ATC220301: Report of the Portfolio Committee on Tourism of Quarter 1 and Quarter 2 Performance Report for 2021/22 Financial Year, Dated 1 March 2022

Tourism

REPORT OF THE PORTFOLIO COMMITTEE ON TOURISM OF QUARTER 1 AND QUARTER 2 PERFORMANCE REPORT FOR 2021/22 FINANCIAL YEAR, DATED 1 MARCH 2022

 

The Portfolio Committee on Tourism, having considered the First and Second Quarter Performance Report of the Department of Tourism (Department) and South African Tourism (SA Tourism) on 8th February 2022, reports as follows:

 

1. Introduction

 

The Department and SA Tourism conducted their Quarter 1 and Quarter 2 service delivery functions within an environment riddled with COVID-19 challenges. The two organisations could not achieve some of their pre-determined objectives as these were negatively impacted by prevailing conditions. In this context, by the end of Quarter 1, the Department had achieved 48 (71.64%) and spent R637.9 million (26.3%) of the R2 429.6 billion budget allocation. By the end of Quarter 2, the Department had achieved 44 (72.13%) of the 61 targets identified for the quarter, and spent R864.9 million (35.6%) of the R2 429.6 billion budget allocation.

 

1. Department of Tourism - Service Delivery Environment

 

The service delivery environment affected the various Programmes of the Department in the following manner:

 

2.1     Tourism Research, Policy and International Relations

 

Tourism Recovery Plan – implementation context: Department of Tourism briefed the Committee that the recovery environment is continuously affected by changes to the macro environment resulting in uncertainty:

• However, working with sector partners, implementation is in progress.
• The onset of the third and fourth wave of COVID-19 infections leading to the extension of lockdown restrictions;
• The COVID-19 TERS benefit was extended by Government for certain categories of employees during this period which was welcomed by the private sector.

Social unrest which affected the KwaZulu-Natal and Gauteng Provinces, but also the country as a whole in respect of confidence in the country's social stability and brand;  The two provinces account for about 50 percent of the national GDP (Source National Treasury)

• Vaccination against COVID-19 was rolled out for various age categories in the period namely: 17 May- age 60; 15 July- ages 50-59; 1 August- ages 35-49; October- age 18 upwards.
• Norms and Standards for safe operations was approved by Cabinet in August 2021 and gazetted for implementation in December 2021;
• Industry is continuously monitoring the implementation of   Covid-19 protocols in the sector and the Hospitality Industry in particular.

 

South Africa’s response to travel bans:

 

• The travel restrictions had an adverse impact on the tourism industry, as they triggered mass cancellation of bookings affecting the December period and beyond due to uncertainty.
• According to media research, as at 1 December 2021, travel restrictions implemented by other countries on South Africa increased from 60 restrictions in mid-2021 to 87 restrictions in December 2021. These restrictions included “suspended travel, may be closed to entry, or entry which maybe be possible if you are a citizen/meet strict entrance requirements”.
• The Minister and the Department engaged selected foreign embassies in the country and SA Missions abroad on the challenges posed by travel restrictions and their impact on the South African economy. This was further supported by the SA Tourism through a Global Advocacy Campaign to position South Africa as a COVID-19 safe destination.
• The Executive Authority convened an urgent meeting with tourism private-sector stakeholders to address how private and public sector could collaborate to mitigate the effects of travel bans related to new COVID-19 variants on the tourism sector.
• Reports from the sector indicate that domestic tourism is showing positive signs and helped mitigate the negative impact of the low arrivals. Industry has been implementing discounts which enabled locals to explore the country.

 

1. Destination Development

 

• The Department managed to commence with inductions and to place EPWP participants in the different tourism and hospitality sites for work place experiential learning. These were mainly from the projects which concluded the procurement processing in the last financial year and were ready at the beginning of this financial year.
• Virtual meetings continued with various project stakeholders in instances where physical meetings were not possible. Site visits, where required, were been limited to small teams.
• Investors are watching the environment because they are not sure when the country will likely return to a full recovery.
• The Department has put together a database of distressed tourism businesses, and it is providing investment facilitation support to distressed high impact tourism projects in the database.

