ATC170518: Report of the Portfolio Committee on Tourism for Budget Vote No. 33: Tourism, dated 18 May 2017

Tourism

Report of the Portfolio Committee on Tourism for Budget Vote No. 33: Tourism, dated 18 May 2017
 

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 United Nations World Tourism Organization (UNWTO) has declared 2017 as the International Year of Sustainable Tourism Development.  The Year 2017 is therefore dedicated to promoting tourism’s role in the five key areas including inclusive and sustainable economic growth; social inclusiveness, employment and poverty reduction; resource efficiency, environmental protection and climate change; cultural values, diversity and heritage; and mutual understanding, peace and security.  

The UNWTO approach augers well with the tourism vision of the government of the Republic of South Africa, which has adopted an economic approach that considers tourism as a strategic economic sector with a potential for creating labour intensive, sustainable, and decent jobs, and immensely contributing to the Gross Domestic Product. This has been done through streamlining and entrenching the socio-economic value of the sector in the National Development Plan (NDP). Tourism is a common thread that runs through various chapters of the NDP, which envisions the sector as a major source of revenue and employment for the country through the investment in infrastructure, product and service development. Tourism is therefore considered as an inclusive economic sector that has potential to realise equitable economic development, particularly in rural areas. As such, the sector has immense potential of inclusive economic development through the implementation of the Tourism B-BBEE Sector Codes and conceptualising high impact projects that will foster radical economic transformation.

South Africa is competing on a global level for a share of 1.2 billion international tourist arrivals around the world. It is encouraging to observe an upward trajectory in tourism arrivals following a disheartening decline recorded in 2015. The Committee is pleased to report that South Africa saw over 10 million international tourist arrivals in 2016, a growth of 13 percent. This growth must be sustained as it will lead to more revenue generation by the sector which will lead to more job creation opportunities.

The budget appropriated to Vote 33: Tourism is geared towards ensuring that the sector contribute to inclusive economic growth. The mandate of the Department of Tourism, as outlined in the Tourism Act (Act 3 of 2014), is to promote growth and development of the tourism sector; promote quality tourism products and services; provide for the effective domestic and international marketing of South Africa as a tourist destination; enhance cooperation and coordination of between all spheres of government in developing and managing tourism; and promote the practice of responsible tourism for the benefit of South Africa and for the enjoyment of all its residents and foreign visitors. The Department implements some of its mandate through South African Tourism, especially for international and domestic marketing. This report therefore provides the analysis of the appropriated budget for the 2017/18 financial including the outer years in the Medium Term Expenditure Framework.  The report looks at both the Department of Tourism, referred to as the Department; and South African Tourism, referred to as SAT.

 

1. The Committee Process

 

The national budget with the Estimates of National Expenditure (ENE) detailing the appropriated budget for Vote 33: Tourism was tabled in February 2017.  This was followed by the Department and South African Tourism tabling their Strategic Plans and Annual Performance Plans, which provide specific information on how the allocated budget will be spent in the MTEF.  The Committee then convened a meeting with the Office of the Auditor-General of South Africa (AGSA). The purpose of the engagement was for the Committee to gain insights into the assurance assessment outcomes for the 2016/17 financial year and proactive assessment for the 2017/18 Strategic Plans and Annual Performance Plans of the Department of Tourism and South African Tourism. This was done in preparation for the engagement with both the Department and SAT. The Committee then exhaustively engaged the National Department of Tourism on the 5th May 2017 on their 2017/18 Annual Performance Plan, and South African Tourism on the 12th May 2017 on their 2017 – 2021 Strategic Plan and 2017/18 Annual Performance Plan.

 

1. Department of Tourism

 

The Department tabled the 2017/18 Annual Performance Plan which has considered a number of recommendations made by the Committee since the beginning of the Fifth Parliament. This is an indication of an excellent oversight work done by the Committee in holding the Executive to account. This is also a culmination of a good working relationship between the Committee and the Department, particularly the willingness of the Department to implement the recommendations of the Committee.

 

1. The Strategic Plan

 

The Department did not table a new Strategic Plan as the 2015/16 – 2019/20 document tabled in the 2016/17 financial year is valid for the entire Medium Term Expenditure Framework (MTEF) to 2019/20. The current Strategic Plan is in line with the key priorities of the New Growth Path (NGP), and the National Development Plan (NDP). The interventions and Programmes implemented by the Department advance the achievement of the tourism mandate and harness the socio-economic benefits from the tourism sector. The Department has taken into account the objectives of the Nine-Point Plan in crafting its implementation programmes. Through these programmes, the Department is addressing the triple challenge of poverty, inequality and unemployment.

 

1. Vision:

The vision of the Department is leading sustainable tourism development for inclusive economic growth in South Africa

 

1. Mission:

The vision of the Department is to grow an inclusive and sustainable tourism economy through:

• Good corporate and cooperative governance
• Strategic partnerships and collaboration
• Innovation and knowledge management
• Effective stakeholder communication

 

3.1.3     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.

 

3.1.4     Organisational strategic outcome-oriented goals

The government Medium Term Expenditure pursues a number of strategic outcomes. The Department is contributing towards the achievement of the four of those government outcomes, namely:

• Outcome 4: Decent employment through inclusive economic growth.
• Outcome 7: Comprehensive rural development.
• Outcome 11: Creating a better South Africa, and contributing to a better and safer Africa in a better world.
• Outcome 12: An efficient, effective and development oriented public service and an empowered, fair and inclusive citizenship.

 

The Department seeks to achieve all these activities based on the two main strategic outcome-oriented goals, namely, to achieve good corporate and cooperative governance, and increase the tourism sector’s contribution to inclusive economic growth.

 

1. Department Spending Focus During The Medium Term Expenditure Framework

 

The Department underwent restructuring during the 2016/17 financial year. Four programmes in the previous financial years (2011/12 to 2016/17) were reconfigured. The Programmes have been restructured as follows:

 

1. Programme 1: Corporate Management

The programme purpose is to provide strategic leadership, management and support services to management.

