ATC201119: Budgetary Review and Recommendation Report of the Portfolio Committee on Tourism, dated 17 November 2020

Tourism

BUDGETARY REVIEW AND RECOMMENDATION REPORT OF THE PORTFOLIO COMMITTEE ON TOURISM, DATED 17NOVEMBER 2020

The Portfolio Committee on Tourism (hereafter referred to as the Committee), having considered the financial and non-financial performance of the Department of Tourism (hereafter referred to as the Department) and South African Tourism (hereafter referred to as SA Tourism) for the 2019/20 financial year, reports as follows:

1. INTRODUCTION

The 2019/20 financial year was characterised by a continued growth trajectory at an international level. The United Nations World Tourism Organization (UNWTO) reported that the international tourist arrivals (overnight visitors) worldwide grew by 4percent in 2019 to reach 1,5 billion. The growth rate was, however, slower compared to theoutstanding rates of 2017 (+6 percent) and 2018 (+6 percent), albeit still a robust growth. The good performance in the reporting period was marred by the global outbreak of the novel corona virus pandemic (COVID-19) in the fourth quarter of the year. The very nature of the pandemic as transmitted through human contact meant that the tourism sector was vulnerable as it involves travelling and human contact. The natural response by global destinations was the immediate closure of borders and imposition of stringent travel restrictions, regulations and protocols as it was realised that the virus was getting traction worldwide from its initial stronghold in Wuhan, China.

South Africa was not spared from the effects of the global pandemicwhich added to the impact of xenophobic attacks as the country experienced 270 000 cancellations of tickets in travel to SA in the month of September due to attacks on foreign nationals and the banning of travel of key high-risk countries from entry in SA due to the spread of COVID-19 pandemic. In response to the global outbreak, on the 23rd March 2020, President Cyril Ramaphosa announced a 21-day Lockdown to contain the spread of the virus. Subsequently, a Risk-Adjusted Strategy was introduced, which meant that the Lockdown was indefinitely extended as per the prevalence and extent of infections in the country. The impact of the Risk-Adjusted Strategy was the total shutdown of domestic and international tourism. This had a devastating impact on the performance of the travel and tourism sector across all significant performance indicators, particularly international arrivals, domestic trips, Total Tourism Foreign Direct Spend (TTFDS) and the Total Direct Domestic Spend (TDDS).

The implementation of the 2019/20 Annual Performance Plans of both the Department and SA Tourism were thus seriously impacted by COVID-19. The first quarter of the 2020/21 financial year, which is part of the budget scrutiny in the reporting period shows that the tourism sector was the worst affected by the corona virus pandemic.

This report, therefore, provides the financial and non-financial performance of the Department and SA Tourism as affected by prevailing circumstances in the delivery environment, and advances budgetary recommendations to stimulate the recovery of the tourism sector.

Mandate of the Committee

The Portfolio Committee on Tourism is an extension of the National Assembly, and derives its functions from Rule 227 of the National Assembly. The Committee is established by Section 57 (2) (a) of the Constitution of the Republic of South Africa (Act 108 of 1996) as read with the Rule 225 of the National Assembly.

Core functions of the Department

The mandate of the Department, as outlined in the Tourism Act (Act 3 of 2014), is to promote the growthand development of the tourism sector; promote quality tourism products and services; provide for the effectivedomestic and international marketing of South Africa as a tourist destination; enhance cooperation andcoordination between all spheres of government in developing and managing tourism; and promote responsibletourism for the benefit of South Africa and for the enjoyment of all its residents and foreign visitors.

The Department and SA Tourism pursue their mandate through a number of legislative, policy, and strategic frameworks geared towards positioning South Africa as a preferred tourism destination. The instruments used to advance the tourism mandate are as follows:

1.2.1 Constitutional and Legislative Mandate

The tourism mandate is clearly expressed in the Constitution of the Republic of South Africa (Act 108 of 1996). Part A of Schedule 4 of the Constitution lists tourism as a functional area of concurrent national and provincial legislative competence. Part B of Schedule 4 lists local tourism as a local government competency. Tourism is thus classified as a concurrent function. This defines tourism as a function to be performed by all three spheres of government with respective responsibilities.

At a legislative level, the Tourism Act of 2014 (Act No. 3 of 2014) enjoins the Minister of Tourism to perform specific tasks to drive tourism policy and strategic direction. The Committee is awaiting the introduction of the Tourism Amendment Bill to Parliament by the Minister of Tourism to address the legislative and policy gaps that have been identified in the current enabling Tourism Act.The Tourism Amendment Bill will be drafted once the Department has finalised the policy review process which is currently underway.

Policy mandate

The mandate of the Department is driven through the White Paper on the Development and Promotion of Tourism in South Africa and a number of strategies at a national level. The significant policy instruments and strategies are provided hereafter:

The National Development Plan

The National Development Plan (NDP) is the blueprint of government that recognises tourism as one of the main drivers of employment and economic growth. The target of the NDP is to create an additional 11 million jobs by 2030, and tourism plays a huge role towards attaining that goal. The NDP envisions tourism as a major source of revenue and employment creation for the country through investment in infrastructure, product and service development. It envisages rising employment, productivity and incomes as a way to ensure a long-term solution to achieve a reduction in inequality, an improvement in living standards, and ensuring a dignified existence for all South Africans. The Committee conductsa close scrutiny ofthe contribution of the tourism sector to the 2030 jobs target, and will pay particular attention on the impact of COVID-19 on future tourism jobs.

The New Growth Path

Tourism is acknowledged in the New Growth Path (NGP) as one of the six economic pillars of South Africa. Tourism is recognised as alabour-intensive sector, with a wide value chain that cuts across various economic sectors. The NGP is intended to address unemployment, inequality and poverty in a strategy that is principally reliant on creating a significant increase in the number of new jobs in the economy. The NGP thus envisages tourism as a vehicle to expedite transformation and inclusive tourism growth that encourages participation of all South Africans in the mainstream economy.

1.2.2.3 The White Paper on the Development and Promotion of Tourism in South Africa

The White Paper on the Development and Promotion of Tourism in South Africa (1996),recognises that tourism has been inadequately resourced and funded; has a myopic private sector; is characterized by limited integration of local communities and previously neglected groups into tourism; there is inadequate tourism education, training and awareness; inadequate protection of the environment; poor service; lack of infrastructure, particularly in rural areas; a ground transportation sector that is not geared to service tourists; lack of inclusive, effective national, provincial and local structures for the development, management and promotion of the tourism sector; and growing levels of crime and violence on visitors. Despite huge strides made by the Department in implementing the White Paper, the sector still reflects a number of challenges that were inherited from the past. The Committee has recommended that the current White Paper be reviewed so that it is aligned with the contemporary global and domestic tourism trends. Consequently, the Minister has appointed a seven-member panel of experts to assist the Department in reviewing the current tourism policies and ultimately develop a new policy direction for the tourism sector.

The Minister is commended for initiating the policy review process. This move will ensure that the policy gaps that have been identified by the Committee are addressed accordingly. Ultimately, the tourism sector in South Africa will be on par with contemporary global trends.

The National Tourism Sector Strategy

The Department is implementing the National Tourism Sector Strategy (NTSS) that spans a 10-year period (2016 - 2026). The vision ofthe NTSS is for South Africa to be a top world responsible tourism destination, a safe, rapidly and inclusively growing tourism economy that leverages South Africa’s competitive edge in nature, culture and heritage, underpinned by Ubuntu and supported by innovation and service excellence. The tourism policy review process should take into consideration the strategic thrusts of the current NTSS and offer propositions for amendments where necessary to ensure that the strategy is aligned with the new policy priorities.

1.2.2.5 TheMedium Term Strategic Framework (2014 -2019)

The period 2019/20 was the last financial year in the implementation of the 2014-2019 Medium Term Strategic Framework (MTSF). The MTSF was grounded on the fourteen core priorities of government. The Department and SA Tourism contributejointly to these core government outcomes. The Department was pursuing four of these priorities as follows:

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; and
Outcome 12: An efficient, effective and development-oriented public service and an empowered, fair and inclusive citizenship.

State of the Nation Address

The oversight implications of the 2019/20 State of the Nation Address for the Committee are mainly in relation to the achievement of the 21 million arrivals by 2030 as set by the government. The Committee distilled the SONA implications for tourism development and marketing and concluded that the oversight should include aspects of performance against the 2030 targets; inclusive tourism growth;tourist Safety and Security; linking the District Development Model to tourism development; building social compacts through partnershipsand cooperation; leveraging on social capital; linking tourism growth to the Economic Recovery Plan;leveraging on the proposed State Bank; impact of unstable state enterprises; Presidential Youth Employment Intervention and Women Participation; digital economy; and climate change and tourism. This amplifies the nature of tourism as a multidisciplinary sector that will only thrive through a whole government approach supported by a deliberate and focussed multi-stakeholder coordination.

Strategic Outcome Oriented Goals of the Department and Delivery Agreement targets for 2019/20

The Department developed its Strategic Outcome-Oriented Goals based on the four government outcomes of the MTSF. Table 1 depicts Strategic Outcomes-Oriented Goals of the Department, as stated in the 2015/16 – 2019/20 Strategic Plan.

Table 1: Strategic Outcome-Oriented Goals which correlate with Government Outcomes

Government Outcomes	Strategic Outcome-Oriented Goal
Outcome 4: Decent employment through inclusive economic growth	Improve the impact of tourism on the livelihood of all South Africans
Outcome 7: Comprehensive rural development and land reform	Increased contribution of tourism sector to inclusive economic growth
Outcome 10: Environmental assets and natural resources that are well protected and continually enhanced	Improve levels of competitiveness and sustainability in the sector
Outcome 11: Create a better South Africa and a better world	Strengthen regional, African and international collaboration and partnerships
Outcome 12: An efficient and effective, and development orientated public service and an empowered fair and inclusive citizenship	Achieve good corporate and cooperative governance

Source: NDT Annual Performance Plan 2019/20

The Department was implementing a number of programmes in pursuing the achievement of the stated outcomes. Some of the impactful programmes include the various training programmes; the Tourism Transformation Fund (TTF), the Tourism Equity Fund; the Working for Tourism Programme (EPWP implementation) and the Tourism Incentive Programme (TIP). It should be noted that the 2019/20 financial year was the final year of the implementation of the aforementioned strategic outcome oriented goals of the fifth administration.

1.4 Purpose of the Budget Review and Recommendation Report

The Budget Review and Recommendation Report (BRRR)compilation process is governed by the Money Bills Procedures and Related Matters Amendment Act (Act 9 of 2009). The Act sets out the process that allows Parliament to make recommendations to the Minister of Finance to amend the budget of a national department. In October of each year, the Committee must compile the BRRR that assesses service delivery performance given available resources; evaluate the effective and efficient use and forward allocation of resources; and may make recommendations on forward use of resources. The BRRR also acts as a source document for the Standing/Select Committees on Appropriations/Finance when making recommendations to the Houses of Parliament on the Medium-Term Budget Policy Statement (MTBPS). The comprehensive review and analysis of the previous financial year’s performance, as well as performance to date, form part of this process.

Method

The Minister of Tourism tabled in Parliament the Annual Reports for the Department in October 2020 and SA Tourism in November 2020. The Committee then scheduled a meeting with the Office of the Auditor-General for the 2019/20 financial year audit outcomes and was further briefed by the Department on their financial and non-financial performance on the 10th November 2020. The Annual Report briefing meeting was scheduled with SA Tourism on the 11th November 2020. The Committee considered and adopted the report on the 17th November 2020.

Outline of the contents of the Report

The report is made up of five constituent parts as follows:

Constitutional, legislative and policy mandate of the Committee and the process that was followed in developing this Budget Review and Recommendation Report.
Previous financial performance of the Department on both financial and non-financial aspects.
Financial, non-financial and service delivery issues for the period under review.
Key findings from the oversight work of the Committee, public hearings and research by external stakeholders that inform the recommendations.
Recommendations to the Ministers of Finance and Tourism in terms of the budgetary requirements, performance, and service delivery improvement of the Department.

Overview of the key relevant policy focus areas

The tourism sector is regulated by government legislative, policy and strategic frameworks that are aligned to the vision 2030 of the National Development Plan.

Key Government policies

As alluded under the broad mandate of the Department, the key government policy in relation to tourism are the National Development Plan, the New Growth Path, the National Tourism Sector Strategy and the White Paper which drive the policy and strategy trajectory of the sector. The Tourism Act, 2014 (Act No.3 of 2014) provides the legislative framework that holds these policies and strategies together. The tourism delivery environment is ever changing and the government policies need to keep abreast of these changes, hence the policy review process currently underway by the Department. The policy alignment amongst various government departments is also critical in the execution of the tourism mandate. This is crucial as some aspects of the tourism sector fall outside the ambit, purview and span of control of the Department of Tourism.

Overview of the revised Strategic Plan and Annual Performance Plans

The Department tabled its 2018/19 - 2020/21 Strategic Plan with the revised 2019/20 Annual Performance Plan. The focus for the period under review was aligned to the national government priorities and the National Development Plan. However, the budget allocated to the Department did not reflect the economic development mandate given to the sector. With regard to the strategic plan, the Committee, introduced a new focus on the Villages, Townships and Small Dorpies (VTSDs). The Committee acknowledged that the period under review straddled the 5th and 6th Parliaments and it was not possible for the Department incorporate the new strategic thrust as the Strategic Plans and Annual Performance Plans were based on the 5th Parliament Committee focus areas. However, the Committee made it categorically clear that the new focus on VTSDs was to be incorporated in all the business units of the Department and South African Tourism, and that the focus on VTSDs was going to be central in determining future planning and resultant implementation programmes.

Strategic goals

The Department was pursuing the following twelve (12) organisational strategic objectives which are spread over its four Branches/ Programmes:

To ensure economic, efficient and effective use of departmental resources,
To enhance understanding and awareness of the value of tourism and its opportunities,
To create an enabling legislative and regulatory environment for tourism development and growth,
To contribute to economic transformation in South Africa,
To accelerate the transformation of the tourism sector,
To facilitate the development and growth of tourism enterprises and to contribute to inclusive economic growth and job creation,
To facilitate tourism capacity-building programmes,
To diversify and enhance tourism offerings,
To provide knowledge services to inform policy, planning and decision- making.
To reduce barriers to tourism growth and to enhance tourism competitiveness,
To enhance regional tourism integration, and
To create employment opportunities by implementing tourism projects.

Departmental programmes

The Department fulfils its mandate through four Branches/Programmes, namely, Programme 1: Administration; Programme 2:Tourism Research, Policy and International Relations; Programme 3: Destination Development; and Programme 4: Tourism Sector Support Services. These four Programmes are interwoven and work collaboratively to deliver on the constitutional mandate of the Department. The Department was pursuing the strategic objectives and the strategic outcome-oriented goals through these four Programmes, with respective and thoughtful purposes as depicted in Table 2.

