but was not developed. This was due to deadlines for the final THRD which shifted by two months into third quarter. The Draft THRD Strategy implementation plan with monitoring and evaluation framework will be developed in the fourth quarter in line with new delivery timelines.

The Memorandum of Understanding (MoU)/Service Level Agreement (SLA) on the development of the Infrastructure Master Plan were not signed and concluded as planned. The Department took a decision to negotiate the MOU with DBSA since IDC could not agree to the current scope of work regarding tourism infrastructure master plan.  The MOU/SLA will be finalised during Q3 and entered into with DBSA who is still currently evaluating it. A service provider was also not appointed for the development of the Infrastructure Master Plan as the Department and DBSA MOU/SLA is still to be finalised. The MOU/SLA will be finalised during Q3. The Phase 1: Audit of the tourism infrastructure also did not commence as planned. The same reason of the NDT and DBSA MOU/SLA that is still to be finalised was advanced by the Department and this will be done once the MOU/SLA is finalised during quarter 3.

On the number of full-time equivalent (FTE) jobs created through the SRI Programme per year, an annual target of 3 488 was planned with 872 for Q2. The Department was only able to create 255 FTEs as most of the projects that reported in quarter 1 have been completed thus no sufficient active projects in Q2. Furthermore, delays in the procurement process have affected the number of projects that moved into implementation. In addition, the Department has appointed the Government Technical Advisory Centre (GTAC) to undertake the economic and technical evaluation of projects under planning and those that had to be stopped and re-evaluated after the forensic investigations. This exercise will also affect the achievement of the FTE targets.

 

1. Expenditure trends for the first six months of 2016/17

The Department has spent a total of R1.007.050.00 of the total appropriated budget of R2.009.516.000 for the 2016/17 financial year totalling 50 percent of the total budget. At a glance, depicts a perfect expenditure pattern as the Department has spent half of its budget within a half of the financial year. A closer scrutiny however, depicts a worrying factor as the 50 percent is a balancing act amongst the extremes of 63 percent expenditure in Programme 2 and dismal 18 percent in Programme 4. The Programme expenditure indicates that the expenditure in Programme 1: Administration was R100.090.000 of the R 237.456.000 total budget appropriated for the Programme, which amounts to 42 percent total expenditure. Programme 2: Policy and Knowledge Services has a total appropriation of R1.269.753.00 and the Department was able to spend R797.689.000 which is equal to 63 percent total expenditure by the Programme. Programme: 3 International Tourism has a total appropriation of R55.624.000 and was able to spend R29.308.000 which is 53 percent of total expenditure. The total appropriation for Programme 4:  Domestic Tourism is R44.683.000 and the Department has only been able to spend R79.963.000 which amounts to 18 percent total expenditure. Table 2 indicates the expenditure by the Department in Quarter 2 of 2016/17.

 

Table 2: Budget and Expenditure as at 30 September 2016

Programme	AENE Budget (R’000)	Expenditure (R’000)	Expenditure as per % of ENE Budget
1.  Administration	237.456	100.090	42%
2. Policy and Knowledge Services	1.269.753	797.689	63%
3. International Tourism	55.624	29.308	53%
4. Domestic Tourism	446.683	79.963	18%
Total	2.009.516	1.007.050	50%

Source: NDT second quarter report 2016

 

The National Treasury in its Vote: 33 mid-term expenditure trends analysis in the MTBPS for the 2016/17 financial year has indicated that expenditure by the Department of Tourism was R1 million, or 50.1 per cent of the adjusted appropriation of R2 billion for the year. In comparison, mid-year expenditure in 2015/16 was R932.3 million or 52 per cent of the 2015/16 adjusted appropriation. Compared to the first six months of 2015/16, expenditure over the same period in 2016/17 increased by R74.7 million, or 8 per cent. This was mainly due to the transfer payment made to South African Tourism for purchases paid for in foreign currency. The revenue in the first six months of 2016/17 was R4.7 million, or 88.5 per cent of the adjusted revenue estimate of R5.3 million for the year. In comparison, mid-year revenue in 2015/16 was R938 000, or 50.3 per cent of the 2015/16 adjusted estimate. Compared to the first six months of 2015/16, revenue over the same period in 2016/17 increased by R3.7 million, or 397.5 per cent. This was mainly due to debt recovered in relation to expenditure from previous years.