 

1. Programme 2: Tourism Research, Policy and Internal Relations

Programme two used to be called Policy and Knowledge Services. The programme purpose is to plan for and monitor the tourism sector performance with enabling stakeholder relations and policy environment. This programme consists of the following sub-programmes: Tourism Policy and Planning Management; Tourism Sector Policy and Strategy; Research and Knowledge Management and South African Tourism (SAT).

 

1. Programme 3: Destination Development

 

Programme three used to be called International Tourism Management. The programme purpose is to facilitate and co-ordinate destination development through destination planning, tourism product, experience and infrastructure development, investment promotion and the provision of tourism programmes including incentives and Working for Tourism that support host communities to deliver quality experiences for visitors and enhance residents’ wellbeing. It consists of the following sub-programmes: Destination Development Management; Product and Infrastructure Development; Destination Planning and Investment Promotion; and Working for Tourism.

1. Programme 4: Tourism Sector Support Services

Programme four was called Domestic Tourism Management. The programme purpose is to enhance transformation of the sector and tourism services through people development, enterprise support and service excellence in order to ensure South Africa is a competitive tourism destination. It consists of the following sub-programmes: Tourism Development Management; Tourism Human Resource Development; Enterprise Development and Transformation; Visitor Services; and Tourism Incentive Programme.

 

3.2.1     Budget allocation and expenditure

 

The Department is allocated R2 140.2 billion in 2017/18 financial year. Over the Medium Term Expenditure Framework (MTEF), the Department’s focus will be on marketing the country; rural focused job creation; improvement of tourism facilities and transformation. In so doing, it will develop new tourist attractions, support rural enterprises and grow domestic and international tourism. Transfers to South African Tourism (SAT) are projected at 53.2 percent over the MTEF. These funds are expected to drive growth in local and overseas tourists, as well as tourist spending. A further R174 million has been allocated to SAT over the MTEF for marketing in established and emerging markets. SAT will further be allocated the reprioritised budget of R20 million in 2017/18, R30 million in 2018/19 and R40 million in 2019/20 from the Tourism Incentive Programme (TIP) to the South African National Convention Bureau (SANCB). These funds will be set aside to assist in sourcing through providing funding to organisations to secure hosting rights of Meeting Incentives Conventions and Events (MICE).

 

The Department is further expected to transfer R1.1 billion over the MTEF to the Working for Tourism projects through the Expanded Public Works Programme (EPWP). This investment into the EPWP Programme is expected to yield 10 629 full-time equivalent jobs by the end of the 2019/20 financial year. The Department will spend a further R124.8 million through the Enterprise Development and Transformation (EDT) sub-programme meant to support 1 400 rural tourism enterprises over the MTEF in a bid to drive tourism transformation. Through partnership with local municipalities and communities, the Department intends to develop underutilised public recreation facilities to attract private sector investment and counteract seasonality. For this purpose, the Department has set aside R200 million over the MTEF.

 

It is therefore expected that the SAT would perform better than in preceding years. International tourist arrivals will be expected to increase from 10 million in 2016/17 to 10.5 million in 2017/18. 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 Enterprise and Visitor Support Services Programme.  The sub-programme will receive a budget allocation of R547.9 million over the MTEF. These funds are earmarked for the creation of direct linkages between South African inbound tour operators and international tourism companies by assisting South African tour operators in exhibiting their products at trade shows across the world of market access for local tour operators and tourism businesses in recognised local and overseas exhibitions. Table 1 reflects the allocation of funds per programme in the Department of Tourism’s budget.

Table 1: Overall budget allocation 2016/17 and 2017/18

Tourism	Budget		Nominal Increase / Decrease in 2017/18	Real Increase / Decrease in 2017/18	Nominal Percent change in 2017/18	Real Percent change in 2017/18
R million	2016/17	2017/18
Corporate Management	232,5	219,1	-  13,4	-  26,4	-5,76  percent	-11,35  percent
Tourism Research, Policy and Internal Relations	1 088,8	1 208,7	119,9	48,3	11,01  percent	4,43  percent
Destination Development	421,9	444,0	22,1	-  4,2	5,24  percent	-1,00  percent
Tourism Sector Support Services	266,3	268,4	2,1	-  13,8	0,79  percent	-5,18  percent
TOTAL	2 009,5	2 140,2	130,7	3,9	6,5  percent	0,19  percent

 

1o R205 in 2012om R192 was accounted for in salariesNational Treasury (2017) – Vote 33 Tourism

 

Programme 2: Tourism Research, Policy and Internal Relations has been allocated 56 percent of the departmental budget; followed by Destination Development and Enterprise and Visitor Support Services. This prioritisation aligns with the national priorities and the stated priorities of the Department for 2017/18. However, the ratio of the appropriated budget in relation to compensation of employees and goods and services is 1:3 whilst the ideal ratio is 1:2. The appropriated budget is therefore not sufficient to carry out the mandate of the Department.  In addition to being the priority programme, Tourism Research, Policy and Internal Relations is also the only programme that experienced real growth in the current financial year. Also, whilst Vote 33 as a whole experiences real growth, this is insignificant, at less than 1 percent.

 

 

1. Programme Analysis

 

The Department is executing its mandate through the four restructured Programmes, and the budget is allocated as follows:

 

4.1        Programme 1: Administration

 

The budget allocation to the Administration Programme is for strategic leadership management and support services to the Department. The total Administration budget has decreased from R232.5 million in 2016/17 to R219.1 million in 2017/18. The decline in allocation was majorly affected by the decline in the allocations to the management and corporate services sub-programmes. This represents a nominal decrease of 5.8 percent, and a decrease of 11.35 percent in real terms. This Programme consumes 10.24 percent of the Department’s total budget, most of which will be spent through the Corporate Services sub-programme, which accounts for 57.83 percent of the Administration programme. The role of this sub-programme is to enhance management oversight to create an enabling policy and legislative environment. Table 2 depicts budget allocation for Programme 1.