Table 2: Departmental Programmes

Programme	Name of the Programme	Purpose of the Programme
Programme 1	Administration	To provide strategic leadership, management and support services to management. The sub-programmes for Programme 1 are Ministry; Management; Corporate Management; Financial Management; and Office Accommodation.
Programme 2	Tourism Research, Policy and Internal Relations	To enhance a strategic policy environment, monitor the tourism sector’s performance and enable stakeholder relations. The related strategic outcome-oriented goal is to achieve good corporate and cooperative governance
Programme 3	Destination Development	To facilitate and co-ordinate destination development. The strategic outcome-oriented goal is to increase the tourism sector’s contribution to inclusive economic growth.
Programme 4	Tourism Sector Support Services	To enhance transformation of the sector, increase skills levels and support its development and to ensure that South Africa is a competitive tourism destination. The strategic outcome-oriented goal is to increase the tourism sector’s contribution to inclusive economic growth.

Source: Adapted from the Department of Tourism 2019/20 Annual Performance Plan

Overview of key developments in the organisational and service delivery environments of the Department for 2019/20 and 2020/21 MTEF cycle.

The sector experienced a number of developments impacting on the service delivery environment. These developments were at a political/Executive level; endogenous with intra-organisational dynamics and exogenous as influenced by the domestic, regional and global dynamics. Towards the end of the financial year, the global health crisis triggered by the novel coronavirus, dubbed COVID-19,struck a blow tothe tourism sector, and South Africa in particular. The key developments are summarised as follows:

Organisational environment

The Department experienced a change in political leadership during the period under review. Following the general elections on the 8th May 2019, Hon MmamolokoKubayi-Ngubane was announced by the President of the Republic as the new Minister of Tourism, and assumed Office on the 30th May 2019. This was barely a year after Mr Derek Hanekom had been reappointed as Tourism Minister by President Cyril Ramaphosa following a Cabinet reshuffle in February 2018. The Department has undergone four leadership changes at an Executive Level since 2017, and this has somehow caused delays in implementing critical changes in the legislative, policy and strategy review processes.

The transition between the 5th and 6th Administration has meant that the Department and SA Tourism had to re-acclimatise to the vision and focus of the 6th Administration. Consequently, there have been delays on critical deliverables, such as the introduction of the Amended Tourism Bill. The Department has since been stabilised underthe new leadership,as the Director-General was re-appointed by the new Minister, which assisted with continuity. The new Minister is keen in taking on board the recommendations made by the Committee, particularly on streamlining tourism developments in the VTSDs. The Committee will continue working with the Minister in ensuring inclusive tourism growth.

2.3.2 Outbreak of the novel coronavirus

During the Fourth Quarter of the 2019/20 financial year, the global tourism sector was decimated by the outbreak of COVID-19. The core mandate of the Department and SA Tourism, which is to market South Africa domesticallyand abroad, was adversely affected. Most tourism development activities by the Department and marketing activities by SA Tourism came to a grinding halt. International tourism was stopped as international borders were closed, international flights grounded, international travel restricted, and bookings were cancelled. This hasdrastically reduced the number of international arrivals in the country. In turn, this will have a negative impact on the 2030 target of 21 million arrivals, albeit the target will remain unchanged.

Domestic and international tourism havesince been opened, albeit with restrictions and requirements to adhere to strict health protocols in order to prevent the second wave of infections in the country. The tourism sector has been able to strike a healthy balance between saving lives and livelihoods through adopting industry safety protocols, to combat the spread of COVID-19.

However, the gains made in the historic growth of holiday trips in 2019 will be lost as the domestic tourism market has to reboot, and some domestic travellers are still apprehensive and sceptical to take domestic trips.

The closure of the tourism sector has other impacts with regard to revenues generated from TOMSA Levy collections. This will put a strain on the revenues of South African Tourism. The South African Conventions Bureau (SANCB) was not able to conduct any business tourism activities. Even with the alert Level 1,meetingvenues are still restricted to 50 percent capacity or a maximum of 250 attendees. Some conferences and meetings have been cancelled. This will have a negative impact on the contribution of business tourism to the GDP of the country.The closure and minimum operation of the tourism business sector means there will be no revenue generated through INDABA and Meetings Africa.This calls for the development of anew strategy that looks into hybrid events to boost business tourism. The Committee will conduct a focussed oversight over the SANCB on how they adapt their strategies to the new normal in terms of innovation such as hybrid conferences and meetings.

Initiatives to combat impact of COVID-19

When the tourism industry came to a complete halt, businesses, big and small, were affected. The government had to provide a R200 million Tourism Relief Fund to be used towards fixed costs, operational costs, supplies and other pressure cost items, as a relief to the sector. The Tourism Relief Fund was administered and disbursed by South African Tourism. There was dissatisfaction from some members of the civil society about the inclusion of the BBBEE in the criteria, and the Minister was taken to court by AfriForum and Solidarity who claimed this requirement was “racist”. The case was dismissed by the Constitutional Court. This put in the spotlight the need for the Department to continue engaging and educating the tourism private sector and society at large about the importance and tenets of the Broad-Based Black Economic Empowerment strategy in the tourism sector.

The continued impact of the closure of the tourism sector saw a number of initiatives by both government and the private sector to cushion the industry from the impact of COVID-19. This included the lobbying for the extension and expansion of the Unemployment Insurance Fund (UIF) and Temporary Employee Relief Scheme (TERS) to help freelancers in the tourism sector who were not eligible for the TERS; the introduction of the Tourism Relief Fund for the registered freelance tourist guides and the development of the Tourism Industry Standard Protocols for Operations. The Committee commends the Department, SA Tourism and the Tourism Business Council of South Africa (TBCSA) for being proactive in developing these protocols which have received the stamp of approval by the World Travel & Tourism Council (WTTC). The tourism protocols have assisted in the safe reopening of domestic tourism, and will be pivotal in reopening international tourism. The Minister should also be commended for initiating a process of gazetting the tourism protocols as minimum standards for the sector. The Committee awaits the conclusion of this process and implementation.

Summary of previous year key financial and NON-financial performance recommendations of the Committee

2018/19 BRRR recommendations

Summary of key financial and non-financial performance recommendations made by the Committee

The Committee made a total of fifty-two (52) financial and non-financial recommendations to the Ministers of Finance and Tourism. The responses by the Minister of Finance were extracted from the annexures tabled by the National Treasury with the Division of Revenue in February 2020. The responses from the Minister of Tourism were received by the Secretariat on the 23rd September 2019. This was after the Chairperson of the Committee had written a letter to the Minister requesting tabling of the responses in facilitating the compilation of the 2020 BRRR by the Committee. The Committee is concerned about the late tabling of the responses by the Minister of Tourism, not only for the BRRR recommendations, but other responses, including quarterly reports and oversight visit reports.The evaluation of the 2019 Budget Review and Recommendations Report is done for both the Minister of Finance (National Treasury) and the Minister of Tourism.

Responses by the Minister of Finance

The Committee had made two recommendations that took into consideration the national fiscal constraints. The recommendations were made to provide anenabling environment for the tourism sector to flourish in the country. Firstly, the Committee recommended that the Minister of Finance work with the Department of Tourism to reprioritise the budget for the Tourism Vote in line with the Committee’s new oversight approach focusing on villages, townships and small towns. The Minister of Finance responded by saying that the National Treasury and the Department of Tourism will hold further discussions to realign budget and spending priorities over the medium term. The Committee will make a follow up on these engagements to ascertain how the budget hasbeen reprioritised to entrench tourism development and marketing for Villages, Townships & Small Dorpies (VTSDs).

Secondly, the Committee recommended that the Minister of Finance, notwithstanding the constrained national fiscus, consider the contribution of the tourism sector to the gross domestic product (GDP) of the countryand the labour-intensive nature of the tourism sector and find innovative ways of increasing the budget appropriated for the Tourism Vote. The Minister of Finance responded by saying that the National Treasury recognises tourism’s important contribution to GDP growth, but there is little scope to provide additional funding at this time. The National Treasury discussion paper, Economic Transformation, Inclusive Growth, and Competitiveness: Towards an Economic Strategy for South Africa, identifies the tourism sector as one of the labour-intensive sectors that could create jobs for semi-skilled and unskilled workers in the short to long term. In the paper, National Treasury supports the implementation of microeconomic reforms that could stimulate growth, investment and job creation in tourism.

The Committee is not satisfied with the responses from the National Treasury as tourism contributessignificantly to the national fiscus. The Committee holds the view that the provisions of the National Treasury discussion paper, Economic Transformation, Inclusive Growth, and Competitiveness: Towards an Economic Strategy for South Africa, do not adequately address the current issues in the sector.

The Committee’s analysis of the discussion paper proposals focuses on these aspects:

Greater budgetary support for tourism agencies is required and measures should be introduced to protect their budgets from the negative impact of currency fluctuations given their impact on marketing in foreign destinations.
The Department of Tourism should increase the level of support to tourism firms to navigate the highly regulated business environment.
South Africa’s visa regulations should be amended to ensure a better balance between security concerns and growing the tourism sector.
Adopting proposals for the reintroduction and enhancement of the Tourism Safety Initiative, with highly visible policing in tourist hotspots can address the perception of South Africa as an unsafe destination.

Firstly, the Committee is of the view that the National Treasury places morefocus on tourism agencies which deal with marketing and completely neglects tourism development. This perpetuates the current status quo of imbalance in the tourism sector as marketing mainly benefits the existing tourism businesses. The focus of the 6th Parliament Portfolio Committee on Tourism is on the development of village, township and small towns’ tourism. The allocated budget should have a proclivity towards these niche tourism opportunities to expedite transformation. This is based on the Committees’ oversight philosophy of rebranding, repositioning and renewal which seeks, amongst other things, to introduce more new entrants into the mainstream tourism economy, whilst protecting the existing businesses. The National Treasury is urged to ring-fence budget for rural community-based tourism and township tourism development in the VTSDs.

Secondly, the Committee also holds the view that the tourism budget should be able to fund new entrants to the tourism sector through carefully crafted funding mechanisms. A stark focus should be paid on emerging tourism enterprises, whilst supporting the existing businesses. This could be achieved through recapitalising the Tourism Transformation Fund and the Tourism Equity Fund to drive meaningful transformation in the sector. Tourism SMMEs should thus be funded to grow their businesses whilst stimulating ‘tourism-preneurs’ to start new businesses and transform the tourism landscape in the country.

Thirdly, the Committee noted with optimism that during the Department of Home Affair’s budget vote debate for 2019/20 financial year, the Deputy Minister, Mr. Njabulo Nzuza, indicated that thedepartment was moving forward with the implementation of the country’s e-Visa regime. If implemented, this regime will place technology at the centre of the Department of Home Affair’s operations by making it easy, yet secure, to enter South Africa, and that the e-Visa regime is anticipated to be fully introduced in November 2019. This is a welcome development and the Committee will make a follow up on these announcements.

Lastly, the Committee is of the view that the discussion paper is shallow on addressing crime committed against tourists as it only refers to the Tourist Safety Initiative which is implemented by the private sector. The document does not refer to the lack of a comprehensive National Tourism Safety Strategy, which is currently being developed by the Department of Tourism. The Portfolio Committee on Tourism took an initiative and convened a Consultative Workshop on Tourist Safety in South Africa on the 27th August 2019. The workshop made a number of resolutions that will assist in dealing with crime committed against tourists and crime reporting. The Committee will follow up with all stakeholders who have a role to play in implementing the resolutions.

Responses by the Minister of Tourism

The Minister of Tourism provided responses on the recommendations made on the financial and non-financial performance of the Department. The Committee commends the Department on the amount of work that has been done since the recommendations were made. The Committee notes that the Department and SA Tourism have incorporated the recommendations of the Committee on their strategies. The Committee, however, is of the view that more can still be done to effectively take the sector forward. The Committee will further engage the Department and SA Tourism on itemised issues as presented in the 2019 aand 2020 Budget Review and Recommendation Report.This will ensure that the Department and the Committee have the same understanding of the 6th Parliament Portfilio Committee on Tourism’soversight approach and the the vision.

2019/20 Committee Budget Report

In the 2019/20 Budget Report the Committee made various recommendations to the Minister of Tourism for both the Department and SA Tourism. The recommendations covered budget allocation and expenditure; legislative and policy environment; employment creation in the sector; coordination amongst the three spheres of government; drop-out rates in projects implemented by the Department; rural and township tourism; the Nelson Mandela Capture Site; Blue Flag Beaches; decrease international arrivals; implementation of the 5-in-5 Strategy; personnel matters; need to expedite transformation; destination access and visa related matters; safety and security concerns for tourists; communication of government decisions; inappropriate wildlife interactions; concerns about perceptions created by the government policy on land expropriation without compensation; need to boost domestic tourism; implementation of the Events Strategy and a need for improvement and policy review ofthe grading scheme in South Africa.

The Department and SA Tourism have done a commendable work in implementing various recommendationsmade by the Committee. Notable amongst the implemented recommendations is the inclusion of the VTSDs in the tourism plans, albeit in infancy and more work still cut out for the Department and the Entity; the policy review; implementation of the Tourism Transformation Fund and Tourism Equity Fund, albeit disbursements of funding very slow. The Department and the Entity need to strengthen stakeholder engagements to ensure that other government departments and the private sector assist in addressing recommendations outside their mandate.

Overview and assessment of financial performance

The Committee scrutinised the budget allocation and expenditure trends in the sector over the 2015/16 – 2019/20 financial years to establish the trends for Vote 33.

4.1 Budget and expenditure, 2015/16– 2019/20

The Department has had a steady increase in the allocated budget over the past five years as depicted in Table 3. In the 2015/16 financial year, the Department was appropriated R1 794 178 000 and spent 99 percent of its total budget. In the 2016/17 financial year the Department was allocated R2 009 516 000 and spent R1 919 790 000, representing 95.5 percent expenditure of the appropriated budget. In the 2017/18 financial year the Department was allocated R2 140 156 000 and spent R2 133 976 000, which was 99.7 percent of the appropriated budget. In the 2018/19 financial year the Department was appropriated R2 261 817 000 and spent R2 234 802 000 which was 98.8 percent of its appropriated budget.