 

1. South African Tourism

 

The performance results of South African Tourism for quarter 2 of the 2016/17 financial year present a serious challenge in terms of conducting oversight over the Entity’s performance indicators. For one the Entity continues to present the domestic tourism performance statistics which are outside of the financial year reporting cycle. For example, the Entity has provided January to June statistics as first and second quarter (2016/17) performance figures, whereas the fiscal year’s first and second quarter is from April to September. The quarterly oversight exercise is carried out to measure the Entity’s performance over its predetermined objectives in alignment the appropriated budget. However the approach adopted by the Entity presents a challenge in terms of overseeing the performance of the Entity in line with the oversight mandate of Parliament, furthermore making it even more difficult to plan and budget effectively for subsequent years. The Committee raised this disjuncture and challenge it presents in terms of conducting oversight, however the Entity was adamant they had to benchmark internationally. The Committee did not suggest they do not benchmark, however, when reporting the quarterly reports should be in line with the Public Finance Management Act (PFMA).

 

3.1        Achievement of targets

South African Tourism has fourteen annual targets for 2016/17. The assessment of the achievement of pre-determined objectives in quarter 2 indicates that only five targets were achieved and two were not achieved. Of the five targets that were achieved, three were exceeded. The other seven targets were not due for reporting however progress has been given on how far they have been implemented. SAT continues to report on calendar year instead of financial year and this is not consistent with the Annual Performance Plan. This performance is a course for concern for the Committee as SAT also did not perform well in quarter 1. The worrying factor is that those the targets not achieved in quarter 2 are the same as those which underperformed in quarter 1.  Table 3 depicts SAT performance against quarter 2 targets.

 

Table3: Achievement of quarter 2 targets for 2016/17 as reported

Key performance indicator	Annual target	Quarterly target	Number achieved/ variance
Number of tourist arrivals achieved	9 077 995	2 294 078	4 969 087
Number of domestic holiday trips achieved	3 059 764	603 579	621 000
Total revenue achieved (in billions)	R95.7	R21.6	R23.2
Percentage of positivity achieved	40 %	NA	38 percent progress
Number of business events hosted in South Africa	138	No quarterly targets	Annual target - not due for reporting. 50% achieved.
Number of business delegates hosted in South Africa	77 567	No quarterly targets	No quarterly targets
Number of grades establishments	5 650	1 362	1 321
Number of graded rooms	5 650	29 567	33 527
Stakeholder satisfaction score	No baseline	N/A
Stakeholder engagement matrix in consultation with stakeholders	Approved stakeholder engagement matrix in consultation with stakeholders	N/A
Staff satisfaction score	3.7	N/A
Unqualified audit	Unqualified annual report	Unqualified annual report	Unqualified annual report
Percentage of staff turnover	7%	N/A	The percentage of staff turnover is almost at par with the annual target of 7% at 7.2%.
Reviewed leisure tourism market portfolio	Approved market portfolio	Approved market portfolio model	A Marketing Investment Framework is currently being developed to assist SA Tourism to select markets for optimal return on investment 75% of the work has been completed and consultations with stakeholders are underway.

Source: SAT 2016/17 Quarter 2 Report

The Committee has also observed some discrepancies in reporting on some of the targets. This includes Year-to-date (YTD) figures which are not updated and quarter one performance which is not consistent with what is reported in quarter 2.  SAT also continues to report on annual performance on some of its targets, especially international arrivals, revenue and number of business events.

 

3.1.1     Foreign tourist arrivals

It is commendable that the target on international tourists arrivals was exceeded with 2 248 082 from 2 053 746 set for the quarter. There was also a positive year on year performance in tourist arrivals which increased by 15.4 percent from 4 307 225 for the period Jan-Jun of 2015 to 4 969 087 in 2016 with significant growth experienced in all markets. The performance was driven by the value for money South Africa offers with the devaluation of the rand; economic recovery by some source markets; additional visa facilitation centres across China; re-introduction of a direct air route in Brazil and China; improvements in visa processing in Kenya, Uganda and Nigeria; various in-market promotional activities; and that in the wake of recent global terrorist activities, South Africa is perceived as a relatively safe destination.

The increase is most welcome however, the capacity of Home Affairs to process international arrivals, particularly at the OR International airport has been observed as a challenge. The long queues continue to bedevil first experience for tourists in the country. The requirement of Unabridged Certificates in the draft amended Regulations is also a cause for concern with regard to increase in international arrivals.