 

2.3       Tourism Sector Support Services

 

• Economic activity and contribution of tourism have been severely depressed due to negative impact of the COVID-19 pandemic and associated lockdown conditions – reduced revenue, reduced foreign exchange earnings, business closure, loss of tourism products and experience, job losses, reduced tax revenue, etc.
• Reduced tourism activity negatively impact or delayed some departmental programmes such as the placing of learners in the skills programmes for experiential learning.
• Cancellation of bookings due to COVID-19 restrictions caused a spike in the number of complaints lodged by tourist demanding refunds.
• More use of technology to adapt to the “new normal”. Webinars replaced the traditional method of hosting and engagement.
• Legal action challenging transformation. Through the court decision that ruled in favour of the application of the provisions of the Tourism BBBEE in the Tourism Relief Fund was appealed against, and legal action was brought against the Department and Sefa against the Tourism Equity Fund. The interim interdict placed on the Tourism Equity Fund has halted the Department’s efforts to stimulate sector transformation.
• Retrenched youth in the tourism sector acquired an opportunity to be upskilled and re-skilled through our skills development programme.

 

2.4       Corporate Management

 

The Department has developed various business protocols to mitigate against the COVID-19 pandemic national lockdown and associated restrictions to ensure seamless operations continue. A hybrid staff rotation system was established which included physical reporting to the office and remote working. COVID-19 protocols on isolation and quarantine were also observed when positive cases were reported. Systems and mechanisms are also in place to ensure employee safety and the Department continues to provide psychosocial support to staff to assist with coping strategies on the impact of the COVID-19 pandemic, to enhance service delivery and achieve a work-life balance.

 

Diverse platforms were strengthened to enhance communication and ensure business continuity, within all departmental units.  Branches continued to engage virtually with their stakeholders. The impact of COVID-19 also resulted in a worldwide shortage of computer components and slow delivery of equipment due to less cargo flights around the world.  Procurement was also affected because service providers are also reluctant to quote, which means in a number of cases, quotes expire before a purchase order can be issued. The Department has developed and implements a Combined Assurance Model for Performance Information Procedure. The model seeks to strengthen the integrity of the organisational performance information system, integrity of organisational performance information, as well as records management discipline.

 

The COVID-19 pandemic required of Human Resources and Development function to migrate from manual paper based to online applications system and also introduced changes in the process of managing recruitment in order to mitigate against the risks of contracting the virus through contacts and interacting with documents. An email portal was created for submission of applications for vacancies but the change in the system and adjustments resulting in some delays. The implementation of the ceiling by National Treasury on the compensation budget resulted in many vacant positions declared unfunded. The inability to fill vacant positions on the establishment impacted on the Department’s ability to reach the target of 50 percent women presentation at SMS level in the Department.

 

1. Overview and assessment of programme performance

 

The Department executes its mandate through four programmes, i.e. Administration; Tourism Research, Policy and International Relations; Destination Development; and Tourism Sector Support Services.

 

Table 1: Quarter 2 performance against the predetermined objectives

Branches	Achieved	Not  achieved; significant work done	Not achieved; intervention required	Insufficient information  to express opinion
Corporate Management	83.33% (15 of 18)	72,13% (44 of 61)	0.00% (0 of 18)	0.00% (0 of 18)
Tourism Research, Policy and International Relations	86.67% (13 of 15)	6.67% (1 of 15)	6.67% (1 of 15)	0.00% (0 of 15)
Destination Development	88.89% (8 of 9)	11.11% (1 of 9)	0.00% (0 of 9)	0.00% (0 of 9)
Tourism Sector  Support Services	42.11% (8 of 19)	26,32% (5 of 19)	31,58% (6 of 19)	0.00% (0 of 19)
Total	72,13% (44 of 61)	16,39(10 of 61)	11,48% (7 of 61)	0,00% (0 of 61)

Source: Department of Tourism Quarter 2 report for 2021/22

 

Table 1 depicts the achievement of predetermined objectives in each Programme. By the end of the first quarter of the 2021/22 financial year, the Department was able to achieve 48 of its 67 identified quarterly targets, with 8 (11.94%) targets partially achieved and 11 (16.42%) requiring intervention. By the end of the second quarter of the 2021/22 financial year, the Department was able to achieve 44 of its 61 identified quarterly targets, with 10 (16.39%) targets partially achieved and seven (11.48%) requiring intervention. Programme performance discussed in the following section primarily focuses on the Department’s quarter two performance.