 

 

 

 

 

Table 2: Budget allocation for Programme 2

Programme	Budget		Nominal Increase / Decrease in 2017/18	Real Increase / Decrease in 2017/18	Nominal Percent change in 2017/18	Real Percent change in 2017/18
R million	2016/17	2017/18
Ministry	32,4	30,6	-  1,8	-  3,6	-5,56  percent	-11,15  percent
Management	14,3	2,9	-  11,4	-  11,6	-79,72  percent	-80,92  percent
Corporate Services	131,0	126,7	-  4,3	-  11,8	-3,28  percent	-9,01  percent
Financial Management	25,4	29,4	4,0	2,3	15,75  percent	8,89  percent
Office Accommodation	29,3	29,6	0,3	-  1,5	1,02  percent	-4,96  percent
TOTAL	232,5	219,1	- 13,4	-  26,4	-5,8  percent	-11,35  percent

 

1o R205 in 2012om R192 was accounted for in salariesNational Treasury (2017) – Vote 33 Tourism

 

In terms of economic classification, the growth in expenditure for the Administration programme is accounted for in compensation of employees, which accounts for more than half (54.9 percent) of the Programme’s budget. The allocation to the sub-programme Financial Management is the only one that experienced a nominal and real increase, from R25.4 million in 2016/17 to R29.6 million in 2017/18. The increase in expenditure will be spent on operating leases, specifically travel and subsistence, which has increased significantly from R8 million to R15.6 million.

 

 

1. Programme 2: Tourism Policy and Planning

 

The budget allocation to the Tourism Research, Policy and Internal Relations Programme, which consumes the largest part of the total departmental budget, i.e.  56.48 percent, increased by 4.43 percent in real terms compared to the 2016/17 financial year. This Programme is entrusted with ensuring strategic policy development and monitoring of the tourism sector’s performance. The South African Tourism (SAT) sub-programme, which is tasked with the responsibility of stimulating sustainable international and domestic demand for South African tourist experiences and regulates the standards of tourism facilities and services, consumes 94.12  percent of the Programme’s budget. The South African Tourism budget will grow at an average growth rate of 7.7 percent over the MTEF. The majority of the remaining budget (R44.1 million) is allocated to compensation of employees.

 

 

Table 3: Budget allocation for Programme 2

Programme	Budget		Nominal Increase / Decrease in 2017/18	Real Increase / Decrease in 2017/18	Nominal Percent change in 2017/18	Real Percent change in 2017/18
R million	2016/17	2017/18
Tourism Planning and Policy Management	5,1	7,0	1,9	1,5	37,25  percent	29,12  percent
Research and Knowledge Management	32,0	28,7	-  3,3	-  5,0	-10,31  percent	-15,63  percent
Tourism Sector Policy and Strategy	8,0	11,2	3,2	2,5	40,00  percent	31,70  percent
South African Tourism	1 024,8	1 134,3	109,5	42,3	10,69  percent	4,13  percent
International Relations and Cooperation	18,8	27,5	8,7	7,1	46,28  percent	37,61  percent
TOTAL	1 088,8	1 208,7	119,9	48,3	11,0  percent	4,43  percent

National Treasury (2017) – Vote 33 Tourism

 

 

1. Programme 3: Destination Development

 

The Destination Development Programme is responsible for the facilitation and coordination of tourism destination development. Table for depicts the budget allocation for Programme 3.

 

 

Table 4: Budget allocation for Programme 3

Programme	Budget		Nominal Increase / Decrease in 2017/18	Real Increase / Decrease in 2017/18	Nominal Percent change in 2017/18	Real Percent change in 2017/18
R million	2016/17	2017/18
Destination Development Management	4,9	47,2	42,3	39,5	863,27  percent	806,18  percent
Product and Infrastructure Development	17,6	21,1	3,5	2,2	19,89  percent	12,78  percent
Destination Planning and Investment Promotion	12,8	36,3	23,5	21,3	183,59  percent	166,79  percent
Working for Tourism	386,6	339,3	-  47,3	-  67,4	-12,23  percent	-17,44  percent
TOTAL	421,9	444,0	22,1	-  4,2	5,2  percent	-1,00  percent

National Treasury (2017) – Vote 33 Tourism

 

The allocation to this Programme increased by 5.2 percent in nominal terms from R421.9 million in 2016/17 to R444 million in 2017/18. A significant amount of the destination development Budget will be focused on the Working for Tourism sub-programme, as it will account for 76.42 percent of the total programme budget. The bulk of the Programme’s budget will be allocated to goods and services, of which part will be allocated to training and consultancies and R153.5 million will be allocated to households for projects and R107.5 million will be allocated to buildings and fixed structures.

 

 

4.4     Programme 4: Enterprise and Visitor Support Services

 

Whilst the Department’s budget allocation for the Enterprise and Visitor Support Services Programme reflects a nominal increase of 0.8 percent from R266.3 million in 2016/17 to R268.4 million in 2017/18, the allocation to this programme has decreased by 5.18 percent in real terms. This programme is responsible for the enhancement of transformation in the sector, increasing sector skills levels and supporting enterprise development to ensure that South Africa is a competitive tourism destination. The spending focus will mostly be on the Tourism Incentive Programme (TIP) sub-programme. This sub-programme accounts for 64.05 percent of expenditure under this programme. The expected increase to this Programme will be highly influenced by the increase in the allocation to the Enterprise Development sub-programme, an increase in the goods and services, of which R75.7 million will be allocated to consultants and R14.7 million allocated to consultants.