 

3.1.2     Domestic tourism performance

A total of 621 000 domestic holiday trips were achieved against the 603 579 targeted for Quarter 2 which is exceeded the quarterly target by 2 percent. This over performance was driven by the increase in the share of holiday trips.  The domestic trips however, declined from 5.8 million to 5.4 million when compared to the same period last year. Of those people that didn’t take a trip in the quarter, the majority cited affordability as the main deterrent. It is however notable that about one in five respondents said they didn’t have a reason to take a trip whilst a few stated time constraints as a key deterrent. This raises concerns as it indicates that messaging is still not reaching some citizens and therefore the culture of travel will take time to develop.

The economic conditions in the country continue to be a challenge for South Africans to take domestic holidays. Although the second quarter of 2016 showed recovery in terms of GDP growth, the inflation rate remained above the desired threshold of 6 percent, which indicates a constrained environment for consumers. This means SAT has to conceptualise radical interventions, including intensifying the cheap domestic tour packages in collaboration with the private sector.

 

3.1.3     Total revenue achieved

The total revenue targeted for the second quarter was R21.6 billion and this was exceeded as the actual performance for the quarter was R23.2 billion. The reasons for exceeding the target were the increase in arrivals; the year on year increase in average spend per arrival; the weakened Rand; the promotion of packaged tours which resulted in more disposable income spent in South Africa; and domestic revenue generated increased to R6.4 billion from R4.5 billion year on year due to the increase in spend per trip from R770 in 2015 to R1 180 in 2016.

This indicates that there is a correlation between international arrivals/ domestic trips and revenue generation. The more tourists arrivals and domestic trips, the more revenue generated. This in turn translates to more jobs created. It is therefore imperative that SAT starts setting targets for job creation as this is one of the indicators which provide the impact of tourism on economic growth.

 

3.1.4     Percentage of brand positivity achieved

The target of 48 percent brand positivity was not achieved. This was also not achieved in quarter 1 due to the 48 percent decline in SA Tourism's declining Global media budget over 4 years as a result of exchange rate losses and Global media inflation. Consequentially, SA Tourism's impact on brand positivity in the Core and Investment markets has declined/ below target in Australia (27 percent); Japan (5 percent), France (38 percent), Nigeria (37 percent), Germany (39 percent), USA (37 percent), Canada (28 percent), Ghana (23 percent), and the UK (33 percent). Average positivity in core markets is at 39 percent and investment markets at 27 percent. Overall positivity declined in the investment markets from 41 percent (Feb, 2015) compared to 27 percent (Feb, 2016).

It must be noted that brand positivity is the outcome of the budget that has been spent in preceding quarters/ financial years and that the current financial year budget is seriously affected by foreign currency exposure. South African Tourism is however not indicating any corrective measures to address the declining brand positivity.

 

3.1.5     Geographic spread

It is encouraging that the provincial spread in South Africa has improved from an international perspective with the arrivals increasing in 5 of the 9 provinces in the Q2 of 2016. However, it is concerning that most of the provinces saw arrivals decline from 2015 levels with the exception of Gauteng, Western Cape, Eastern Cape and Limpopo. The conjecture may have been that international arrivals should be increasing given the favourable exchange rates and interventions made on immigration regulations. SAT should provide possible interventions to be made for the less visited provinces. 

With regard to the geographical spread of Bids submitted, the trend indicate that Cape Town has had a large share of more that 50 percent from 2013/14 to 2016/17. The other Metros including small cities and towns compete for the remaining 50 percent. It is not clear what may be the cause for this skewed submission of bids given that Johannesburg and Durban have the capacity of hosting big events.

 

3.1.6     Number of graded establishments and graded rooms

The number of graded establishments was not achieved by 3 percent with 1 321 achieved out of 1 362 planned for the quarter. However 30 new hotels joined the star grading system which boosted the number of graded rooms. The achievement for the graded rooms was 33 527 from 29 567 planned for the quarter. The number of cancellations also dropped from the previous quarter by 63 establishments.  In the last 6 months a positive trend has been observed where a net decrease in properties was experienced only in one month.

These are positive developments but the concern still remain with cancellations. The concern is more with the 44 percent auto cancellation at expiry time of the grading term. The Tourism Grading Council should put mechanisms in place for renewing before auto cancellation is activated.

 

3.1.7     Shift from Visiting Friends and Relatives (VFR) to domestic holiday trips

SAT indicated that although the YTD performance on domestic holiday trips is 5 percent below target, the quarterly target was exceeded by 2%. This over performance was driven by the increase in the share of holiday trips in spite of the year on year decrease in total trips taken in Q2 of 2016 (5.4 million) compared to Q2 in 2015 (5.8 million).   However there is no breakdown/ benchmark of the numbers in terms of how the shift has occurred. SAT should provide more clarity to indicate how holiday trips are replacing VFR.