Table 3: Overview of budgetary allocation and expenditure 2015/16 – 2019/20

Year	Voted Allocation (R'million)	% change from previous year (nominal)	* Voted Allocation adjusted for inflation (R'million)	** % change from previous year (adjusted for inflation)	Adjusted Allocation (R'million)	Expenditure (R'million)	Expenditure as a percentage of Adjusted Allocation (%)

2015/16	1 800 233,0	8,3%	1 711 248,10	3,0%	1 794 178,0	1 777 394,0	99,1%
2016/17	2 009 516,0	11,6%	1 796 976,77	5,0%	2 009 516,0	1 919 646,0	95,5%
2017/18	2 140 156,0	6,5%	1 824 403,68	1,5%	2 140 156,0	2 133 976,0	99,7%
2018/19	2 261 817,0	5,7%	1 827 597,32	0,2%	2 261 817,0	2 234 802,0	98,8%
2019/20	2 392 670,0	5,8%	1 837 765,58	0,6%	2 392 670,0	2 384 392,0	99.7%
* Real change in Rand value
** Real change in percentage terms

Source: Own calculation adapted from previous ENEs

The Department is commended for a good financial performance with regard to expenditure over the five-year period. This is confirmed by its four unqualified audits, two of which were clean audits, and the 98 percent average expenditure over the five financial years. The Committee has observed a trend that although the Department has an average of 98 percent expenditure over the past five years, the performance against the predetermined objectives has not always been that impressive. The Department also struggled to implement good financial management systems over the years and this still persists. The Committee will pay particular attention on the financial management systems, internal controls and compliance with legislation.

FINANCIAL PERFORMANCE FOR 2019/20

In the 2019/20 financial the Department was allocated R2,4 billion of which R334.4 million was allocated to fund Compensation of Employees. The National Treasury imposed a ceiling on Compensation of Employees over the MTEF period and the ceiling amounts are R334.4 million for 2019/20, R360,3 million for 2020/21 and R383,7 million for 2021/22. An amount of R359.2 million was budgeted for Goods and Services, R1,554 billion for Transfers and Subsidies and R144.6 million for the payments of Capital Assets. Table 4 reflects the allocation of funds per programme.

Table 4: Expenditure for 2019/20

Programme	Final Appropriation (R’000)	Expenditure (R’000)	Expenditure as % of Final Appropriation	Over/(Under) Expenditure (R’000)	% Variance from final Appropriation
Administration	288 274	287 323	99.67%	951	(2.57%)
Tourism Research, Policy and International Relations	1 419 142	1 419 060	99.99%	82	6.62%
Destination Development	430 338	430 011	99.92%	327	7.11%
Tourism Sector Support Services	254 916	247 998	97.4%	6 918	(15.72%)
TOTAL	2 392 670	2 384 392	99.65%	(8 278)	-

Source: 2019/20 Quarter 4 Report

At the end of the financial year, the Department had spent R2.384 billion or 99.7 percent of the available budget, mainly towards transfers and subsidies. The actual expenditure for the period under review is 0.4 percent below projected expenditure of R2.4 billion. The underspending was mainly as a result of delays in purchasing of IT equipment as the replacement of servers and mainframes could not be finalised prior to financial year end. The main cost driver for Vote 33 was Programme 2, which consumes more than half (approximately 56 percent) of the total Vote allocation for the development, destination development and transformation of the tourism sector. Compensation of employee’s budget for 2019/20 amounted to R334.4 million. As at end of the fourth quarter, cumulative spending on compensation of employees amounted to R329.4 million, against projected spending of R334.4 million. This translates into a variance of R5 million or 1.5 percent due to the implementation of human resource reduction strategies and stricter measures to adhere to the compensation ceiling.

The Programme performance against the appropriated budget was as follows:

Programme 1: Administration

Programme 1 provides strategic leadership, management and support services to management. Sub-programmes include Ministry, Management, Corporate Management, Financial Management, and Office Accommodation. Actual expenditure at the end of the fourth quarter amounted to R287.3 million or 97.1percent of the programme’s total available budget of R295.9 million for the financial year. When actual expenditure is compared to projected expenditure of R295.9 million, this represents a variance of R8.6 million or 2.9 percent. The underspending is primarily driven by delays in purchasing of IT equipment as the replacement of servers and mainframes could not be finalised prior to financial year end.

Programme 2: Tourism Research, Policy and International Relations

Programme 2 focuses on enhancing the strategic policy environment, monitoring the tourism sector’s performance and enabling stakeholder relations. The actual expenditure at the end of the fourth quarter amounted to R1 419.1 billion or 99.99 percent of the programme’s total available budget for the financial year. When actual expenditure is compared to projected expenditure of R1.4 billion, this represents a variance of R82 000 or 0.01 percent. The minor underspending is under compensation of employees due to the reassignment of staff to the Programme who had previously served in the offices of the former Minister and Deputy Minister, respectively.

Programme 3: Destination Development

Programme 3 focuses on facilitatingand coordinatingdestination development. The actual expenditure at the end of the fourth quarter amounted to R430.0 million or 99.9 percent of the programme’s total available budget of R430.3 million for the financial year. When actual expenditure is compared to projected expenditure of R430.3 million, this represents a variance of R327 000 or 0.08 percent. The minor underspending is primarily due to the processing of additional payments for training and development component of the Expanded Public Works Programme.

Programme 4: Tourism Sector Support Services

Programme 4 focuses on enhancing transformation of the sector, increasing skills levels and supporting development to ensure that South Africa is a competitive tourism destination. The actual expenditure at the end of the fourth quarter amounted to R247.9 million or 97.3 percent of the programme’s total available budget of R254.9 million for the financial year. When actual expenditure is compared to projected expenditure of R254.9 million, this represents a variance of R6.9 million or 2.17 percent. The underspending was within Compensation of Employees due to strict policies adhered to by the Department to reduce expenditure on salaries and wages.

Quarterly spending trends

The Department experienced a minor underspending in all the four quarters of the 2019/20 financial year. This led to the total underspending of R8.27 million or 0.3 percent of the total budget allocation.

In Quarter 1of the 2019/20 financial year, the Department was able to achieve 60 of its 79 identified targets, with 7 (8.86 percent) targets not achieved and 12 (15.19 percent) requiring intervention. First quarter expenditure amounted to 99.8 percent of projected expenditure of R1.2 billion for the period (49 percent) of the R2.4 billion budget allocated. The underspending was mainly attributable to the Tourism Incentive Programme (TIP) owing to considerable delays in the finalisation of contracts with beneficiaries and thus impacted the disbursement of funds. In addition, the underspending was also as a result of outstanding invoices from the Department of Public Works linked to office accommodation.

At the end of Quarter 2 the Department had spent 62 percent of the budget as appropriated in the Estimates of National Expenditure (ENE). The bulk of that expenditure was the transfers made to SA Tourism through Programme 2: Tourism Research, Policy and International Relations. The amount transferred to SA Tourism was R1.1 billion of R1.3 billion. The underspending trend in Quarter 2 was a continued trend as incurred in Quarter 1.

In Quarter 3, the Department achieved 53 (71.62 percent) of the 74 identified targets. Of the 21 targets not achieved, the Department had done significant work on six (8.11 percent) of them, whilst the remaining 15 (20.27 percent) required intervention. In terms of financial performance, by the end of Quarter 3, the Department had spent R1.862 billion (78 percent) of the R2.393 billion budget allocated.

In Quarter 4, the Department achieved 58 (76.32 percent) of the 76 identified targets. Of the 18 targets not achieved, the Department indicated that significant work had been done on four (5.26 percent) of them, whilst the remaining 14 (18.42 percent) required intervention. In terms of financial performance, by the end of Quarter 4, the Department had spent R2.4billion (99.7 percent) of the R2.393 billion budget allocated. Thus, by the end of the financial year, the Department spent almost all of the allocated budget, whilst only managing to achieve 76 percent of its targets for the year. The reasons proffered by the Department and SA Tourism on the discrepancies between expenditure and achievement of predetermined objectives were reasonable and accepted by the Committee.

5.2 Transfers and subsidies

In the period under review, the Department transferred an amount of R1.5 billion to various organisations. These included Culture, Arts, Hospitality and Sports Sector Education and Training Authority (R200 000); bursaries for Non-Employees: National Tourism research Framework capacitation (R3.5 million); South African Tourism (R1.3 billion); United Nations World Tourism Organisation membership (R2.2 million); Expanded Public Works Programme Incentive: Work opportunities (R53.8 million); Expanded Public Works Programme: Work opportunities (R66.7 million); Federated Hospitality Association of South Africa: Membership fee (R400 000); Various institutions: National Tourism Careers Expo (R3.7 million); Various institutions-Tourism Incentive Programme: Work opportunities (R169.9 million). These funds were disbursed according to the specifically appropriated budget and there were no issues raised by the National Treasury.

Auditor-General Report

The report of the Auditor-General is presented for both the Department and SA Tourism.

5.3.1 Auditor-General’s Report with regard to the Department of Tourism

The 2019/20 audit findings are presented against the backdrop of qualified audits that were issued to the Department and SA Tourism by the Auditor-General. The 2019/20 financial and non-financial performance improved as presented in the audit findings below:

Audit opinion

The Department received an unqualified audit in the 2019/20 financial year.

Pre-determined Objectives

No material findings on the usefulness and reliability of the reported performance information for the selected Programme: Tourism Sector Support Services. The reported performance information is useful and reliable in all material respects.

Financial Statements

Financial statements present fairly, in all material respects, the financial position of the Department of Tourism as at 31 March 2020, and its financial performance and cash flows for the year then ended in accordance with the modified cash standard (MCS) as prescribed by the National Treasury as required by section 40(1)(b) of the Public Finance Management Act of South Africa, 1999 (Act No. 1 of 1999) (PFMA) and the Division of Revenue Act of South Africa, 2019 (Act No. 16 of 2019) (Dora).

Compliance with Laws and Regulations

Material non-compliance with key applicable legislation were identified. Some of the bid documentation for procurement of commodities designated for local content and production, did not stipulate the minimum threshold for local production and content as required by the 2017 preferential procurement regulation 8(2).

Effective and appropriate steps were not taken to prevent irregular expenditure amounting to R8.4 million as disclosed in note 22, as required by section 38(1)(c)(ii) of the PFMA and treasury regulation 9.1.1. The majority of the irregular expenditure disclosed in the financial statements was caused by the preference point system not being applied by implementing agents on behalf of the department.

Internal Controls

Internal control deficiency was identified. The Department compiled an action plan based on the audit report findings; however, they did not adequately monitor the existing action plan. This resulted in material non-compliance re-occurring in the current financial year.

5.2.1.6 Other reports

The Director-General instituted an independent investigation regarding the irregular and fruitless and wasteful expenditure incurred on the EPWP projects. The investigation was completed by the time of this report. The Director-General had initiated the recommendations as per the investigation report.

The 2019/20 audit findings depict a marked improvement from the 2018/19 financial year in which the Department received a qualified audit mainly on the basis of the insufficient audit evidence that immovable tangible capital assets were properly accounted for in accordance with the requirements of the Modified Cash Standard. The Department has corrected these audit findings to the satisfaction of the Auditor-General in the year under review. The Committee will continue monitoring the financial and non-financial performance of the Department and SATourism to prevent these organisations from regressing in their audit findings.

5.3.2 Auditor-General’s Report with regard to SA Tourism

5.3.2.1 Audit opinion

The Entity received an unqualified audit opinion with material findings in the 2019/20 financial year. This is a regression from the previous audit period and points to repeat findings and the lack of effective measures implemented to address the matters raised by the Auditor-General in the previous audits.

5.3.2.2 Irregular expenditure

As disclosed in note 32 to the financial statements, irregular expenditure of R49,962,765 was incurred in the current year due to non-compliance with prescribed procurement prescripts.

5.3.2.3 Subsequent event after financial statements

Note 30 to the financial statements, which deals with subsequent events and specifically the possible effects of the future implications of COVID-19 on the public entity. Management has revised the annual performance plan for 2020-21 as a result of a budget reduction of 66% (R866 million).

5.3.2.4 Usefulness and reliability of audit information

The material findings on compliance in respect of the usefulness and reliability of the selected programme, Programme 5 (Tourist Experience) are:

Number of officials/frontline staff that attended the welcome training:
- The achievement of 514 was reported against a target of 800 in the annual performance report. However, some supporting evidence provided differed materially from the reported achievement, while in other instances the AG was unable to obtain sufficient appropriate audit evidence. This was due to the lack of accurate and complete records. The AG was unable to further confirm the reported achievement by alternative means. Consequently, the AG was unable to determine whether any further adjustments were required to the reported achievement.

Material findings on compliance with specific matters in key legislation are as follows:
- Expenditure management - Effective and appropriate steps were not taken to prevent irregular expenditure of R49,962,765 as disclosed in note 30 to the annual financial statements, as required by Section 51(1)(b)(ii) of the PFMA. The majority of the irregular expenditure was caused by contracts identified the previous year, which were amended or extended without the approval of the National Treasury, as required by paragraph 9.1 and 9.2 of national treasury instruction note 3 of 2016-17.

Procurement and contract management - Some of the quotations were accepted from prospective suppliers who did not submit a declaration on whether they are employed by the state or connected to any person employed by the state, which is prescribed in order to comply with treasury regulation 16A8.3.

Submission of financial statements - the financial statements submitted for auditing were not prepared in accordance with the prescribed financial reporting framework as required by Section 55(1)(b) of the PFMA. Material misstatements of revenue and the segment information disclosure note identified by the auditors in the submitted financial statements were corrected, resulting in the financial statements receiving an unqualified audit opinion.

5.3.2.4 Internal control deficiencies

There has been a slow response to addressing non-compliance. Leadership did not ensure that the public entity complied with applicable laws and legislation. The public entity’s internal processes and systems did not prevent irregular expenditure.

The public entity compiled an action plan based on the audit report findings. However, they did not adequately monitor the existing action plan. The underlying systems and controls were inadequate to provide reliable evidence to support the reporting on predetermined objectives for programmes selected for auditing. The relevant staff did not verify the data in the registers.

5.4 Summary of key issues contained in reports of Finance/Appropriation Committees

In the period under review, the Department and SA Tourism had no issues raised by the finance or appropriation Committees.

Summary of key financial issues contained in any other relevant report(s)

The Standing Committee on Public Accounts (SCOPA) did not raise any issues with regard to spending by the Department. No financial issues were identified from other sources.

2019/20 MTEF financial allocations

Summary of funding submissions to the National Treasury for the 2019/20 MTEF.

The detailed funding submissions made to the national Treasury for the 2019/20 financial year are contained in section 3.2 of this report. The Committee is satisfied with the general response from the national Treasury that always point to the constrained national fiscus without due consideration of how a well-funded tourism sector will contribute the labour intensive job creation and eradication of poverty in South Africa.

OVERVIEW AND ASSESSMENT OF SERVICE DELIVERY PERFORMANCE

The service delivery performance assessment is presented for both the Department and SA Tourism.

The Department of Tourism

As alluded earlier, the Department executes its mandate through four programmes, that is, Administration; Tourism Research, Policy and International Relations; Destination Development; and Tourism Sector Support Services.

Financial performance

The Department was allocated R2 392 670 billion in the 2019/financial year, R334 372 million of which was allocated to fund Compensation of Employees; R536 150 million to Goods and Services; R1 358033 billion to Transfers and Subsidies and R21 393 million to Capital Assets. At the end of the financial year, the Department spent 99.7 percent of its total budget with a variance of R8 278 000 million. The Department’s performance is depicted in Table 5.