 

 

Table 5: Budget allocation for Programme 4

Programme	Budget		Nominal Increase / Decrease in 2017/18	Real Increase / Decrease in 2017/18	Nominal Percent change in 2017/18	Real Percent change in 2017/18
R million	2016/17	2017/18
Tourism People Development Management	9,8	9,7	-  0,1	-  0,7	-1,02  percent	-6,89  percent
Tourism Human Resource Development	22,9	25,7	2,8	1,3	12,23  percent	5,58  percent
Enterprise Development and Transformation	34,3	41,5	7,2	4,7	20,99  percent	13,82  percent
Visitor Services	14,1	19,6	5,5	4,3	39,01  percent	30,77  percent
Tourism Incentive Programme	185,3	171,9	-  13,4	-  23,6	-7,23  percent	-12,73  percent
TOTAL	266,3	268,4	2,1	-  13,8	0,8  percent	-5,18  percent

 

0.17 in the 2015/16 financial year the transfer to South African Tourism will be reduced by R40.7 millionernal audit cost. the National Treasury (2017) – Vote 33 Tourism

 

Whilst the Tourism Incentive Programme (TIP) appears to be the priority sub-programme in terms of budget allocation, it experiences a decrease of 5.54 percent in real terms. This sub-programme experienced under expenditure during the 2015/16 financial year of R10 million as a result of unspent funds. This was 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 has lost funds through TIP. During the 2014/15 financial year the Department lost R78 million through the same sub-programme, which was redirected to Eskom. The sub-programme was introduced in the 2014/15 financial year, but did not deliver on its set mandate to help Small Micro and Medium Enterprises (SMMEs) and established businesses to grow through improved market access.  It should be further noted that the Department had experienced underspending on the sub-programme owing to delays in finalising components of the TIP programme.

 

1. Committee observations with regard to the Department of Tourism

 

Having scrutinized the Annual Performance Plan for the 2017/18 financial year as tabled by the Minister of Tourism, it is notable that the new APP has a marked improvement from the previous years. This emanates from the changes that have been effected in the Department though organisational restructuring. For the Department to effectively and efficiently implement its Annual Performance Plan the following issues should be addressed:

 

1. Allocation and expenditure

The Department is underfunded and cannot fully execute its mandate as espoused in the Tourism Act (Act 3 of 2014), and meet the expectations of all stakeholders.  The Committee has established through a number of stakeholder engagements, including the recent Local Government Tourism Conference held from the 3rd - 4th April 2017, that the Department is not fulfilling its mandate due to financial constraints. These are particularly with regard to product development, maintenance of tourist attractions, and capacitating local government to perform its constitutional duties. The amount allocated to goods and services which is used for service delivery by the Department is insufficient to fulfil its mandate. This calls for more interaction with the National Treasury to ensure that socio-economic contribution of tourism is recognised and Vote 33 is appropriated accordingly.

 

1. SMART principle for the predetermined objectives

The Committee has always recommended that the Minister ensures that the Department and South African Tourism set targets that are specific, measurable, attainable, realistic and time-bound to improve organisational performance and grow the tourism in the country. This should be done within the Framework for Monitoring Programme Performance (FMPPI) which the National Treasury is implementing with all the government departments. The Framework for Strategic Plans and Annual Performance Plans (APPs) issued by the National Treasury also provides guidelines that guide government institutions when developing their Strategic Plans and Annual Performance Plans.  The important aspect of these guidelines is the requirement to adhere to SMART (specific, measurable, achievable, relevant and time-bound) principles. The 2015/16 and the 2016/17 Strategic Plans of the Department did not meet the SMART principles. This led to a number of predetermined objectives not being met as they were not realistic and achievable when they were conceptualised.  These included, amongst others, predetermined objectives whose achievement depended on other institutions but the Department had not done adequate ground work and planning to ensure that the targets were attainable; and departmental internal audit did not identify potential risks that could lead to poor performance by the end of the financial year.

 

The Committee observed that the Department has improved on setting its predetermined objectives in the 2017/18 APP as some of the issues raised by the Committee have been addressed. However, the risk of delays in achieving quarterly targets remains as the Department will still be implementing projects in partnership with a number of stakeholders. The Committee will be vigilant in its oversight work from quarter 1 of the 2017/18 financial year to ensure that no delays are incurred in achieving the quarterly, thus annual targets.

 

1. Revised organisational structure

The Committee welcomed the revised organisational structure. The Committee always held a view that the Department should remove Programme 3: International Tourism as it overlapped with the work of other Programmes within the Department and duplicated the work done by South African Tourism. The Committee also recommended that the Department should consolidate its training programmes as these were spread across all Programmes and there was no focussed strategy. There were also concerns about the lack of focussed approach to enterprise development and call to have an incubator programme, especially for tour operators, was made. All these concerns have been addressed in the new departmental structure.

It was noted that the organisational structuring has resulted to staff being moved across the Programmes. The number of chief directorates remained the same and the structure has reduced the staff complement from 648 to 503. With regard to support to local government the Committee noted that the Department now has a Directorate that will focus on municipalities. The staff that were based in provinces as Provincial Programme Managers will now be based in Pretoria and the process of fully incorporating them will be finalised in December 2017 to allow them to settle in Pretoria with their families. It was also noted that the movement of the provincial staff to Pretoria will assist the Department to deal with projects comprehensively. The Committee was pleased to note that the Unions were consulted and they agreed to the new structure. This will ensure stability and prevent unnecessary labour conflicts.

 

1. The policy and legislative considerations

The Committee observed that the Tourism Bill will be introduced into Parliament in the fourth quarter of the financial year. The first three quarters of the year will be taken by government processes, which will include the Cabinet consultations and gazetting the Bill for public comments. The Committee process will probably not be finalised in the 2017/18 financial year and might be concluded in 2018/19.

The Committee appreciates the ever changing environment in which the Department operates. In its 2016 Budget Review and Recommendations Report, the Committee recommended that the Department should revise the White Paper on the Development and Promotion of Tourism in South Africa to address the national transformation imperatives and contemporary global and national trends in the sector. This is important as the tourism consumer behaviours are constantly evolving and the Department should provide strategic and policy responses for the sector. These responses should be reflected in the manner the Department deploys its financial resources; responds to technological advancements; aligns and continuously capacitates its human resources; and puts in place structures and processes to deal with the dynamism of the tourism sector. The tabled Annual Performance Plan provides some of these strategic responses but does not address all the immediate challenges. Chief amongst these, are the disturbances caused by the sharing economy, such as Uber and Airbnb. The Department should not stifle innovations in the sector but should provide clear policy and regulations to advance healthy competition and competitiveness.