 

3.1       Programme 1 - Administration

 

The Department achieved 15 (83.33%) of its 18 targets by the end of the Quarter 2. The following are noteworthy in the Department’s performance by the end of  Quarter 2:

 

The Department reported a variance in its vacancy rate at 12.5 percent from the annual target of 10 percent. It ascribed this variance to an increase in the expiry of employment contracts within the Ministry sub-programme. The target on 50 percent women representation at Senior Management Service (SMS) level was achieved for Quarter 2. The Department maintained its minimum representation of employees with disabilities at 4.4 percent, thus exceeding the target of a minimum of 3 percent representation of employees with disabilities.

 

The Department also continued with its support of small micro medium enterprises, with 68.62 percent spent procuring from said businesses during Quarter 2. This exceeded the minimum 30 percent expenditure target set by the Department. Unfortunately, the Department did not achieve its target on the 100 percent payment of invoices within the stipulated 30 days to service providers, achieving only 97.92 percent of this target. The Department reported that the target for the development of a framework for procurement of commercial venues was not achieved in Quarter 1. However, venues were procured in Quarter 2 without the mentioned framework.

 

1. Programme 2 – Tourism Research, Policy and International Relations

 

The Department achieved 13 of its 15 targets set under this Programme by the end of the Quarter 2. For both quarters the Department’s spending fell short of its projected expenditure. The slower spending is attributed to the second tranche payment towards South African Tourism, which occurred at the end of October 2021.

 

Performance highlights under this programme include eight monitoring and evaluation reports were produced during the period under review. The Norms and Standards report for safe operations in the sector in the context of COVID-19 and other related pandemics, which is one of the deliverables in the Tourism Sector Recovery Plan, has been developed. The Department reported that it was gazetted for implementation on 3 December 2021. The objective of the norms and standards is to facilitate consensus on minimum universal practices, which the sector will abide by to prevent the spread of COVID-19. This will further provide assurance to potential visitors and all stakeholders that South Africa’s tourism products and services are equipped to operate safely.

 

Performance challenges reported include the target on the incorporation of public comments into the draft discussion document, which entails the review of the White Paper on the Development and Promotion of Tourism, was not achieved. The Department reported that the Draft Discussion Document was not finalised, resulting from delays in soliciting public comments on the document. The target on conducting a quarterly outreach to the diplomatic community focusing on South Africa’s tourism recovery was not achieved. The Department reported that dates for the outreach are still to be confirmed with the Minister.

 

1. Programme 3 – Destination Development

 

The Department achieved eight of its nine targets set for this programme in the Quarter 2. The Department spent 19.7 percent of its budget whilst achieving 89percent of its targets under the programme. The much slower than projected spending is attributed to the COVID-19 second and third waves that delayed the awarding of tenders and the signing of contracts for Skills/Training projects and Hospitality/Tourism Monitors projects.

The Department reported the following performance highlights under this programme include the target on the facilitation of investment promotion platforms was achieved. This is a new indicator for the Department. The Department also achieved its target on the implementation of infrastructure maintenance work in 19 national parks. This is done in partnership with SANParks.

 

The Department reported that support was provided towards the implementation of thirty community-based tourism projects. The formulation of this target is vague, thus making reporting on it unclear. It’s difficult for the Committee to establish what exactly was done, where and how much was spent. This is also a new target, while some of the projects might not be new (e.g. Phiphidi Waterfall) for the Department. The findings of the 2018 Government Technical Advisory Centre (GTAC) report and 2018/19 Auditor-General of South Africa’s (AGSA) forensic investigation on EPWP projects should serve as a warning on unclear targets of this nature. The Department exceeded its target on the number of work opportunities created during Quarter 1. Instead of the planned 574 work opportunities for Quarter 1, 1 997 were created. However, the Department fell short on this target in Quarter 2. Instead of achieving the planned 956 work opportunities, only 395 were created.