Table 5: Department of Tourism Financial Statement for the 2019/20 financial year

Programme	Adjustment Appropriation (R’000)	Virement	Final Appropriation (R’000)	Expenditure (R’000)	Over/(Under) Expenditure (R’000)	Virement %
1. Administration	295 874	(7 600)	288 274	287 323	951	(2.57)
2. Tourism Research, Policy and Internal Relations	1 331 053	88 089	1 419 142	1 419 060	82	6.62
3. Destination Development	463 297	(32 959)	430 338	430 011	327	7.11
4. Tourism Sector Support Services	302 446	(47 530)	254 916	247 998	6 918	(15.72)
Total	2 392 670	-	2 392 670	2 384 392	(8 278)	-

Source:Department of Tourism Annual Report for 2019/20

The Department spent 99.9 percent of the total Working for Tourism (EPWP and Expanded Public Works Incentive Programme) budget, resulting in underspending of R326 000, which is allocated within Programme 3: Destination Development. The Tourism Incentive Sub-Programme within Programme 4: Tourism Sector Support Services, spent 98.5 percent of its allocated budget, resulting in underspending of R 2 207 million (including Compensation of Employees).

The Department reports that the virements between the main divisions were towards the Tourism Relief Fund. The Department and SA Tourism agreed to embark on a collaborative initiative to address the impact of the COVID-19 pandemic on the tourism sector. The collaboration involved the implementation of a tailored funding mechanism to unlock support for those affected within the tourism sector. The funding mechanism, known as the “Tourism Relief Fund” (TRF), offered funding support to qualifying tourism small micro and medium enterprises (SMMEs) that are in distress due to the pandemic. The Department transferred R100 million in the 2019/20 financial year to SA Tourism to fund the TRF. In quarter four National Treasury, in terms of section 43 of the Public Finance Management Act (PFMA), approved the shifting of the amount to Departmental Agencies and Accounts (Programme 2). The Department managed to spend 99.7 percent of its budget and only achieved 82.43 percent of its annual targets.

Service delivery performance for the 2019/20 financial year

The Department executes its mandate through four programmes, namely, Programme 1: Administration; Programme 2: Tourism Research, Policy and International Relations; Programme 3: Destination Development; and Programme 4: Tourism Sector Support Services.

Table 6: Overview of the Department’s performance for the 2019/20 financial year

Branches / Programmes	Achieved	Not achieved; significant work done	Not achieved; intervention required	Insufficient information to express opinion
Branches / Programmes
Administration	80.00% (8of10)	20.00% (2of10)	0.00% (0 of10)	0.00% (0 of 10)
Tourism Research, Policy and International Relations	91.67% (11 of 12)	8.33% (1 of 12)	0.00% (0 of 12)	0.00% (0 of 12)
Destination Development	91.30% (21 of 23)	0.00% (0 of 23)	8.70% (2 of 23	0.00% (0 of 23)
Tourism Sector Support Services	72.41% (21 of 29)	17.24% (5 of 29)	10.34% (3 of 29)	0.00% (0 of 29)
Total	82.43% (61 of 74)	10.81% (8 of 74)	6.76% (5 of 74)	0.00% (0 of 74)

Source: Department of Tourism 2019/20 Annual Report

The Department was pursuing 74 predetermined objectives in the 2019/20 financial year, with targets due for reporting varying over the four quarters of the year. The Department achieved 61 of 74 predetermined objectives planned for the year under review across the four Programmes. The unmet targets relate to postponements, resulting from the national lockdown occasioned by the outbreak of the COVID-19 pandemic. Some of the unmet or partially met targets relate to delays in procurement processes and learner drop-outs from capacity building programmes. These include delays in procuring contractors for both the Leopard Trail in the Baviaanskloof and for Shangoni Gate. In addition, the Tourism Equity Fund was not launched due to delays in the finalisation of the concept proposal. Further elaboration on the achievement and non-achievement of these targets is discussed below.

6.1.3 Programme performance

The performance across the four Programmes was as follows:

6.1.3.1 Programme: Administration

The purpose of this programme is to provide strategic leadership, management and support services to the Department.

Table 7: Programme 1- Administration

Total targets set	10
Targets achieved	8 (80%)
Targets not achieved	2 (20%)
Budget allocated	R288 274 million
Budget spent	R287 323 million (99%)
Over expenditure	R951 000

The Department performed relatively well under this programme in delivering on eight of the 10 identified targets. Unmet targets relate to female representation at senior management level as a result of resignations or retirement. The Department indicated that it will be more deliberate in its recruitment processes by appointing suitably qualified female candidates.

The Department only met 95 percent of its target on the Workplace Skills Programme. This was as a result of employees not being able to attend a course, offered by the University of Pretoria, due to a reduction in the number of interested participants from other organisations. The University indicated that it would not be feasible for it to teach less than the required 25 participants for the course. The Department reported that the course, which is on Analysing Financial Statements, will be undertaken through a digital platform by the interested departmental officials.

The Department reported that it exceeded its target on its procurement of goods and services from small micro and medium enterprises (SMMEs). The Department spent 59.52 percent (29.52% more) than the minimum target of 30 percent, procuring goods from level 1-5 B-BBEE compliant service providers. The Department is to be commended for exceeding its target for employing people with disabilities, with representation currently at 4.3 percent against a minimum annual target of 3 percent. This trend is a continuation of the previous financial years’ performance on this target. This speaks to the Department’s attempts at creating an inclusive working environment for people with disabilities.

6.1.3.2 Programme 2: Tourism Research, Policy and International Relations

The purpose of this programme is to enhance the strategic policy environment, monitor the tourism sector’s performance and enable stakeholder relations.

Table 8: Programme 2: Tourism Research, Policy and International Relations

Total targets set	12
Targets achieved	11 (91.7%)
Targets not achieved	1 (8.3%)
Budget allocated	R1 419 142 billion
Budget spent	R1 419 060 billion (99%)
Under expenditure	R81 000

The Department performed very well under this programme, as it only has one unmet target out of the 12 identified. The Department continues with its endeavours to provide relevant data through its monthly, quarterly and annual tourism performance reports on the country’s tourism sector performance, information which is critical for both local stakeholders and potential investors.

The Department produced a report evaluating the impact of its capacity-building programmes. The programmes evaluated included: Hospitality Youth Programme, Blue Flag Programme, Tourism Safety Monitors, Wine Service Training Programme, Executive Development Programme and Tourist Guiding Programme. The purpose of the evaluation was to ascertain the extent to which the intended objectives and outcomes of the capacity-building programmes were achieved. A significant portion of the evaluation was the analysis of the budget spent towards the various programmes, the competitiveness within the current workforce on human capacity development, and creation of employment opportunities for the South African youth within the tourism sector. This report is important in determining the return on investment of these programmes, especially with the number of challenges that have been encountered in their implementation over the previous years.

The Department reported that it was unable to host the Tourism Research Seminar, which is a platform used to disseminate and discuss research findings by universities that are in partnership with the Department. This was as a result of lockdown regulations prohibiting public gatherings. To make up for this, a webinar was hosted within the 2020/21 financial year.

6.1.3.3 Programme 3: Destination Development

The purpose of the programme is to facilitate and coordinate tourism destination development.

Table 9: Destination Development

Total targets set	23
Targets achieved	21 (91.3%)
Targets not achieved	2 (8.7%)
Budget allocated	R430 338 million
Budget spent	R430 011 million (99.9%)
Under expenditure	R327 000

The Programme was allocated R430 338 million in the 2019/20 financial year, the bulk of which (R376 511 million or 87.5%) was allocated to the Working for Tourism sub-programme. Working for Tourism consists of the Expanded Public Works Programme (EPWP) and Expanded Public Works Incentive Programme. The Department was able to achieve 21 of the 23 identified targets as depicted in Table 9. The destination development programme includes the enhancement of both tourism products and destinations aimed at increasing geographic spread and combating seasonality. Effective destination development provides visitors with options and provides opportunities for niche markets, which are important for destinations on the periphery of urban spaces.

The following master plans have been completed: Port Nolloth to Hondeklipbaai (NC); Sutherland to Carnarvon (NC); Orange River Mouth to Vioolsdrift (NC); and Port St Johns to Coffee Bay (EC). These projects fall under the Operation Phakisa programme. The finalisation of the master plans means that the Department can engage with the relevant stakeholders, such as the local municipalities, tourism authorities and potential funders on the implementation of the identified projects in these plans. The Department reported that the budget resort network and brand concept has been completed. This is an important initiative for the revival of underutilised budget and municipal resorts that can play a significant role in job creation, entrepreneurial growth and domestic tourism.

Of the fifteen destination enhancement initiatives, targets were not met for two of the initiatives. The target for the construction of the Leopard Trail in Baviaanskloof was not met. The Department reported that even though a contractor has been appointed, construction is yet to commence. Delays were also experienced as a result of the national lockdown. The second initiative relates to the appointment of a contractor for Shangoni Gate. Shangoni Gate entails the construction of a gate into Kruger National Park via Muyexe village near Giyani in Limpopo Province, making it the shortest route to the park via the R81. When complete, the project will comprise of the Shangoni visitors’ entrance gate, reception facility, picnic site and camping sites. The Department reported that the engineer appointed to manage the implementation of the project resigned in February 2020, thus affecting the appointment of the project’s contractor. A consulting engineering firm has since been appointed in June 2020. Reporting on this project is ongoing over the medium term and is included in the Department’s annual performance plan till the 2021 financial year. The Committee will follow up on implementation.

The annual target for the creation of 4 331 full-time equivalent (FTE) jobs was met. However, the Department overstated its achievement by stating that it exceeded the target by 288 when in actual fact this is only by 227. According to the Department, more participants were taken into training programmes during the year to manage the dropout rate of participants.

6.1.3.4 Programme 4: Tourism Sector Support Services

The purpose of this programme is to enhance transformation, increase skill levels and support the development of the sector to ensure that South Africa is a competitive tourism destination.

Table 10: Programme 4: Tourism Sector Support Services

Total targets set	29
Targets achieved	21 (91.3%)
Targets not achieved	8 (27.5%)
Budget allocated	R254 916 million
Budget spent	R247 998 million (97.3%)
Under expenditure	R6 918 million

Table 10 indicates that the Department achieved 21 targets of the 29 identified and spent 97.3 percent of its budget under this programme. The Department reported that no deviations were encountered with its target of implementing five incentive programmes for the financial year. However, this is difficult for the Committee to assess, as no quantitative indicator is provided in the Annual Performance Plan per incentive programme to establish whether the numbers achieved are in line with the Department’s overall targets and timelines. An example is the approval of only six applications for the Tourism Transformation Fund. Of the R40 million set aside for the programme, only R2 million was spent during the financial year. While recognising that the fund is managed by the National Empowerment Fund and its distribution is dependent on their capacity and systems; a more efficient way has to be investigated and established to increase the reach of this fund to deserving applicants and tourism products. The target on the implementation of the Tourism Equity Fund (TEF) was not achieved. Delays were experienced with the finalisation of the concept proposal. Both funds are targeted at transformation of the tourism sector but the pace of their implementation is of concern.

The Department partially met its ongoing target of domestic tours targeted at designated groups such as the youth, the elderly and people with disabilities – designed to encourage local travel among communities. For the 2019/20 financial year, the Department was unable to conduct activations with the youth due to precautions taken with the increase in COVID-19 infections. Activations planned for the month of March with the groups had to be postponed until after the national lockdown. The target on developing two incubators off-site, specifically the Tour Operators Incubator and Innovation Incubator, was also not met. A service provider was not appointed in time for the tour operators’ incubator and the service level agreement was not finalised for the innovation incubator.

The target on completing a feasibility study of community-based enterprises in communities around five national parks was also partially completed. Feasibility studies for both Augrabies and Addo Elephant National Parks were not finalised, as the Department extended the period for the submission of the report by the service providers to ensure that the study is substantial.

Whether the target on the Hospitality Youth Programme targeting 3 900 unemployed youth was met is not clear. The Department indicates that 3 650 students enrolled in 2018 and only 788 graduated in 2019. The reduced 3 650 results from 250 participants from the Free State province who could not be enrolled due to the COVID-19 pandemic. As at 31 March 2020, 1 884 youth remained in the programme with an estimated 978 participants having dropped out of the programme or obtained other employment. In quarter two, the Department reported that the project in the Free State was under review and that both the service level agreement and business plan had been finalised.

The annual target on employing 1 500 youth in the Food Safety Programme was not met. The Department reported that it was unable to procure a suitable supplier to implement the programme. The lack of implementation of the programme dates back to the 2018/19 financial year. The Department reported that three of the four planned capacity-building initiatives for the Women in Tourism (WiT) Programme were not implemented. Identified partnerships for the implementation of the project did not materialise as planned. The Department indicated that it will budget for the programme on its own to avoid reliance on external parties. In addition, the target for the Mentorship Pilot Programme was also not achieved, as the programme was not implemented. The Department aims to implement the programme virtually during the 2020/21 financial year.

South African Tourism 2019/20 Service delivery performance

The financial and non-financial performance for SA Tourism in the period under review was as follows:

Financialperformance

The Entity receives approximately 83 percent of its annual budget from Government grants and subsidies, and 9 percent from the private sector through the Tourism Marketing South Africa (TOMSA) levy allocated through the Tourism Business Council of South Africa (TBCSA). The remaining 8 percent relates to income from exhibitions, such as Indaba and Meetings Africa (5%), grading fees (2%) and sundry income (1%). For the period under review, the Entity received R1 208 billion in government grants and subsidies. Voluntary TOMSA levies totalled R121.5 million, up from the R116.8 million received in the 2018/19 financial year. Grading revenue collected during the year under review marginally increased from R20.65 million in 2018/19 to R21.74 million in 2019/20. With the appropriate incentives to the private sector, both the revenue from grading and the TOMSA levy can be increased to further boost the Entity’s budget.

Table 11: Budget and expenditure summary for 2019/20

	2018/19			2019/20
Programme	Budget (R’000)	Actual Expenditure	(Over) / Under Expenditure	Budget (R’000)	Actual Expenditure	(Over) / Under Expenditure
1. Corporate Support	132 271	158 725	(26 454)	130 023	152 190	(22 167)
2.Business Enablement	85 929	85 929	-	80 730	79 059	1 671
3. Leisure Tourism Marketing	1 026 270	1 049 171	(22 901)	1 005 446	960 976	44 470
4. Business Events	129 287	129 287	-	180 068	178 855	1 213
5. Tourist Experience	65 807	65 807	-	102 031	77 021	25 010
Total	1 439 564	1 488 919	(49 355)	1 498 298	1 448 101	50 197

Source: South African Tourism Annual Report for 2019/20

Table 11 shows that the Entity had a budget allocation of R1 498 298 billion for the 2019/20 financial year, with expenditure amounting to R1 448 101 billion. The Entity underspent its 2019/20 budget allocation by R50 197 million, while underperforming by 38 percent in respect of set performance targets.