The quality assurance measures in the destination are also jeopardised by the manner in which the grading scheme is structured in the country. The Committee has observed in its various oversight work and through engagements with the Tourism Grading Council of South Africa (TGCSA) and the private sector, which the grading scheme is failing in its current form. The Committee wants to reiterate its call that the Minister of Tourism should ensure quality assurance of tourism product offering and tourist experiences through conducting a policy review of the grading scheme. The Committee would thus closely scrutinise the Tourism Bill when it is introduced later in the financial year to ascertain whether it provides checks and balances, and enough regulatory mechanisms for these industry innovations. 

 

1. Radical economic transformation and inclusive growth

The Committee noted that in order to deal with funding issues, the Department will be introducing a Tourism Fund which will assist in developing SMMEs. To maximise the usage of available budget, the Committee will rethink and restructure the Tourism Incentive Programme (TIP) in the following financial years. The Committee noted that the TIP funding is not deeply committed and as more projects which are currently being implemented are completed more money will be released. The TIP would then be restructured to favour emerging tourism enterprises and start-ups.  Some of the current TIP projects were very good such as the grading assistance that is implemented through SAT, and they should be reinforced.

This will culminate in competitive tourism SMMEs that would add to the product mix and garner inclusive growth.

 

The money transferred to SAT will also be used for radical economic transformation. The Committee also noted that the Department joined the Operations Phakisa Programme about 18 months later than other departments and this affected the time frames for the implementation of their programmes. Tourism infrastructure is part of the Oceans Economy, including Cruise tourism as part of the Coastal/ Marine Tourism Programme. The Blue Flag Programme implemented by the Department is a collaborative work amongst stakeholders such as municipalities, provinces and the Department of Environmental Affairs and should be rolled out to more coastal municipalities.

 

1. Departmental oversight over  South African Tourism

Despite the work done by the Board of South African Tourism (SAT), the Committee has observed that SAT does not always comply with the guidelines for preparing the Strategic Plans and Annual Performance Plans (APP). SAT receives 53 percent of the departmental budget thus the imperative for the Department to conduct effective oversight over the Entity. The Committee had previously raised concerns about the manner in which SAT reported against their Strategic Plans and Annual Performance Plans. This led to the office of the Auditor-General of South Africa intervening in this regard. In the meeting with the Committee the Office of the Auditor-General indicated the Chief Executive Office of South African Tourism had committed to effecting the required reporting changes. The Committee noted that South African Tourism will be reporting on both the financial year time frames and United Nations World Tourism Organisation standards. The major affected predetermined objectives are Number of international tourist arrivals the number of domestic holiday trips achieved; the number of business events achieved in South Africa; the number of business delegates achieved in South Africa, and total revenue achieved.

 

1. Change from Social Responsibility Implementation to Working for Tourism

The Committee noted that the Department has made changes in the implementation of the Expanded Public Works Programme from the Social Responsibility Implementation Initiative (SRI) to the Working for Tourism Programme. It was however observed that the Working for Tourism Programme has no significant changes in shape and form from the erstwhile SRI Programme. The choice and nature of projects is substantively still the same as the projects implemented under SRI.

 

1. Consolidation of training programmes

The Committee has always been concerned about incoherent training programmes delivered by the Department in the past. Training and/ or capacity building programmes were previously ineptly dispersed over all four programmes of the Department without a vibrant and coherent strategy. The Committee observed that the 2017/18 APP has clustered all training programmes under Programme 4. This signals a good intention towards the delivery of effective and efficient capacity building programmes.  Nonetheless, it remains to be seen how the Department will deliver on this new approach as some of the training still belongs to other Programmes, such as the National youth Chefs, Sommelier training course, youth in hospitality service training, and food safety programmes that belong to Programme 3.

 

1. Air Lift Strategy

 

It was observed that the ease of access that depends on a comprehensive airlift strategy is still a challenge in South Africa. The Committee acknowledges that this depends on a collaborative effort amongst a number of stakeholders, including the Department of Transport.  The issue of the Open Skies Policy also compounds this challenge as it needs an integration with a number of countries which are not moving in the same pace and direction. At the African Union level the matter is complicated by the Visa regimes as some countries want to protect their sovereign air space. This is coupled with the need to sustain national carriers. The Committee urges the Department to work closely with the Department of Transport to deal with air access in South Africa. The Airports Company South Africa should also be engaged to look at the issue of improving air travel. The Committee is concerned that the cost of travel is made exorbitant due to aviation taxes.

 

 

1. Governance issues

The Committee observed that the Department is doing well with regard to setting up internal controls and governance structures. This led to the awards achieved in the previous financial year. The Committee has however always raised concerns about the proper implementation of the systems/ internal controls, particularly internal audit and risk management. The case in hand is the manner in which the Department has always set its predetermined objectives and relying mostly on external stakeholders without sufficient preparations being made beforehand. The Committee will scrutinise how the Department implements its internal controls to further enhance the good work done by the Department.

 

 

1. South African Tourism

 

The core mandate of South African Tourism is derived from the Tourism Act, 2014 (Act No.3 of 2014) which provides for the functions of the South African Tourism Board to market South Africa as a domestic and international tourist destination; market South African tourism products and facilities internationally and domestically; develop and implement a marketing strategy for tourism that promotes the objectives of the Act, and the NTSS; advise the Minister on any other matter relating to tourism marketing; with the approval of the Minister, establish a National Convention Bureau in order to market South Africa as a destination for business events by coordinating bidding for international conventions; liaising with other organs of state and suitable bodies to promote South Africa as a destination for business events; and reporting to the Minister on the work performance of the National Convention Bureau.

 

1. Strategic Plan for 2017 – 2022

South African Tourism tabled a new Strategic Plan for 2017 - 2022 and an Annual Performance Plan for 2017/18 financial year. The Committee noted that South African Tourism (SAT) is using 2017 -2021 and 2017 - 2022 interchangeably throughout the Strategic Plan and raised concerns about these timeframes. The new strategic plan is comprehensive and takes into account the recommendations made by the Committee previously and those of the Ministerial Review Committee on South African Tourism. SAT has undergone an organisational review hence the new strategic plan.