 

3.1.8     Joint marketing agreements/ marketing efforts

The increase of tourist arrivals in South Africa and an increase in number of domestic holidays should be an outcome of deliberate marketing efforts and not happen by default. The Committee should request SAT to provide specific details on their Joint Marketing Agreements and other marketing efforts. These relate to the deliverables in those JMAs and whether they are met. This will talk whether arrivals in South Africa and an increase in domestic trips are the results of SAT activities or just happen by default.

 

1. Opportunity to address some issues during the planning phase

The Committee acknowledges that SAT is currently developing the Annual Performance Plans for the 2017/18 financial year to be tabled around March 2017. This presents an opportunity to address issues such as:

• Breaking down of some annual targets into quarterly targets, e.g. number of business events hosted.
• Ensuring an equitable geographical spread of business events throughout the country.
• Introducing specific marketing interventions for less visited provinces.

 

3.1.10   Alignment of activities with the NDT

The Department is currently developing a Mobile App for attractions in South Africa which in a way assists with marketing the country. It is not clear how South African Tourism will include these apps in their marketing mix. It is therefore important that SAT starts a process of integrating these APPs in their future plans.

 

3.1.11   Impact analysis of SAT activities

The Committee had previously requested SAT to conduct an impact analysis of its programmes. It is noted that the process is underway for the organisational review and ascertaining staffing requirements. It is advisable that SAT includes an impact study in the Annual Performance Plan for 2017/18.

 

3.2        Budget and expenditure

The financial performance for SAT in quarter 2 was as follows:

3.2.1     Income

SA Tourism received R 756.3 million from the National Department of Tourism. This amount was R243.9 million more than budgeted amount. Reason for variance was the upfront transfer to mitigate risk of material currency rate movement. An amount of R67.1 million from TBCSA. This amount was R 17.4 million more than budgeted. The reason for variance was that the projected income, based on TBCSA income, was more than anticipated and contribution to collaborative fund. SAT should indicate how they are going to reprioritise the budget based on more income than budgeted.

 

3.2.2     Under-expenditure

SA Tourism incurred R 616.2 million marketing expenditure during the period under review. This amount was R 71.2 million less than budgeted. The reasons for under-expenditure was that the 2015/16 domestic budget was spent on an approved media buy for the full year, in the first half of the year.  This therefore led to the proposed budgets splits in 2016/17.  However, due to a change in media agency, it was recommended to buy media on a quarterly basis in order to be more adaptive to market needs. The larger part of this is in the travel periods within quarters three and four. For digital marketing, digital platforms are in a renovation phase to best respond to data analytical needs (which means converting the 74 platforms onto one common platform). Project in progress but will only be invoiced on completion in February 2017.

SA Tourism incurred R149.1 million in administration costs during the period under review. This was R 6.8 million more than the budgeted amount. The reason for variance was the savings in HR costs as a result of vacant positions during period under review including CEO, CM: Australia and Netherlands.

 

3.2.3     Reporting against the ring-fenced domestic tourism budget

SAT received the additional budget for domestic tourism but there is still no significant improvement. SAT should report against this ring-fenced budget to indicate how they are using the money to improve domestic tourism. This means SAT should provide a feedback when reporting in every quarter on how they are performing in all their above the line and below the marketing activities.

1. Recommendations

 

It is recommended that the Minister ensures that:

4.1       The Department improves on both financial and non-financial performance to meet the annual targets set in the Annual Performance Plan.

4.2       South African Tourism should improve on both financial and non-financial performance to meet the annual targets set in the Annual Performance Plan

4.3       South African Tourism incorporates the matters identified by the Committee in their 2017/18 Annual Performance Plan, such as breaking down of some annual targets into quarterly targets, e.g. number of business events hosted; ensuring an equitable geographical spread of business events throughout the country; and introducing specific marketing interventions for less visited provinces.

4.4       South African Tourism includes an impact study in the Annual Performance Plan for 2017/18

 

1. Conclusion

 

The Committee is concerned that the performance of both the Department and South African Tourism was below fifty percent at the end of the second quarter. The major issues are with Programme 4 which is far below the targets on both financial and non-financial performance. Both the Department and South African Tourism assured the Committee that they will achieve all their annual targets, except the Full-Time Equivalent (FTE) jobs as a result of the Government Technical Advisory Centre (GTAC) interventions. The Committee will therefore be closely conducting oversight over these two organisations in the remaining two quarters to ensure that their performance improves on their quarterly performance and ultimately achieve their annual targets.

 

Report to be considered