The reasons for the variances per programme are as follows:

Programme 1– the 17 percent over-expenditure is due to accounting for non-cash balance as part of the overall programme expenditure, i.e. translation of foreign financial transactions into presentation currency, property, plant and equipment depreciation and amortisation of intangible assets.

Programme 2– the 2 percent variance is due to suspension of fieldwork linked to the departure survey as a result of COVID-19 in quarter four.

Programme 3– the variance is due to a decision to suspend extensive externally focused marketing activities as a result of the impact of COVID-19 on the tourism sector. The Entity made a tactical decision to keep the brand alive through minimum investment in social media marketing.

Programme 4– the variance is due to the Entity no longer participating at the Internationale Tourismus-Börse (ITB) Berlin, one of its strategic exhibition platforms, that was cancelled in February 2020 due to COVID-19.

Programme 5 – the Entity made a decision to suspend all media and trade hosting during the global pandemic. The variance is due to no hosting activities and trade training taking place during this period.

6.2.2 Performance against the predetermined objectives

The Entity executes its mandate through five programmes, namely, Corporate Support, Business Enablement, Leisure Tourism Marketing, Business Events and Tourist Experience.

Table 12: Performance targets per main programme 2019/20

Programme	No of targets	No. achieved	Partially achieved	Not achieved
Corporate Support	6	4	-	1
Business Enablement	4	3	1	-
Leisure Tourism Marketing	16	10	2	4
Business Events	7	5	1	1
Tourist Experience	4	1	-	3
Total	37	23	4	10

Source: Adapted from South African Tourism Annual Report for 2019/20

In the 2019/20 financial year, the Entity was able to achieve 23 (62%) of its 37 identified KPIs, spread across its five delivery Programmes. The Entity did not achieve 10 (27%) of its KPIs and indicated that with the remaining 4 (11%) KPIs, whilst also not achieved, significant work has been done towards their accomplishment. Table 12 depicts the performance against the predetermined objectives across the five Programmes.

Overall, the Entity underperformed against its predetermined objectives for the 2019/20 financial year. A significant number of the targets not achieved were as a result of precautionary steps taken in response to the outbreak of the COVID-19 pandemic. The Entity once again did not comply with the requirements for its B-BBEE status, resulting in the attainment of a Level 8 certificate instead of Level 4. The performance on the target for the grading of accommodation establishments has not been achieved for the past three financial years. The target on international arrivals was also not met, with a number of cancellations from source markets resulting from the outbreak of the coronavirus. While inbound travel struggled, domestic tourism more than doubled due to affordable and deal-driven travel packages.

Programme performance

The Programme performance for the year under review was as follows:

Programme 1: Corporate Support

The purpose of this programme is to provide support to the organisation and ensure compliance with statutory requirements.

Table 13: Programme 1 – Corporate support

Total targets set	6
Targets achieved	4 (66.6%)
Targets not achieved	2 (33.3%)
Budget allocated	R130 023 million
Budget spent	R152 190 million (117%)
Over expenditure	R22 167 million

Table 13 depicts that the Entity only achieved four of its six targets, yet overspent its allocated budget. The Key Performance Indicators (KPIs) under this programme include the staff satisfaction score, vacancy rate, compliance with employment equity and audit requirements. The Entity submitted all the required documentation to both the Department of Labour and Auditor-General’s office, as per compliance requirements.

One of the targets not achieved in this programme relates to the maintenance of the vacancy rate, which was not met, with a deviation of 14 percent to the planned target. Achievement of the vacancy rate was affected by resignations, implementation of the Entity’s organisational design process and delays in recruitment at the South Europe office due to international labour law processes.

The target on the Entity’s B-BBEE level compliance was once again not met. Instead of meeting the planned Level 4 target, which indicates full compliance, the Entity attained a Level 8 status, which is a downgrade. In 2018/19 the Entity reported a similar occurrence, stating that the poor scoring was as a result of the socio-economic development requirement, which was due to a change in the calculation for social responsibility initiatives. However, for this year the Entity reported delays in the finalisation of the report by the appointed supplier.

Programme 2: Business Enablement

The purpose of this programme is to ensure strategy development and integration with business performance monitoring, governance and evaluation. It provides centralised research insights and analytics to support core business and provide an open source for information sharing.

Table 14: Programme 2 - Business Enablement

Total targets set	4
Targets achieved	4 (75%)
Targets not achieved	1 (25%)
Budget allocated	R80 730 million
Budget spent	R79 059 million (117%)
Over expenditure	R1 671 million

The Entity exceeded its target on the number of quarterly stakeholder meetings attended. This is important, as these platforms allowed the Entity to align its strategic plan with those of relevant stakeholders in the sector. Another target achieved is on the publishing of four quarterly market insight reports, which are available on the Entity’s website.

The Entity also developed a performance indicator dashboard during the financial year. The dashboard is designed to provide data on performance against targets for some of the following key performance indicators: international tourist arrivals, tourist foreign spend, domestic tourism trips, domestic direct spend and brand performance. The dashboard is active and can be accessed from the Entity’s website. However, the Entity was unable to launch the dashboard due to a potential conflict of interest with the National Tourism Visitor Information System (NTVIS).

Programme 3: Leisure Tourism Marketing

The purpose of the programme is to provide destination tourism marketing for leisure tourists for both international and domestic markets.Table 15 depicts that the Entity only achieved 10 (62.5%) of its planned 16 targets under this programme, whilst spending 96 percent of its allocated budget. The Entity was unable to meet its targets on both international tourist arrivals and foreign direct spend.

Table 15: Programme 3-Leisure Tourism Marketing

Total targets set	16
Targets achieved	10 (62.5%)
Targets not achieved	6 (37.5%)
Budget allocated	R1 005 446 billion
Budget spent	R960 976 million (96%)
Under expenditure	R44 470 million

With regard to the number of international tourist arrivals, the Entity targeted 11.4 million arrivals, whilst only 10 million tourists came into the country. This unmet target resulted from: travel cancellations, about 270 000 in the month of September due to attacks on foreign nationals; and the banning of travel from high-risk countries into the country due to the outbreak of COVID-19. At the end of the financial year, the Entity was not able to meet its target for total tourist foreign direct spend (TTFDS), at R75 billion against a target of R90.7 billion.

The Entity met its annual target on impressions from digital channels, which entails distributing media information through digital channels. One of the targets not achieved relates to increasing the geographic spread of international arrivals. This was as a result of a decrease in inbound arrivals and a lack of implementation of the provincial Memorandum of Understanding (MoUs) aimed at promoting travel to each province. The Entity reported that the targets on brand positivity and brand awareness were not achieved. This was as a result of a change in brand communication agencies, resulting in limited coverage of the Entity’s brand campaigns. The exploration of digital platforms for brand awareness activities might provide the Entity with alternative opportunities in addressing this challenge.

The number of domestic holiday trips for the year increased significantly from the anticipated 2.7 million, with the annual target exceeded at 7.3 million. Domestic spend also increased significantly to R18.9 billion against the target of R8.1 billion. This substantial growth resulted from the number of deal-driven campaigns that were launched by the Entity and private sector, such as Sho’t Left and Travel Week, in turn increasing demand for domestic travel. SATourism was unable to achieve its target on the seasonality index of domestic tourists. At 37.1 percent, against an annual target of 28.5 percent, the index showed an inconsistency in travel patterns throughout the year. There was a high number of domestic travel over certain peak periods and the index seeks to measure consistent travel throughout the year.

6.2.3.4 Programme 4 – Business events

The purpose of this Programme is to market South Africa as a business events destination.

Table 16: Programme 4 - Business Events

Total targets set	7
Targets achieved	5 (71.4%)
Targets not achieved	2 (28.5%)
Budget allocated	R180 068 million
Budget spent	R178 855 million (99%)
Over expenditure	R1 213 million

Table 16 shows that the Entity achieved only five (71.4%) of its planned seven targets and spent 99 percent of its allocated budget for the programme. The Entity exceeded its targets on the number of events held in the country, including the number of delegates in attendance. Business tourism is a lucrative market for South Africa and continues to offer opportunities beyond the urban ‘golden triangle’ of Cape Town-Johannesburg-Durban. This was one of the areas for concern highlighted in the 2018/19 Auditor-General’s report, where the Entity was required to provide evidence of the accuracy on the number of events and delegates hosted in the country. According to the Entity, a company has been appointed to collect this information.

The Entity reported that it was not able to achieve its target on the number of meetings held at Meetings Africa. Due to the short duration of the event, two days, not all the anticipated meetings could happen. Another target not achieved relates to the Africa Travel Indaba. Due to the national elections and the change of dates for the event, some exhibitors and buyers cancelled, in turn reducing the number of planned meetings.

Programme: Tourist experience

The purpose of this programme is to deliver a quality experience expected by international and domestic tourists by grading establishments, developing product capacity and creating itineraries for tourists.Table 17 shows that the Entity only achieved one (25%) of its planned four targets and spent 75 percent of its budget for the programme. Performance under this programme, specifically on grading, has posed a challenge for the Entity over the past three years, with it consistently failing to meet its targets relating to this indicator.

Table 17: Programme 5 - Tourist Experience

Total targets set	1
Targets achieved	4 (25%)
Targets not achieved	3 (75%)
Budget allocated	R102 031 million
Budget spent	R77 021 million (75%)
Over expenditure	R25 010 million

The key challenge has been increasing the number of graded establishments and, in turn, graded rooms. Against a target of 5 500, only 5 173 accommodation establishments were graded. The Entity reported that cancellations were as a result of a lack of demand, a lack of value recognition in the voluntary grading process and expensive fees. This in turn affected the target for the number of graded rooms.

The target on training frontline staff and officials on the Welcome Campaign was also not met. According to the Entity, the final training was planned for March 2020 and was cancelled as a precautionary measure in response to the early threats posed by the COVID-19 pandemic. Performance under this target has been highlighted as an audit outcome by the office of the Auditor-General. According to the Auditor-General, the achievement of 518 officials attending the training could not be verified.

Quarterly expenditure for 2020/21

This following information provides financial expenditure for the first quarter of the 2020/21 financial year. This is critical in establishing whether there is improvement from the previous year’s performance.

Department of Tourism

In the Quarter 1 of the 2020/21 financial year the Department achieved 48(76.19%) of the 63 predetermined objectives set for the quarter. Of the 63 targets identified, the Department did not achieve seven (11.11%) where significant work had been done and eight (12.70%) required intervention. The performance of the Department against the predetermined objectives is depicted in Table 18.

Table 18: Department’s Quarter 1 performance for the 2020/21 financial year

Programme	Targets	Achieved	Not Achieved	% Achieved	% Not Achieved
Administration	17	14	3	82.35%	17.65%
Tourism Research, policy and International Relations	17	16	1	94.12%	5.88%
Destination Development	9	9	0	100%	0%
Tourism Sector Support Services	20	9	11	76.19%	23.81%

Source: Own calculation adapted from Department of Tourism 2020/21 Quarter 1 Report

In terms of financial performance, the Department spent R329 653 million (13%) of the R2 480 984 billion budget allocated as presented in Table 19. The 2020/21 Quarter 1 report is made against the backdrop of the budget adjustments that were made to the Tourism Vote budget allocations. In the wake of the COVID-19 pandemic, R200 million and R30 million were made available for the Tourism Relief Fund and the Tourist Guides Relief Fund respectively. An amount of R1 billion was also adjusted downwards from the initial appropriation of R2.5 billion.

Table 19: Expenditure for Quarter 1 of 2020/21

Programme	2020/21 ENE Allocation (R’000)	Expenditure (R’000)	Expenditure as % of ENE Allocation	Variance from ENE Allocation (R’000)	% Variance from ENE Allocation
Administration	308 593	67 081	22%	241 512	78%
Tourism Research, Policy and International Relations	1 391 382	158 327	11%	1 233 055	89%
Destination Development	485 897	51 386	11%	434 511	89%
Tourism Sector Support Services	295 112	52 859	18%	242 253	82%
TOTAL	2 480 984	329 653	13%	2 151 331	87%

Source:2020/21 2019/20 Quarter 1 Report

This caused the Department and South African Tourism to remove some of the initially planned activities such as marketing, various incentive schemes, some training programmes and the Working for Tourism Expanded Public Works implementation projects. Expenditure patterns against the revised allocations, aligned to the 2020 Supplementary Adjustment Budget, will only be reflected in the reporting for Quarter 2.

6.3.2 South African Tourism

SA Tourism had a total of 26 key performance indicators (KPIs) for the 2020/21 financial year. In Quarter 1, the Entity was pursuing a total of 19 predetermined objectives, with the remaining being annual targets. The Entity was able to achieve 18 (95%) of the planned predetermined objectives, with one (5%) target not achieved.

Table 20: Expenditure for Quarter 1 of 2020/21

Programme	Annual Budget (R’000)	Expenditure Forecast by 30 June 2020 (R’000)	Expenditure (R’000)	% of Expenditure on Total Budget	% Expenditure on Forecasted expenditure to Date
Corporate Support	111 445	28 567	32 748	29%	115%
Business Enablement	33 807	6 114	6 157	18%	101%
Leisure Tourism Marketing	226 382	76 121	91 621	40%	120%
Business Events	23 291	6 804	6 937	30%	102%
Visitor Experience	44 061	6 301	6 502	15%	103%
TOTAL	438 986	123 908	143 965	33%	116%

Source: 2020/21 Quarter 1 Report

With regard to financial performance, the Entity had spent R143 965 million (33%) of the R438 986 million budget allocated, at the end of Quarter 1, having projected an expenditure of R123 908 million (about 28%) for the quarter. The Entity had an over expenditure of R20 057 million (about 16%) more than forecast for the quarter.

Key reported achievements

The following are some of the key achievements in the period under review:

The R200 million Tourism Relief Fund provided for the sector to provide relief in mitigation of the negative impacts of the COVID-19 pandemic.
The R30 million provided for the registered freelance tourist guides.
Facilitated the development of the tourism sector protocols in assisting the safe opening of the tourism sector according to the COVID-19 Risk-Adjusted Strategy.
Published the Tourism Sector Recovery Plan for public comments.
Approved a total of 96 applications during the 2019/20 financial year for Market Access Support Programme, 57 of which had to be cancelled as a result of the cancellation of exhibitions due to the outbreak of COVID-19.
Approved 2 765 discounts for Tourism Grading Support Programme.
Approved 27 applications for the Green Tourism Incentive Programme.
Approved 6 applications for the Tourism Transformation Fund.
The final Tourism Equity Fund concept document was approved in February 2020 for an initial planned launch in 2020/21. The planned launch has however been postponed and a new launch date will be announced in due course.
Created 4 558 full-time equivalent jobs through the Working for Tourism Programme (WfT). An additional 227 jobs were created over the planned target.