 

1. The Enhanced Strategy for Growth

The new Strategic Plan is rooted the overarching objective of reaching 5 million additional tourists in 5 years (5-in-5).  The 5-in-5 strategy covers the period 2017 – 2021. This means SAT is strategically poised to achieve an additional five million tourists in the next five years. The breakdown of the targets in the 5-in-5 strategy comprises four million international arrivals (from 10.9 million in 2017/18 to 15.5 million in 2019/10) and one million domestic trips (from 24.9 million in 2017/18 to 26.1 million in 2019/20).  The Enhanced Strategy for Growth is based on five strategic thrusts as follows:

 

• Thrust 1: Optimising Marketing Investments - this seeks to develop and implement an investment strategy that allows SA Tourism to focus on prioritised markets and segments.
• Thrust 2: Reassessing and Realigning the Brand – it seeks to build a recognised, appealing, resilient and competitive tourism (and business events) brand for South Africa across the target markets and segments
• Thrust 3: Developing Effective Stakeholder Partnerships – it seeks to collaborate with partners, both local and international, to maximise synergies, enhance traveller experience and close sales
• Thrust 4: Utilising Resources Effectively – it drives operational efficiencies in all activities, including human, marketing and other resources available to SA Tourism, and
• Thrust 5: Being an Inspired Organisation – it seeks to build an inspired and energised organisation that is motivated to meet the defined goal

 

1. Programmes and Strategic Objectives

 

South African Tourism will be implementing its 2017/18 Annual Performance Plan through five Programmes and six strategic objectives.  The Entity has introduced clearly defined Programmes for the first time in the current financial year based on the interventions by the Committee and National Treasury. The five Programmes are:

 

• Programme 1: Corporate Support
• Programme 2: Business Enablement
• Programme 3: Leisure Tourism Marketing
• Programme 4: Business Events, and
• Programme 5: Tourist Experience

 

These will be achieved through two broad strategic outcome oriented goal of (i) increasing the sector’s contribution to inclusive growth and (ii) operational efficiency and good governance. These two are pursued through six strategic objectives as follows:

• SO1 - To contribute to inclusive economic growth by increasing the number of  

                   international and domestic tourists

• SO2 - To contribute to an enhanced, recognised, appealing, resilient and

           competitive  tourism and business events brand for South Africa across the

           target markets and segment.

• SO3 - To enhance stakeholder and partnership collaboration, both local and

           international, to better deliver on South African Tourism’s mandate.

• SO4 - To contribute to an improved tourist experience in line with brand promise.
• SO5 - To position South African Tourism’s corporate brand to be recognised as a

           tourism and business events industry leader in market intelligence, insights                             

           and analytical.

• SO6 - To achieve operational efficiencies in all activities, including human,

           marketing and other resources available to South African Tourism.

 

1. Budget

 

The budget appropriated for South African Tourism in the 2017/18 financial year is R 1 363 609 000 which is an increase from the R 1.2 billion allocated in the 2016/17 financial year as depicted in Table 6. The budget will increase in the MTEF to R 1 450 billion in 2018/19 and to R1 519 billion in 2019/20 respectively. The total of R 1 134 288 000 of the 2017/18 budget is a direct transfer from the National Department of Tourism, which accounts for 53 percent of the departmental budget. The other amounts are generated from the activities of South African Tourism and a contribution from the private sector through the TOMSA levies. An amount of R 124 586 000 is a contribution from TOMSA levies.

  

Table 6:    Revenue and expenditure estimates over the MTEF

Revenue	2013/14	2014/15	2015/16	2016/17			2017/18	2018/19	2019/20
				ENE Estimate	Adjustment	Approved
Rand (thousand)	Audited ((R’000)	Audited (R’000)	Audited (R’000)	Budget (R’000)	Budget (R’000)	Budget (R’000)	Budget (R’000)	Budget (R’000)	Budget (R’000)
Government Grant	846 333	880 009	977 712	1 024 847		1 024 845	1 134 288	1 216 017	1 279 889
Tomsa Levies	131 289	111 063	123 063	99 450		99 450	124 586	124 589	124 586
Indaba and Meetings Africa	59 438	65 134	81 547	54 506	-3 183	51 323	63 391	67 131	70 890
Grading Fees	1 520	2 561	4 035	20 098		20 098	21 344	22 603	23 869
Sundry Revenue	57 610	28 766	10 768	22 934		22 934	20 000	20 000	20 000
Total	1 096 190	1 087 533	1 197 265	1 221 835	-3 183	1 218 652	1 363 609	1 450 337	1 519 235

Source: South African Annual Performance Plan for 2017/ 18

Indaba and Meetings Africa contribute R 63 391 000; grading fees R 21 344 000 and sundry revenue R 20 000 000. There is an increase in government grant of R 90 million earmarked for subvention fund.  An additional budget of R 174 million was appropriated for tourism marketing execution.

With regard to the allocation of budget for the five Programmes, Programme 1 responsible for corporate support will receive R 99.3 million; Programme 2 responsible for business enablement is allocated R 87.5 million; Programme 3 dealing with leisure tourism marketing receives the largest share of the budget at R 895.06 million; Programme 4 dealing with business events is allocated R 84.1 million; and Programme 5 responsible for tourist experience is allocated R 59.75 million.

 

6.2.1          Linking budget to outcome oriented goals

The budget allocation over the five Programmes, and spread over the six strategic objectives confirms that the large portion of the budget will be on the core functions. This is a well-balanced allocation for the 2017/18 financial year. The budget allocation over the five Programmes is as follows:

 

• 80.7 percent of the total budget will be expended on brand building, implementation  of Global Trade Strategy,  implementation of consumer strategy as well as implementation of domestic strategy;
• 14.5 percent of total budget will be used to bolster strategic research capability, project ignite, business processes and new organisational structure to support 5 year strategy; and
• 4.8 percent of total budget will be expended on continuous delivery of quality experiences as well as exploring expansion of quality accreditation for other products in the tourism value chain.