 

1. Programme 4 – Tourism Sector Support Services

 

The Department achieved only 8 of its 19 targets under this programme. The much slower than projected spending is attributed to the minimal uptake in Tourism Incentive Programmes (TIP) and incentives due to COVID-19, as well as tranche payments towards the Tourism Equity Fund (TEF), which have been suspended pending the court interdict. The TEF was officially launched by the President on 26 January 2021. On 26 April 2021, an order by the High Court of South Africa interdicted and restrained Sefa from receiving, processing or making any payment pursuant to any application for funding from TEF, pending confirmation of the validity of the criteria of the Fund. The court interdict has delayed spending of the R180 million allocated for TEF in the 2021/22 financial year.

 

The adjudication meeting for the Tourism Equity Fund, planned for Quarter 2, was not hosted. This is as a result of the court interdict placed on the Fund. The targets for both Quarter 1 one and Quarter 2 for the Domestic Tourism Scheme were not achieved. The Department reported delays with the appointment of a service provider due to the development of a new concept document for the scheme. The target on the community-based enterprises incubation programmes was not achieved due to delays with the appointment of a service provider.

 

The targets for both Quarter 1 and Quarter 2 for the WiT Enterprise Development Programme were not achieved. Delays with the appointment of a service provider was cited as the main reason. The annual target on this programme was also not achieved in the 2020/21 financial year. In its previous report, the Department indicated that the procurement process did not yield the desired results. As a result, the programme was moved for implementation to 2021/22.  The Department reported that the target for the implementation of the UNWTO Women in Tourism Pilot Programme in Limpopo Province was not achieved for both quarters. There were delays with the appointment of a service provider, resulting in the programme not being launched.

 

The target on the Implementation of the National Tourism Monitors Programme was partially achieved at the end of Quarter 2. Placement of monitors only took place at SANBI and SANParks, with delays experienced with provinces. The Department reports that this was as a result of delays in the signing of contracts, service provider appointments and supply chain management processes.

 

Delays were experienced with the achievement of targets for the following capacity-building programmes:

• Food Safety Quality Assurers Programme: Three service provinces have been identified for the implementation of the programme, namely the Western Cape (WC), Kwazulu-Natal (KZN) and Gauteng (GP). The programme was implemented in the WC and partially completed in GP. However, a service provider is still to be appointed in KZN.

 

• CHEF/Professional Cookery: Three provinces were identified for the implementation of the programme, namely the Northern Cape (NC), Free State (FS) and North West (NW). The training was only implemented in the NC and partially achieved in the FS. However, a service provider has not been appointed for the NW.

 

• Wine Service Training Programme: The target was partially implemented for both KZN and the WC. Learner orientation did not take place as planned in Quarter 1, thus resulting in the programme not being implemented in Quarter 2.

 

• Hospitality Youth Programme: The targets for both quarters were not achieved. In Quarter 1, recruitment and orientation of learners did not take place as planned due to delays in the appointment of service providers in the different provinces. This affected programme implementation in the Quarter 2.

 

• Support to Thirty Chefs through RPL process: The recruitment, selection and induction of learners was not completed due to delays in procuring a service provider.

 

• Training of 225 SMMEs on norms and standards in nine provinces: The target for Quarter 1, which entailed procuring a service provider, was not achieved, including the recruitment, selection and induction of the SMMEs.

 

1. Budget and expenditure as at the end of Quarter 2

 

The Department of Tourism’s main appropriation amounted to R2 429.6 billion for the 2021/22 financial year. Table 2 depicts the expenditure at the end of Quarter 2.

Table 2: Budget and expenditure review as at 30 September 2021 (Quarter 2)

Programme	2021/22 ENE Allocation (R’000)	Expenditure (R’000)	Expenditure as % of ENE Allocation	Expenditure as % of ENE Allocation	% Variance from ENE Allocation
Administration	305 279	125 443	41%	179 836	59%
Tourism Research, Policy and International Relations	1 382 209	636 174	46%	746 035	54%
Destination Development	305 567	60 133	20%	245 434	80%
Tourism Sector Support Services	436 572	43 192	10%	393 380	90%
Total	2 429 627	864 942	36%	1 564 685	64%

Source: Department of Tourism

At the end of Quarter 1, the Department spent R637.9 million or 26.3 percent of the available budget. This translates into R702.3 million or 52.4 percent lower than anticipated spending against the projected spending of R1 340.1 billion for Quarter 2. The slower spending is mainly attributed to slow spending on goods and services, as a result of delays in the Expanded Public Works Programme (EPWP) and transfers and subsidies due to delayed tranche payments towards the Tourism Equity Fund (TEF), pending the court interdict.