The Minister in her capacity as the Executive responsible for tourism:

Participated in the development and approval of the Southern African Development Community (SADC) Tourism Programme 2020-2030.
Was part of the process of the development of the African Tourism Strategic Framework 2019-2028 (ATSF), which was endorsed by the African Union Executive Council (ATSF) during its Ordinary Session held in Niamey, Niger in July 2019. The ATSF seeks to provide a strategic action plan geared towards development of a competitive, sustainable and integrated tourism industry in Africa.
Took part in the UNWTO General Assembly held in Saint Petersburg, Russia in September 2019, where the UNWTO Agenda for Africa 2030 – Tourism for inclusive growth, was endorsed.
Participated in the 3rd Ministerial Round Table held alongside the Tourism EXPO Japan in Osaka in October 2019, and represented South Africa at the G20 Tourism Ministers’ Meeting held in Kuchan, Hokkaido.
Hosted a successful Tourism Breakaway Session on Wednesday, 6 November 2019 during the President’s South Africa Investment Conference, which took place from 5-7 November 2010 in Sandton. The tourism and hospitality category pledged investment to the value of R36,1 billion, which amounted to 9,9 percent of the total pledges amounting to R363 billion.

Non-financial Audit outcomes and steps taken to address adverse audit findings

The Committee is satisfied with the remedial action taken by both the Department and SA Tourism in addressing the Auditor-General’s findings. However, the Committee is of the opinion that more still needs to be done and is making further recommendations in this report to improve on financial and non-financial performance.

In relation to the Department, the fruitless and wasteful and irregular expenditure was incurred regarding the EPWP Infrastructure projects.The Director-General (DG) instituted an independent investigation on these projects. The investigation report was received in June 2020.The DG has initiated the recommendations as per the investigation report.The Committee will follow-up on the recommendations during 2020-21 audit.

Previous year issues

The following findings were made in the previous audit period:

The internal control deficiencies relating to the qualification areas of immovable tangible capital assets (EPWP Infrastructure projects) and fruitless and wasteful expenditure were as follows:
- The Department did not have adequate capacity and appropriate competencies to ensure that appropriate oversight is exercised on the EPWP Infrastructure projects;
- Inadequate project management and sufficient records were not kept;
- There were no detailed feasibility studies performed before approval of infrastructure projects;
- There were no regular site visits being conducted during the construction of the infrastructure projects as part of project management;and
- Implementing agents did not follow procurement prescripts when procuring goods and services on behalf of the Department.

Process management followed to address the qualification matter from prior year

The Department has addressed the audit finding through the following actions:

Appointed consulting engineers who conducted onsite audits and reviewed progress reports against what was delivered.
Utilised the engineers’ reports to adjust the immovable tangible capital assets balance and quantified the fruitless and wasteful expenditure relating to those projects.
Requested guidance from National Treasury on the handover of infrastructure assets in terms of section 42 of the PFMA. This guidance assisted the Department specifically to comply with section 42 of the PFMA.

6.5.3 Preventative controls

The Department put the following preventative mechanisms in place:

Adequate reviews on accurate recording of infrastructure projects were implemented. Training was provided on SCM prescripts to implementing agents.
The Department received approval from National Treasury to approach DBSA to assist with project management of these infrastructure projects.
The physical verification of the projects was conducted by the quantity surveyors.

In relation to SA Tourism, an increase in irregular expenditure in the prior year and an investigation on the irregular expenditure has been conducted by the internal auditors. The investigation is completed and the report has been discussed with management and was tabled at the audit committee. No financial loss was identified.

Other service delivery performance findings

The following service delivery findings are based on the interactions with other organisations that have an impact on the service delivery environment ofthe Department and SA Tourism.

The Committee learnt from the KwaZulu-Natal Women in Tourism Chapter that the situation has deteriorated at Howick Falls. The Committee had reported in the 2019 Budget Review and Recommendation Report about an oversight visit undertaken to Howick Falls and Mpophomeni in KwaZulu-Natal on the 26th September 2019. The Committee had observed that there had been a decline in tourist numbers in the area over the past few years. The decline was attributed to, amongst other things, crime and grime, muggings, drunk driving, drug dealings, general lack of maintenance, car spinning, and many other public indecent behaviours at the Howick Falls. Consequently, there was general lawlessness, and businesses reported declining turnovers. The Committee received responses from the Umngeni Local municipality and the Department of Tourism. The Committee still awaits responses from the UMgungundlovu District Municipality and the province. The outstanding reports make it difficult for the Committee to have a comprehensive picture of the progress made.
In the interaction with stakeholders, the Committee learnt about the threat posed by captive lion breeding, animal interaction and canned hunting to the tourism sector in South Africa. The Committee will make a follow up on this matter.
In the interaction with Brand South Africa, the Committee noted that the government was in the process of reconfiguring all the government entities. This has a potential effect to the way SA Tourism does its business. The Committee will keep abreast of the developments in that regard.
The interaction with the Board of Airlines of South Africa highlighted a number of issues that need urgent attention. Some of these issues include the factors that affect airlift for South Africa; the need for ratification of the Yamoussoukro declaration to facilitate the open skies policy in Africa; the importance of the national airline in promoting trade and tourism; the need for coordination amongst various stakeholders to improve airlift for South Africa; and the factors that determine the cost of flying.

Relevant external research assessing performance of the Department

There was no direct external research that assesses the performance of the Department by other state institutions considered for this report. The information provided herewith relates to the assessment of the future performance of the tourism sector in relation to the COVID-19 pandemic.

The Risk-Adjusted Strategy

At the time of drafting this report the country had been put under Level 1 of the Risk-Adjusted Strategy according to the Government Gazette dated 17th September 2020 and amended on the 11th November 2020. This has many implications for the tourism sector, albeit positive.The National Coronavirus Command Council (NCCC) has announced that the whole country will move to Level 1 of the Risk Adjusted Strategy from 21 September 2020. The implications are that:

All domestic interprovincial travel will continue for business and leisure purposes.
International travel movement had opened from 01 October 2020 subject to further regulations and conditions.
On the 11th October 2020 international travel had been opened to countries subject to the necessary health protocols and the presentation of a negative COVID-19 certificate. This will go a long way in assisting the tourism and hospitality sectors to plan for recovery.
Domestic flights for business and leisure purposes are available from all commercial airports in South Africa.
Gatherings capped at 250 pax for indoor and 500 for outdoor events.
All hotels and accommodation establishments are allowed to operate within the stipulated legislation.
The regulations for sale of alcohol and at retail outlets had been amended to normal trading hours.
Professional services such as tourist guides, tour operators, travel agents and tourism information officers including training of nature guides and other related services can continue in their current environments.
All restaurants, fast food outlets and coffee shops; hotels, lodges, bed and breakfast, time share facilities, resorts and guest houses, conference and meeting venues including casinos will provide detailed training for their staff and inform staff of their responsibility to advise the employer if they are tested positive for COVID-19 or have been in contact with someone who is COVID-19 positive.

COVID-19 presents an opportunity for tourism transformation

The United Nations World Tourism Organisation’s policy brief entitled “COVID-19 and Transforming Tourism” was published in August 2020. This policy brief entails that as travel restarts in some parts of the world, limited connectivity and weak consumer confidence, the unknown evolution of the pandemic and the impact of the economic downturn present unprecedented challenges to the tourism sector. Supporting the millions of livelihoods that depend upon a sector affected by months of inactivity, and building a sustainable and responsible travel experience that is safe for host communities, workers and travellers are key to accelerating recovery. This crisis is also an unprecedented opportunity to transform the relationship of tourism with nature, climate and the economy. It is time to rethink how the sector impacts the natural resources and ecosystems, building on existing work on sustainable tourism; to examine how it interacts with societies and other economic sectors; to measure and manage it better; to ensure a fair distribution of its benefits and to advance the transition towards a carbon neutral and resilient tourism economy. A collective and coordinated response by all stakeholders can stimulate the transformation of tourism, together with economic recovery packages, and investments in the green economy.

The implications ofthis policy brief is for the Department and SA Tourism to rethink the way they plan, develop and market tourism in South Africa. This has telling implications for inclusive growth, particularly the involvement of the Villages, Townships & Small Dorpies, which are at the heart of the Committee’s transformation agenda.

Finance and Service delivery performance assessment

Deducing from the quarterly reports, the Department had the following expenditure patterns which had an effect on service delivery:

Expenditure - the Department spent R2 384 billion of the R2 392 billion appropriated for the 2019/20 financial year. This accounts for 99.7 percent expenditure of the available budget. This is consistent with the expenditure in the previous financial years.

Performance against the predetermined objectives - the Department was pursuing 74 predetermined objectives (targets) in the 2019/20 financial year. The Department achieved 61 of 74 predetermined objectives planned for the 2019/20 financial year. The achievement of predetermined objectives was at 82.43 percent, with 10.81 percent not achieved but significant work done and 6.76 percent not achieved with intervention required. The achievement of planned targets is not commensurate with the budget spent, as 99.7 percent of the budget was spent to achieve 82.43 percent of targets.

Virements - the National Treasury, in terms of section 43 of the Public Finance Management Act (PFMA), No1.of 1999, states that the Accounting Officer of the Department may utilise a saving in the amount appropriated under a main division within a vote towards the defrayment of excess expenditure under another main division on condition that it does not exceed 8 percent of the amount appropriated under that main division. Accordingly, the National Treasury approved the shifting of R100 million to Departmental Agencies and Accounts in order to fund the Tourism Relief Fund administered by South African Tourism in response to the economic impact of the COVID-19 outbreak.

Underspending - of the 99.7 percent budget spent in the 2019/20 financial year, the Department, in Programme 1incurred the underspending of R951 000.00 as a result of delays in purchasing of IT equipment as the replacement of servers and mainframes could not be finalised prior to financial year end. In Programme 2 an underspending of R82 000.00 was incurred due to cost containment measures implemented by the Department during the financial year. In Programme 3 an amount of R327 000.00 was incurred in the Expanded Public Works Programme due to a slight saving on capital projects funded by the programme. It is notable, however, that the Department spent 99.9 percent of the total Working for Tourism (EPWP and Expanded Public Works Incentive Programme). Programme 4 is the one which incurred the largest underspending of R6.9 million due to compensation of employees as influenced by the strict policies adhered to by the Department to reduce expenditure on salaries and wages.

Overspending - the Department did not incur any overspending in the period under review.
Irregular expenditure - the portfolio incurred an irregular expenditure of R58 million in the 2019/20, with R121 million incurred in the 2018/19 financial year. Of R58 million, an amount of R15.4 million represents non-compliance in 2019/20 whilst R43 million is expenditure relating to prior years. SA Tourism was the main contributor to irregular expenditure with the total of R49.96 million. The cause was that some of SA Tourism’s contracts were extended or modified without the approval of National Treasury as required by paragraph 9.1 and 9.2 of National Treasury Instruction note 3 of 2016/17 which was R43.01 million in 2018/19 and R94.4 million in 2019/20. With regard to the Department, the preference point system was not applied in some of the procurement of goods and services. This non-compliance was identified in the procurement processes by implementing agents on behalf of the Department amounting to R8.37 million in 2018/19 and R24.8 million in 2019/20.

Unauthorized expenditure - the Department had no unauthorised expenditure in the period under review.
Fruitless and wasteful expenditure - the Department incurred R14 000 in fruitless and wasteful expenditure in the year under review for flight amendments and no shows, which was subsequently recovered. This is a recurring challenge that needs to be addressed by the Department, and maybe level cases of fruitless and wasteful expenditure against the staff to curb this trend. The reduction is due to consequence management implemented on the fruitless and wasteful expenditure. In the 2018/19 financial year, an amount of R119.84 million was identified in the prior year for infrastructure projects. With a further R723 000 relating to interest and penalties and travel delays as a result of visa challenges, with a total of R120.5 million. In the current year, the Department investigated and quantified the fruitless and wasteful expenditure relating to infrastructure projects of prior years and this resulted in a prior period adjustment of R74 million. This was as part of the prior year action plan to address the qualification on completeness of FWE. The adjustedfruitless and wasteful expenditure for 2018/19 for infrastructure project is R193.84 million with a new total of R194.7 when adding the fruitless and wasteful expenditure for other reasons mentioned above. An amount of R778 473 (SA Tourism: R66 473 and Department: R712 000) related to interest and penalties and travel delays as a result of visa challenges.

The Department has initiated the implementation of the recommendations of the forensic audit. These include opening of cases with SAPS, initiation of the recovery processes through the Office of the State Attorney, and internal disciplinary issues as subsequent events after the reporting period. This was confirmed by the Auditor-General who reported that the Director-General instituted an independent investigation regarding the irregular, fruitless and wastefulexpenditure incurred on the Expanded Public Works projects. The Director-General had initiated the recommendations as per the investigation report. In terms of completion of the projects, the Department has secured the services of the Development Bank of Southern Africa to serve as an implementing agent for the Department.

Training and development - the expenditure increased by R81.442 million in the reporting period. This increase is due to an increase in the number of EPWP training projects funded by the Department.

Expenditure on agency and support/outsourced services - the expenditure increased by R171.464 million. From April 2019 the Department was instructed by National Treasury to allocate stipends paid to workers in the Expanded Public Works (EPWP) projects to this item. Previously this expenditure was classified as transfer payments to households.

Expenditure on contractors - the expenditure decreased by R111.099 million. This is attributable to a once of payment of R110 million for an EPWP maintenance project funded by the Department in 2018/19 that resulted in the expenditure for 2018/19 being significantly higher.

Increase in advertising expenditure - the expenditure increased due to an increase in the adverts related to marketing activities.

Maintenance expenditure - the Department was advised by Treasury to allocate maintenance expenditure on EPWP projects to Property payments. This resulted in a significant increase in this item in 2019/20.

Advance payments - the implementers for the Expanded Public Works Programme and Destination Development projects received prepayments for commencement of the projects.

Voted funds surrendered to the revenue fund/ unspent funds - the Department returned an amount of R8.3 million to the National Treasury. This was less than the R27 million surrendered in the 2018/19 financial year.

Staff debt - the Department reported a staff debt amounting to R613 000.00.

Roll-overs - no request for rollovers was submitted to the National Treasury.

Compliance with laws - the Auditor-General found a material non-compliance with key applicable legislation. Some of the bid documentation for procurement of commodities designated for local content and production, did not stipulate the minimum threshold for local production and content as required by the 2017 preferential procurement regulation 8(2).

Internal Controls - the Auditor-General identified internal control deficiency in the period under review. The Department compiled an Action Plan based on the audit report findings, however, they did not adequately monitor the existing action plan. This resulted in material non-compliance re-occurring in the current financial year.

The impact of the COVID-19 was certainly a factor in the non-achievement of targets. It should, however, be borne in mind that the COVID-19 pandemic hit the country during the last quarter of the 2019/20 financial year. By that time the Department and SA Tourism had already incurred non-achievement in the three quarters of the financial year. The non-achievement of the predetermined objectives has a negative impact on the mandate of the Department, particularly in contributing to the government outcomes. The effects of non-delivery on the planned targets have more negative impacts on the transformation of the sector, job creation, poverty alleviation and marketing of the country. The non-delivery by SA Tourism has the most detrimental impact as the Entity receives at least 53 percent of the budget appropriated to the tourism Vote but has struggled to surpass the 60 percent performance against its targets in the past two years. It is thus an imperative and obligation that the Committee will focus its oversight work on the financial and non-financial performance of the Department and SA Tourism to ensure an improved service delivery and fulfilment of the tourism mandate in South Africa.