 

1. Committee observations with regard to South African Tourism

 

Having considered the 2017/18 Annual Performance Plan the Committee made the following observations:

 

7.1        Focus for the Enhanced Strategy for Growth

 

The Committee noted that the 5-in-5 strategy will address a wide array of the concerns that have always been made around the bias of South African Tourism towards international tourism. The Committee is however, concerned about conservative targets on domestic tourism.  The measures being taken to address seasonality, limited geographic spread and affordability will assist in unlocking the tourism potential. The insights from the study conducted by SAT has revealed that affordability, access, and culture are barriers to the increase of domestic tourism in South Africa. The support that will be given to provincial Destination Management Organisations will assist in aligning the activities of the provincial authorities with national imperatives. The packaging of cheap holidays in partnership with the private sector and enhancement of the Sho’t Left campaign will address affordability. The Destination Management Companies (DMCs) will also be involved in packaging cheaper holiday packages. This is however a challenging activity as most accommodation providers in South Africa still believe in the international markets and they price themselves outside domestic affordability. This calls for new entrants in the industry who will target the domestic market.  SAT will also continue to expose the Hidden Gems to platform that improve their market access.

 

7.2        The Marketing Investment Framework

 

The Committee observed that South African Tourism has conducted an Econometric Study which was used in developing the 2017 – 2022 Strategic Plan and the 2017/18 Annual Performance Plan. The Committee welcomed the Marketing Investment Framework (MIF) recommended in the Econometric study as this swill assist South African Tourism to quantify the Return on Investment with regard to the budget invested for marketing activities against the yield on the number of tourists visiting the country. The study will also assist the Committee to effectively assess the funding needs for the tourism portfolio in the country and engage the National Treasury in a more meaningful way.

 

7.3     Implications from the quarterly performance for 2016/17

 

It was noted that the challenges faced by South African Tourism against the predetermined objectives in the 2016/17 financial year still persist in the 2017/18 Annual Performance Plan.  The Committee raised a concern that SAT was spending all the budget but targets were not met. South African Tourism conceded that they are struggling with the targets on tourist arrivals and domestic tourism. However, targets there were outside the purview of the SAT have been removed in the 2017/ 18 financial year and this should improve performance. The Committee emphasises the need to maintain the clean audit whilst executing the mandate comprehensively.

 

 

7.4     Interventions by the office of the Auditor-General

 

The Office of the Auditor-General indicated that they are following up on the issues raised by the Committee with regard to reporting by South African Tourism. It was reported to the Committee that the Chief Executive Officer of SAT had been approached on these matters and committed that SAT will correct the reporting on the achievement against set targets from the calendar year to the financial year in the annual performance report for the 2016/17 financial year. This includes reporting on the number of international tourist arrivals; number of domestic holiday trips achieved; number of business events achieved in South Africa; the number of business delegates achieved in South Africa; and total revenue achieved. It was reported that SAT had committed that the Annual Performance Plan for 2017/18 and beyond will need to be amended to include a financial year target for these indicators in addition to the calendar year. This was an arrangement made to meet the requirements of the United Nations World Tourism Organisation methodology of issuing some tourism statistics such as tourist arrivals. The Committee however noted that South African Tourism is only required to comply with the dual reporting system in the 2018/ 19 financial year.

 

 

7.5     SMART principles for predetermined objectives

 

The Committee noted the inconsistencies in the Annual Performance Plan of South African Tourism with regard to the number of international tourist arrivals achieved. There are two conflicting figures, the 10.9 million international tourist annual target which is not the same as the annual target of 10.53 million for the same key performance indicator.  The Committee noted that the 10.9 is the figure that is will be used to track performance during the four quarters of the financial year, however this is not the number in the Annual Performance Plan.

 

7.6     Tracking of jobs created in the tourism sector

The Committee noted that the 2017/18 Annual Performance Plan does not include a key performance indicator on jobs created in the sector. This is meant to track both direct and indirect jobs created in the tourism industry as South Africa does not have a direct measure of tourism employment. SAT alluded that their activities culminate to job creation and revenue generation and that tourism may be the sector to take South Africa out of the junk status.

7.7        Grading

The Committee acknowledged that the tourism grading scheme in the country is still facing challenges. The Committee raised the issue of tourism establishments that continue to use the grading plaques even if they have not renewed their grading status. This is the matter that was raised sharply by stakeholders during the stakeholder meetings on oversight stakeholder engagements conducted by the Committee in various provinces. The Committee urges SAT to explore a possibility of introducing tax incentives for tourism establishments that comply with the grading system to entice them to remain within the system thus contribute to quality assurance in the destination. SAT committed that the grading scheme is going to be used to promote transformation through rural and township tourism.

 

With regard to the policy framework on grading, there is currently a policy discussion with the National Department on the grading scheme. This includes whether the scheme should remain voluntary or be made mandatory. This should be included in the Tourism Bill.

 

1. Business events

The Committee observed that the South African National Conventions Bureau (SANCB) focusses mainly on the International Congress and Convention Association (ICCA) events which follow strict criteria where only association conferences and meetings are counted; the meetings and conferences that rotate to at least three countries; and the meetings and conferences that are attended by at least fifty international delegates. The Committee noted that SAT has received a R90 million additional funding to be used as the subvention fund. The strategy for the SANCB also includes delegate boosting and conversion of business tourists to leisure tourists.

The Committee is of the view that the SANCB can do more for domestic tourism through using domestic events as part of improving inclusive tourism growth. SAT confirmed that the SANCB has been reconfigured and strengthened its focus on domestic events.  The SANCB will now be working with a number of stakeholders including partnering with other organisations such as the Department of Sports and Recreation and Fan Clubs to explore opportunities offered by sports tourism.  There are also staff members who focus on domestic events.

 

1. Country Offices

The Committee observed that South African tourism is addressing the costs incurred through operating country offices.  Currently the organisation is operating ten country offices which service forty countries. The organisation is using the hub approach in five regions to cluster countries which are serviced by one office. SAT is also continuously involved in a capacity building programme for the induction of embassy staff. These are done as austerity measures to mitigate foreign currency exposure and maximise the return on investment.  SAT is also using the international trade and consumer platforms to promote the country. Own platforms such as Indaba and Meeting Africa are also used to promote the country.