KEY FINDINGS - COMMITTEE OBSERVATIONS AND RESPONSES

In the course of the oversight work for the period under review, the Committee made a myriad of observations that should be addressed by the Department and SA Tourism.

Generic observations with both the Department and SA Tourism

Technical issues

Repeat findings

The Committee observed that there was a recurrence of audit findings in both the Department and SA Tourism. These are attributable to the slow pace at which the audit findings were addressed. The Committee is, however, satisfied with the work done by both organisations in ensuring that the audit findings are addressed, thus preventing the repeat findings in the subsequent audits of the portfolio.

8.1.2 Irregular expenditure

The Committee noted that both organisations had irregular expenditures and that these could have been avoided as they related to matters that have been raised by the Committee previously. Nonetheless, the Committee acknowledges that irregular expenditure by the Department was not internally, but was caused by the preference point system not being applied by implementing agents on behalf of the Department. With regard to SA Tourism, the Committee noted that the irregular expenditure was incurred due to the three-year contracts that were extended for further two years due to the in-built extension clauses. The extensions were above the 15 percent threshold allowed by the National Treasury and required an approval, which was not granted. The Committee is satisfied with the mitigation as measures being undertaken by the Entity through engaging the National Treasury to condone the irregular expenditure after the independent investigations have revealed that there was no wrong doing, albeit the structure of the contracts which allowed for extensions. The Committee is also pleased that the Board has done away with the extension clauses and that this decisive leadership dispensed by the Board will prevent future irregular expenditure of the same nature.

Expenditure vs achievement of predetermined objectives

It was noted with concern that the trend for both organisationsis the expenditure that is close to 100 percent of the allocated budget whilst not performing well against the predetermined objectives. The Department spent R2 384 billion of the R2 392 billion appropriated for the 2019/20 financial year. This accounts for 99.7 percent expenditure of the available budget whilst 61 of 74 predetermined objectives were achieved accounting for 82.43 percent, with 10.81 percent not achieved but significant work done and 6.76 percent not achieved with intervention required.

SA Tourism spent R1.448 billion of the R1.498 available budget in the 2019/20 financial year. The total budget spending accounts for 97 percent of the available budget. However, the Entity achieved 23 out of 37 predetermined objectives and failed to achieve 14, amounting to 62.2 percent achievement planned targets whilst not achieving 37.8 percent. The Committee acknowledges that a substantial amount of work had been done on the targets that were not achieved. The Entity, for example, had planned and procured some services for the trade shows such as ITB in Berlin and Indaba in South Africa, and had done all the activations and secured meetings for the Meeting Africa event, but all these platforms were abruptly cancelled when the government gazetted travel restrictions to protect lives and livelihoods from the impact of the COVID-19 pandemic.

Procurement and contract management

The Committee has always raised concerns about procurement and contract management by the Department and SA Tourism. In addition to general project management principles, this matter has now been raised by the Auditor-General as a repeat finding. Both the Department and SA Tourism continue to struggle in these areas and the Committee has noted that this culminates in both organisations incurring negative audit findings and delaying implementation of critical projects by the Department. The Committee will pay a special oversight focus on these matters.

Vacancies

The Committee noted that both organisations had vacancies that were not filled. With regard to the Department, the Committee was satisfied that the post of the Deputy Director-General for Tourism Support Services was at an advanced stage. The interviews havebeen and concluded and the recruitment process was at a Cabinet level for the approval of the suggested candidate.

The Committee noted with concern the staff turnover rate at SA Tourism, with 13 people having resigned in the period under review. The Committee was, however, satisfied about the reasons of resignations being appointments with better opportunities elsewhere and the staff not resigning due to untenable labour conditions at SA Tourism. The Committee also noted that the Entity has put a moratorium on new appointments pending the rationalisation of public entities by the government, which might culminate in a recalibrated SA Tourism and may cause redundancy of some posts if the recruitment process was to go ahead. The Committee was, however, pleased that for job continuity, the Board was considering filling in the critical positions at SA Tourism.

8.1.6 New approach to tourism development

The Committee has adopted the new approach to tourism development and marketing which focusses on the Villages, Townships & Small Dorpies (VTSDs). The Committee took a deliberate decision to refer to Villages and not Rural Tourism as some rural areas have world class tourism products such as private game parks and lodges. The historical focus and concertation of tourism development and marketing to the Johannesburg, Durban, and Cape Town triangle has also been noted with great concern. The Committee is, therefore, of the view that future funding for the tourism sector should focus on the VTSDs. The Committee noted the inclusion of some projects in the VTSDs in the new five-year strategic plan and the 2020/21 Annual Performance Plans. However, these projects are not clearly pronounced and it not easy to follow them up for oversight purposes. There is a need for the Department and SA Tourism to clearly indicate all the projects implemented in the VTSDs per Programme/ Branch.

8.1.7 Model to determine employment trends

The COVID-19 has unsettled the tourism sector and had indelible impacts on the major performance indicators such as job creation. The Committee noted that the Department and South African Tourism have not implemented any modelling for the impact of COVID-19 to the potential job losses in the sector. By the end of the financial year, the Committee noted that the Department had reportedly seen no job losses as most companies had not yet laid off employees due to government assisting approximately 50 000 businesses through the Temporary Employee/Employer Relief Scheme (TERS), which meant they were able to assist about 600 000 employees due to relief fund. However, the TERS programme has come to an end and the Department needs develop a proper model to determine the impact of COVID-19 on job creation.

Observations with regard to the Department

Governance and operational issues

Legislative and policy environment

The Committee appreciated that the Minister has appointed a seven-member expert panel to review the current tourism policies and develop a policy direction for the tourism sector. The Committee noted that the panel comprises of experts with diverse knowledge in the sector and the economy and will review all the existing policies, provide guidance to the Minister over a twelve-month period, with a view to developing a new comprehensive and overarching tourism policy framework to guide the sector to new heights. The policy and legislative review is long overdue and the final product of the panel is eagerly awaited. The Committee urges the Minister to incorporate the policy shifts from voluntary but paid grading system to a compulsory but free grading system as communicated to the Department on various occasions. The Committee also expects that the new policy will encourage the expenditure of the appropriated tourism budget to Villages, Townships and Small Dorpies (VTSDs). It is also expected that, in general, the policy will drive inclusive tourism development and marketing that expedites transformation by bringing new entrants into the tourism value chain whilst protecting the existing establishments.

Budget allocation

The Committee is cognisant that the tourism sector has been identified as one of the growth sectors and economic pillars of South Africa. However, the National Treasury has constantly cited the fiscal situation as the reasons why the Tourism Vote cannot be appropriated more funding. The Committee is acquainted with the details of the current economic situation in the country and appreciates the constrained economic growth, including the downgrading of the South African economy by the rating agencies. However, the Committee is of the view that National Treasury should consider that the tourism sector has been the hardest hit by the COVID-19 pandemic. The sector needs to be vigorously marketed internally to facilitate the recovery. This means that the National Treasury should reimburse the R1 billion surrendered to the national fiscus when the world imposed travel restrictions. This budget is most critical in ensuring that the country is marketed to defend the market share and take advantage of the new norm in travel as influenced by the COVID-19.

8.2.3 Projects implemented to shield the sector from the impact of the pandemic

The Committee noted that the Department began the implementation of the Tourism Relief Fund (TRF)as a new activity in response to the COVID-19 pandemic and its impact on SMMEs in the tourism and hospitality sector distressed by decimated tourism activity. The Department re-directed the financial and human resources towards the implementation of the project. The TRF was funded through the reallocation of R200 million. Further to this, the Department rolled out a Relief Fund to assist distressed Tourist Guides who have been impacted by the countrywide Disaster Management Measures to mitigate the COVID-19 pandemic. This is applicable to registered freelance Tourist Guides who operate independently (without any formal employment). This is commended as the tourism industry comprises many SMMEs and was the worst impacted by the travel restrictions.

Poor project planning and implementation

The Department has struggled to implement projects due to challenges related to poor planning and project management. The Department also continues to experience delays in appointing service providers to implement the planned projects. During this reporting period, the Committee also noted that the Department experienced challenges with contract management. This is prevalent in instances where service providers and other third parties fail to deliver on projects awarded to them for implementation. This results in the delays that could have been avoided had the Department conducted proper project planning and contract management.

These are recurring challenges as the Department has unremittingly experienced the same challenge over the past years. Consequentially, poor project planning and contract management culminate in the non-implementation or partial achievement of predetermined objectives, thus the Department fails in fulfilling its mandate. The Committee acknowledges the improvements that the Department is reportedly in the process of introducing in order to improve project management within the organisation. This will be closely monitored.

Funding for transformation purposes

The Committee commends the Department for implementing the Tourism Transformation Fund and the Tourism Equity Fund. These two funding vehicles are viewed as pivotal in facilitating participation by the previously marginalised communities. The Committee is, however, concerned at the rate of the take and slow pace of implementation for both funds. The Committee has previously also raised concerns about the stringent criteria that exclude most of the intended beneficiaries of these funding vehicles. The reported efforts of making the funding criteria accessible are noted and the Committee will continue monitoring developments in that regard.

The role of foreign missions in expanding tourism markets

The Committee views the role of the foreign missions as a vehicle that could be used to increase the marketing footprint of the country and expand the international markets. The South African missions abroad are underutilised with regard to marketing South Africa as a preferred tourism destination. The Committee noted that the Department is engaging the Department of International Relations and Cooperation (DIRCO) on how to expand the tourism reach using the South African missions abroad. The Committee is of the view that these engagements should specifically target the countries that South Africa has yet not invested in with regard to tourism marketing. The Committee also noted that the Department will reportedly be implementing the policy framework that has already been developed to support South Africa missions for tourism development and growth. The Committee awaits further details on implementation in this regard. On the other hand, the Committee noted that the SA Tourism Board has started a process of investigating how the country offices can be effectively used. This calls for both the Department and SA Tourism to work together in figuring out how the SA Missions and country offices could be effectively utilised to maximise marketing whilst using the available resources effectively and efficiently.

Intergovernmental coordination and public-private sector collaboration

The Committee has always made observations and recommendation for the Department to facilitate intergovernmental cooperation and maximise public-private sector collaboration. However, these have not yielded desired outcomes as there is slow progress in these areas. Given the Committees’ oversight approach that is based on cooperation amongst all stakeholders, the Committee is making a number of specific interventions required from each government department to facilitate effective oversight on these matters.

Observations with regard to South African Tourism

The following observations were made in relation to South African Tourism from the Report of the Auditor-General and the analysis of the Annual Report:

Issues for consideration in the reporting period

8.2.8 Addressing the audit findings

The Committee observed that the Entity was unable to adequately resolve the issues raised by the Auditor-General in the previous year’s reporting. This culminated in the Entity still incurring a number of material findings in areas such as irregular expenditure and internal controls. The Entity should assure the Committee that their internal controls, including internal auditing, are able to assist the organisation in eliminating all the systemic and organisational deficiencies that lead to negative findings by the Auditor-General.

Record keeping and finance systems

The Committee noted that SA Tourism has major systemic issues with regard to compiling financial statements and record keeping. The Oracle system currently being used is not enough to comply with auditing imperatives as the Entity deals with transactions in the country and from country offices abroad. The Committee was satisfied that the Entity is embarking on technology improvement through the automation process that will assist with financial analysis and reporting. The Committee will make a follow up on this matter to ensure that the Entity improves on record keeping and financial systems to avoid repeat findings.

MoUs with provinces

The Committee noted with appreciation that the Entity works closely with the provinces whereby the Chief Executive Officers and Chief Marketing Officers have established structured platforms of engagement where they discuss marketing strategies and collaboration on a wide array of matters. However, the Committee was concerned that such collaborations are not being pursued at the level of the Boards. The Committee was, however, satisfied with the assurance from the Board that the cooperation and collaboration at a Board level will be pursued in the near future. The Committee will follow up on this undertaking made by the Board.

Second wave ofthe COVID-19 pandemic

The Committee noted with concern the negative impact that the second wave of COVID-19 infections would have on the work of SA Tourism and the tourism sector at large. As SA Tourism begins to market South Africa to domestic and international markets it is imperative that marketing messages are paired with campaigns on safe travel and the requirement to observe safety protocols as prescribed by the government and the sector. The Committee acknowledged that the government and the National Coronavirus Command Council(NCCC) are monitoring the trends. The Committee also notes that South Africa is at an advantage at the moment compared to other source markets as the country is going into long summermonths which may supress the pandemic as it is more of a winter virus. However, mass gatherings remain a concern as they are super spreaders and restrictions on gatherings continue to affect the MICE sector. The Committee also noted the possibility of having a vaccine in future but that it will be costly for ordinary citizens.

The worst impact of the second wave is being felt from the source markets. From a tourism point of view, the second wave, even if not experienced in South Africa, remains a concern as the source markets remain closed or under strict travel restrictions. At a domestic tourism front, the trend is that recovery is taking place at the facilities located in the rural tourism settings and far away from the major cities. The cities have not started to experience recovery whilst the outskirts have started to see the much needed domestic tourism activities.

Importance of the Africa market

In the past, the Committee has made recommendations about the need for SA Tourism to develop targeted markets such as India, China and Africa. The African market remains a missed opportunity, particularly during these difficult times in the core markets. The Committee noted the efforts of the Minister in engaging her provincial counterparts in targeting the Africa market for the recovery of the sector. The focus is on Africa land for holidays, shopping and other reasons for travel to South Africa. From the airport and boarder perspective, the Committee noted that the Entity is working closely with the Department of Home Affairs to disseminate information about what to expect and do when arriving in South Africa. The Committee urges the Entity to strengthen the relationship with Home Affairs as information dissemination and facilitation of travel is going to be a key feature for future marketing activities and improving confidence about South Africa as a safe tourism destination.

Aviation concerns

The recovery in the international arrivals mainly depends on the airlines flying to South Africa. The Committee noted with concern that the health protocols are not standardised across countries and that this causes an uneasiness amongst airlines to flyto certain destinations, including South Africa as they are confronted with restrictions. At the moment, most airports around the world are operating below 50 percent capacity. In addition to these challenges, South Africa is a long haul destination and international travellers are sceptical to travel long distances, having to connect in other countries. The woes at South Africa Airways have made the situation worse for the African market as travellers from Africa have to fly and connect out of Africa to come to South Africa. SA Tourism is urged to look into these concerns related to the airlift to boost recovery.