 

1. Hosting Tourism Indaba

The Committee noted that SAT will be organising and hosting Indaba internally. The decision to contract an independent service provider was rescinded in favour of hosting the event in-house. This was a strategic decision based on a cost-benefit analysis. The service provider did not meet the set criteria and would have befitted from the tax payers money without adding any value to the event.   The Committee noted that at Indaba 2017, SAT will be announcing the city which will be hosting this event for the next five years based on the bidding that was done by various cities in the Country. The Committee is still calling for Indaba to be a made a hallmark event like other international platforms of the same stature and that SAT must work towards that conclusion.

 

7. 11     Contributions from TOMSA Levy

The Committee observed that the contributions from TOMSA Levy of R124.6 million in 2017/18 is still less than the R131.2 million contributed in 2013/14. The Committee was concerned about the decrease in the number of TOMSA Levy collectors. SAT assured the Committee that they were addressing issues raised by the industry on the usage of the TOMSA Levy. The levy was therefore ring-fenced for a marketing collaborative fund managed by SAT and the board of the Tourism Business Council of South Africa.

 

1. Wine tourism

The Committee noted that SAT is not taking advantage of South Africa’s rich wine history and related endowments to include this endowment in the tourist experience. The wines of South Africa do not have a grading standard and they are susceptible to exploitation by other destinations which brand them as their own. SAT could include this in their marketing activities in line with the global trends. This means SAT should understand what tourists want and undertake aggressive wine marketing, and include this in the brand awareness campaigns.

 

1. Transformation

The Committee noted that SAT has for years been untransformed as the organisation has been procuring from uncompliant companies. SAT indicated to the Committee that a Transformation Framework has been developed to address transformation. This framework is based on three pillars of employment equity; enterprise and supplier development; and market access using platforms to introduce new entrants to the markets.

 

1. Airlift and air access

The Committee reiterated that South Africa is a long haul destination arrivals can only be unlocked through effective air access. The Committee acknowledge that cities such as Cape Town and Durban have been able to attract more airlines and this has contributed to the increase in arrivals and revenue generation for these cities. However, these cities have been doing this alone as their own initiatives without market intelligence form SAT. The role of SAT is therefore paramount to promote airlift for other cities and towns. SAT should also engage domestic airlines to provide airlift to smaller towns and address the issue of exorbitant aviation taxes levied on domestic flights.

 

1. Recommendations

 

Having scrutinised the Strategic Plans and Annual Performance Plans for the 2017/18 financial year, and made a number of observations, the Committee makes recommendations with regard to both the Department of Tourism and South African Tourism. It is recommended that the Minister ensures that:

1. The Department engages the National Treasury to explore prospects of appropriating additional budget to Vote 33 based on the restructuring that has been conducted by the Department of Tourism and the outcomes of the Marketing Investment Framework developed by South African Tourism.

 

1. The Department conducts a focused change management process to ensure that all staff members appreciate and own the new organisational structure to maximise efficiencies and avert any possible unintended consequences of labour disputes.

8.3     South African Tourism effects the required changes in the reporting time frames to meet both the financial year imperatives and the United Nations World Tourism Organisation standards, and that these changes are reflected in the 2018/19 Annual Performance Plan.

8.4     The Department works closely with other stakeholders to deal with exorbitant aviation taxes.

8.5     The Department and South African Tourism engage airlines to improve airlift for both the international and domestic markets to address geographic spread and increase arrivals, domestic trips and tourism revenue.

8.6     The Department undertakes effective implementation of the governance imperatives, including all the systems and internal controls, particularly internal audit, risk management and financial statements.

8.7  The Department conducts stringent oversight over South African Tourism on the implementation of the five-year strategic plan and Annual Performance Plan to achieve the objectives of the Enhanced Strategy for Growth.

8.8        South African Tourism improves on the intergovernmental cooperation and collaboration with the provincial tourism authorities to address signage and other infrastructural issues to improve the tourist experience.

8.9        South African Tourism complies with statutory and regulatory provisions to ensure improvement on the achievement of predetermined objectives against budget expenditure.

8.10      South African Tourism disaggregates annual targets to quarterly reporting on the number of business events hosted by South Africa and the number of delegates attending business events.

8.11      The Department engages South African Tourism and Brand South Africa in developing a Wine Tourism Strategy that promotes food and wine pairing as tourist experience, and promotes the various brands of South African wines.

8.12      The Department and South African Tourism address the grading system in South Africa at both policy and operation level.

 

1. Appreciation

 

The Committee would like to appreciate the support given by the Office of the Auditor-General during the process of scrutinising the Strategic Plans and Annual Performance Plans of both the Department of Tourism and South African Tourism. The proactive assessment of the 2017/18 Annual Performance Plan for South African Tourism assisted in addressing the reporting time frames for SAT. The Committee will be conducting stringent oversight on the commitments made by SAT on dual reporting to comply with the Public Finance Management Act and the United Nations World Tourism Organisation standards.

 

10.     Conclusion

 

The Committee conducted a robust analysis of the Strategic Plans and Annual Performance Plans as tabled by the Department and SAT. A number of improvements were observed in the strategic documents for both organisations. The Committee is however concerned that the budget appropriated to Vote 33: Tourism in not sufficient to fulfil the mandate of tourism in the country. The Minister of Tourism is therefore urged to work closely with all the stakeholders to explore budgetary increase.

The Committee will be conducting comprehensive oversight on both the Department and South African Tourism in implementing their 2017/18 Annual Performance Plans. This will be done following the general objectives of economic, efficient and effective allocation and spending of the departmental budget.

The economic aspect will look into the value for money and delivering the required service on budget, on time and within other resource constraints. On efficiency, the Committee will be checking whether the two organisations get an acceptable return on investment on the budget and other resources allocated to the Department.

Lastly, the Committee will look for effectiveness, namely, the extent to which the two organisations deliver what it is intended to be delivered as per activities outlined in the Annual Performance Plan. The Committee will also conduct oversight over the implementation of Marine Tourism programmes. The budget for Vote 33: Tourism is therefore supported as appropriated in the 2017 Estimates of National Expenditure.

 

Report to be considered