8.2.14 Causes for decline in tourist arrivals

In addition to the impact of the COVID-19 towards the end of the financial year, the decline in tourist arrivals to South Africa can be attributed to various barriers to entry in the country, such as safety and security as well as the visa regime. The Entity should continue advocating eradication of these barriers to entry. The Entity is urged to continue working on these matters and ensure that the focus on tourism recovery is a comprehensive effort that also addresses the pre-COVID-19 challenges faced by the sector.

8.2.15 Positive impact of campaigns implemented to showcase South Africa

The Entity should be commended for the number of campaigns implemented to showcase South Africa as a safe and friendly tourism destination for individuals and families. These campaigns, coupled with the e-Visa system, have aided the Entity in mitigating some of the barriers to encourage more people to visit and explore South Africa. The Entity also continued its efforts of promoting domestic tourism and encouraging South Africans to travel and enjoy their country through the Sho’t Left campaign. As a result, domestic travel grew by 63 percent, with a total of 28.2 million trips for the reporting period.

8.2.16 Future state of the MICE sector

The Committee observed that the future of the MICE sector will be hybrid meetings. The MICE sector plays a pivotal role in international arrivals and tourist spend. The Entity has already suffered in their planned activities due to the strain brought to the MICE sector by the current international travel restrictions. The Committee acknowledges that the impact of current travel restrictions will also be felt in the future performance audits. The Entity is, therefore, encouraged to develop a Hybrid Events Strategy that takes into account the impact of the pandemic into the work of the National Conventions Bureau.

RECCOMMENDATIONS

The Committee, after a careful consideration of the Annual Reports of both the Department of Tourism and South African Tourism in the implementation of the budget appropriated for Vote 33makes recommendations to the Minister of Finance and Minister of Tourism respectively, for responding on or before the end of the 2020/21 financial year - 30 March 2021.

Recommendations to the Minister of Finance

It is recommended that the National Treasury:

Reimburses the Department of Tourism with the R1 billion that was returned to the national fiscus.

Assists SA Tourism on compliance with the procurement processes on transactions conducted in foreign country offices.

Assists SA Tourism with determining the process to be followed to maximise TOMSA Levy collection from the tourism businesses.

Provides ring-fenced funding to promote tourism development in villages, townships and small dorpies.

Generic recommendations for the Department of Tourism and South African Tourism

It is recommended that the Minister ensures that both the Department and SA Tourism:

Respond timeously to all Committee recommendations on all reports to assist the Committee in conducting effective oversight on the issues raised.

Ensure that the expenditure of the budget appropriated is used effectively and efficiently and that the achievement of predetermined objectives always corresponds with the expenditure.

Engage the National Treasury to reimburse the budget that was surrendered to the national fiscus to combat the impact of COVID-19 pandemic as the international borders have been opened and there is an urgent need to resume international marketing activities.

Develop Action Plans to address the findings of the Auditor-General to prevent repeat findings and share the plans with the Committee.
Strengthen internal controls and internal audit to improve effectiveness and efficiency to eliminate organisationaldeficiencies.

Provide feedback on the implementation of the commitments and undertakings made by the Accounting Officers and the Minister in addressing the Auditor-General findings and the Committee recommendations.

Strengthen consequence management for the maladministration committed by the staff to serve as a deterrent for further maleficence, including suspending and dismissing offenders, and report to the Committee on the actions taken.

Expedite the process of gazetting the Tourism Recovery Plan and the Norms and Standards for Safety Protocols in the tourism sector in order to instill confidence in the international markets to improve perceptions of South Africa as a safe and preferred destination.

Develop a clear list of all projects to be implemented in the Villages, Townships and Small Dorpies (VTSDs) according to provinces and municipalities.

Conduct a study to determine the nature of future tourism jobs as influenced by emerging technologies and the new normal imposed by COVID-19.

Develop a mechanism to continuously record and collate information on the number of jobs that are impacted by COVID-19 using a model that will yield insight into future employment trends in the tourism sector.

Engage the National Treasury to blacklist all service providers who default on their contracts and report to the Committee on the number of such service providers.

Develop a comprehensive Stakeholder Engagement Plan to tackle the barriers of entry to South Africa (such as the visa regime, tourist safety, animal interaction and airlift) and provide regular reports to the Committee on progress made in engaging all relevant stakeholders.

Intensify the initiatives intended to create awareness and educate tourism businesses and the general public on the tenets of the B-BBBEE Sector Codes and their application in the tourism industry.

Recommendations with regard to the Department of Tourism

The Minister should:

Expedite the process of reviewing the tourism policy in order to commence with the process of legislative review.

Conduct an econometric study to quantify the exact budget required to market the country effectively across various markets, and share the preliminary results of the study with the Committee to determine if there are further inputs necessary.

In case of Expanded Public Works Projects:

Ensure that the Department strengthens procurement and contract management,especially for the projects implemented by external service providers to ensure that they adhere to all inherent and applicable legislations.

Strengthen internal capacity for the implementation of infrastructure built projects through appointing a resident engineer who will assist the Department with project planning and managing the DBSA interventions.

Develop a concrete plan to implement the infrastructure built projects, that includes a Maintenance Plan, or Project After Care as informed by the experience in the implementation of such projects.

Share the forensic report with the Committee on the Expanded Public Works assessment of infrastructure projects.

Continue to strengthen project planning and contract management to eliminate delays in the implementation of projects.

Conceptualise more infrastructure projects in the VTSDs to increase participation of previously excluded citizens.

Remodel the Tourism Transformation Fund and the Tourism Equity Fund to assist more emerging tourism businesses.

Improve the uptake on the Tourism Transformation Fund and Tourism Equity Fund through simplifying qualification criteria.

Develop an Investment Plan and engage more private developers to implement the outcomes of the Tourism Master Plans commissioned by the Department and provide quarterly feedback in that regard.

Work closely with the Culture, Arts, Tourism, Hospitality, and Sport Sector Education and Training Authority (CATHSSETA) to improve the quality of training offered to the hospitality and tourism sectors; improve the technical application system and make it user friendly; expedite the certification of completed qualifications, especially Tourist Guides; offer more and diverse training on tourism related qualifications and lobby for more funding for the SETA to ensure quality skills training in the tourism sector.

Engage the Department of Transport and its entities and develop an Action Plan on addressing the National Airlift Strategy to open up destination South Africa and servicing small town airports to improve the geographical spread of tourists, lobbying for the ratification of the Yamoussoukro declaration to expedite the implementation of the open skies policy by African countries, the role played by the Airports Company South Africa (ACSA) in facilitating tourism, harmonising the airport taxes to reduce the price of air tickets thus encouraging travel, facilitating the renewal of tour operator licenses by the National Public Transport Regulator (NPTR) and generally improving the road infrastructure to deal with its negative impacts on tourism routes and attractions, especially in rural areas, and other related matters.

Engage the Department of Cooperative Governance and Traditional Affairsand develop an Action Plan on the identification and support of tourism enterprises at Villages, Townships and Small Dorpies, incorporation of tourism in Local Economic Development Plans (LED) and Integrated Development Plans (IDP) with adequate budget, capacitation of politicians and staff at a local government level, development of appropriate bylaws that promote and protect tourism at a local level, ensure that local government provides necessary service delivery and zoning to facilitate tourism development, formation of tourism institutional arrangements at a local level, maintenance of local attractions and tourism infrastructure, and other related matters.

Engage the Department of Arts, Culture, Sports and Recreationand developan Action Plan on the development of heritage and cultural tourism; maintenance of heritage and cultural tourist attraction sites, development of routes, and other related matters.

Engage the Department of Policeand develop an Action Plan on developing a rapid response mechanism for tourist under distress after unfortunate incidences of crime; identifying tourism crimes hotspots; developing and providing various safety measures for tourists, including visible policing and patrols by South African Police services, Metro Police and Safety Monitors of the Department of Tourism at tourist attractions, and other related matters.

Engage the Department of International Relations and Cooperationand develop an Action Plan on the integration of South African Missions abroad to extend the international reach of marketing activities, especially in countries where South African Tourism does not have country offices, creating a positive brand image for destination South Africa, tracking and implementation of tourism bilateral agreements with various countries, and other related matters.

Engage the Department of Home Affairsand develop an Action Plan on creating ease of access to South Africa through improving the visa regime by introducing e-Visas, extending Visa exemptions for identified markets, implementing biometric visa systems, i.e. implementing the E-gates at major entry points and collecting and collating tourism statistics, and other related matters.

Engaging the Department of Basic Education and develop an Action Plan on the elevation of tourism as one of the subjects of choice in schools, collaboration on tourism awareness and education programmes, including the National Tourism Careers Expo, re-introduction of school tours and packaging school tours products and developing quality tourism curriculum for schools, and other related matters.

Engaging the Department of Higher Education, Science and Innovationand develop an Action Plan on the elevation of tourism as one of the qualifications of choice at universities, collaboration with universities on tourism research projects, conceptualising and hosting of tourism colloquia, and other related matters.

Engaging the Department of Finance/ National Treasury and develop an Action Plan on recognising the value of the tourism sector in the economy of South Africa through its contribution to the Gross Domestic Product, Foreign Direct Investments, export nature of the tourism sector, total employment, and domestic tourist spend; quantifying the adequate funding needed to fund the tourism function in South Africa; appropriation of adequate funding to the tourism Vote; procurement of tourism goods and services by the government and payment of tourism accounts within 30 days; compliance with procurement laws in foreign offices, ring-fencing budget for special tourism projects in villages, townships and small towns, and other related matters.

Engaging the Department of Environmental Affairs, Forestry and Fisheriesand develop an Action Plan on the empowerment and involvement of local communications residing around the National Parks in the tourism value chain; making concessions for emerging tour operators and local communities affordable; safeguarding the future of South Africa as a sustainable tourist destination through regulation of canned hunting and animal interaction; creating affordable access for South Africans to National Parks; and other related matters.

Engaging the Department of Communicationsand develop an Action Plan on making internet access affordable to emerging tourism entrepreneurs to enhance tourism development and tourist experience, facilitating digital tourism development such as Augmented Reality and Visual Reality, and other related matters.

Engaging the Department of Healthand develop an Action Plan on the development and adoption of Norms and Standards (safety protocols) to prevent the spread of communicable diseases at tourist attractions, such pandemics like the corona virus; the development and implementation of Medical Tourism, and other related matters.

Engage the Department of Public Enterprisesand develop an Action Plan on the identification and servicing of new lucrative international routes by South African Airways, integration of South African Airways on marketing strategies; importance of SAA on servicing the African market and other existing core markets; stabilising electricity supply to prevent load shedding that negatively affects the tourism industry, and other related matters.

Engaging the Department of Agriculture, Land Reform and Rural Developmentand develop an Action Plan on dealing with the impact of the land reform programme on the tourism sector, identification and realisation of agritourism as a potential niche market in South Africa; impact of captive animal breeding and animal interactions; and other related matters.

Engage the Department of Trade and Industryand develop an Action Plan on recognising tourism as an export sector, thus improving lobbying for more budget appropriation by the National Treasury; the impact of the B-BBEE sector codes on transforming the tourism sector; procurement of tourism goods and services by the government; and the importance of tourism in the positive trade balance of the country.

Engage the Department of Small Business Developmentand develop an Action Plan on advancing the role of small tourism businesses in the economy, the support available to small tourism businesses and the possible collaboration with the Department of Tourism on the development of tourism SMMEs, and other related matters.

Engage the Department of Human Settlements, Water and Sanitationand develop an Action Plan on the importance of reliable supply of quality water in the tourism industry; tourism gentrification (socio-spatial impacts of urban tourism); neighbourhood change and the prospects of Township/Slum Tourism, and other related matters.

Engage the Department of State Securityand develop an Action Plan on the intelligence on crimes perpetrated against tourists, organised crime disguised as crimes against tourists, the intelligence on xenophobic crimes and its impact on the destination brand image, and other related matters.

Recommendations with regard to South African Tourism

Although SA Tourism received an unqualified audit for the year under review, the Committee observed a number of institutional, systemic, legislative and governance concerns. It is recommended that the Minister of Tourism engages the Board of South African Tourism to:

Ensure that financial statements submitted for auditing purposes are prepared in accordance with the prescribed financial reporting framework as required by Section 55(1)(b) of the PFMA to prevent material misstatements.

Strengthen internal controls through taking effective and appropriate steps to eliminate deficiencies by improving on compliance with applicable legislation, improving on internal processes and internal audit function, improving on internal systems and tracking performance against the predetermined objectives.

Take effective and appropriate steps to prevent irregular expenditure through proper contract management and expenditure management in relation to National Treasury instructions, and strengthening compliance with prescribed procurement prescripts.

Develop an effective system to improve on compiling financial statements and record management on performance information to eliminate misstatements and ensuring usefulness and reliability of evidence submitted for audit purposes.

Engage the National Treasury to improve on procurement and contract management for transactions in foreign country offices.

Develop a detailed plan for attracting the Africa market in the current Marketing Investment Framework to mitigate the impact of COVID-19 on the arrivals from the traditional core markets.

Provide quarterly updates on the highlights and milestones reached in the implementation of the new Marketing Investment Framework.

Intensify domestic tourism campaigns with the private sector to boost domestic tourism and provide quarterly reports on progress made.

Develop a partnership model with all relevant stakeholders to improve and coordinate marketing activities, and provide quarterly feedback on their implementation.

Study the effectiveness and efficiency of hybrid meetings as a new normal and the impact this has on business tourism in South Africa in general and the operations of the National Conventions Bureau in particular, and develop a Hybrid Meetings Strategy.

Develop a detailed plan for the stimulation and support of the emerging tourism enterprises.

Provide detailed information on how the South African Missions abroad have been incorporated in expanding the marketing reach for the country across international markets.

Improve on the recruitment process to address vacancies and attract suitable staff with requisite skills.

Provide progress on the government initiative to rationalise public entities and the impact on the mandate of South African Tourism.

CONCLUSION

The Committee is generally satisfied with the financial and non-financial performance of the Department of Tourism and South African Tourism on their 2019/20 financial year. The Committee also commends the Department for the improvement on the audit outcomes from a qualified audit in the 2018/19 financial year to an unqualified audit in the 2019/20 financial year. The operating environment for these two organisations is volatile as tourism depends mainly on the cooperation of national and international organisations and is sensitive to the fluid global trends. The COVID-19 also presented an unprecedented health challenge in the sector. The Committee acknowledges that tourism is a resilient sector and is poised for recovery. The Committee is also confident that the Minister, the Board of SA Tourism and the staff in both organisations are capable to steer the sector to great heights. The Committee is of the view that both organisations have a room to improve on their current performance as the target of 21 million arrivals by 2030remain unchanged.

The Committee will continue conducting oversight on the issue raised in this report. To achieve this, the Committee makes a call to all the public and private sector stakeholders to be partners in the journey to make tourism work for all.

Report to be considered.

Documents

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ATC201119: Budgetary Review and Recommendation Report of the Portfolio Committee on Tourism, dated 17 November 2020

Tourism

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