 

By the end of Quarter 2, the Department had spent R864.9 million or 35.6 percent of the available budget. This translates to R751.7 million or 46.5 percent lower than anticipated spending against the projected expenditure of R1 616.6 billion for the quarter. Slower spending under Programme 4: Tourism Sector Support Services was also a contributing factor, mainly due to delayed tranche payments towards the Tourism Equity Fund (TEF), pending the court interdict that has subsequently resulted in the suspension of the roll-out of the fund.

 

The reported reasons for under expenditure are as follows:

 

1. In Programme 1, the bulk of the underspending is attributed to slow spending on the Office Accommodation due to a delay in invoices received from the Department of Public Works.  The large variance in expenditure is due to the Department revising its expenditure plans downwards after submission of the projections for the 2021/22 financial year. This was done in order to stay in line with the 45 percent projected drawings rule for the first four months of the financial year.

 

1. In Programme 2, the underspending is mainly attributed to slow spending by the Department due to the effects of the COVID-19 pandemic on the tourism industry. The lower spending was also driven by slow spending on transfers and subsidies under due to the second tranche payment towards South African Tourism that only took place at the end of October 2021.

 

1.  In Programme 3, the underspending is mainly attributed to slow spending within the Expanded Public Works Programme (EPWP) due to the effects of the COVID-19 pandemic on the tourism industry.

 

1. In Programme 4, the underspending is mainly attributed to court interdict which has delayed tranche payments to the Tourism Equity Fund.

 

1. South African Tourism

 

The Committee noted that SA Tourism had 36 key performance indicators (KPIS) for the 2021/22 financial year. In respect of Quarter 1, the Entity reported on 20 targets. Of the 20 targets reported on for Quarter 1, the Entity had achieved 16 (80%), reported significant progress on 1 (5%), while 3 (15%) were not achieved. In terms of financial performance, the Entity spent R253.6 million (18%) of the R1 417 622 billion budget allocation by the end of the of Quarter 1. For Quarter 2 the Entity reported on 24 targets. Of the 24 targets reported on for Quarter 2, the Entity had achieved 19 (79%), reported significant progress on 1 (4%) and 4 (17%) were not achieved. In terms of financial performance, the Entity spent R488.5 million (34%) of the R1 417 622 billion budget allocation by the end of the Quarter 2.

 

5.1       Overview and assessment of performance

 

The Entity executes its mandate through five programmes, i.e. Corporate Support, Business Enablement, Leisure Tourism Marketing, Business Events and Tourist Experience. The Entity’s performance on its programmes at the end of Quarter 2 of 2021/22 was as follows:

 

 

1. Programme 1 – Corporate Support

 

The Entity achieved 2 (66%) of its 3 targets by the end of Quarter 2 and spent 56.5 percent of its budget. Spending was aligned with programme performance. The Entity reported that:

 

• Invoices to suppliers were paid within the required 30-day period, with payments processed timeously for both quarters. This benefits service providers who rely on this kind of efficiency for the sustainability of their operations.

Equity targets were all achieved as a result of a targeted recruitment drive approved by the Board.

 

• The target on the 40 percent automation of business processes was not achieved. According to the Entity, the scope of work for this project was understated and this is likely to result in the target not being achieved during this financial year.

 

1. Programme 2 - Business Enablement

 

The Entity achieved 4 (80%) of its 5 targets by the end of Quarter 2 and spent 42.9 percent of its budget. Spending was aligned with programme performance. The Entity reported that the following targets were achieved for the quarter:

 

• The Memoranda of Understanding required to work with Provincial Tourism Authorities (PTAs) were concluded. This resulted in the implementation of activity plans in partnership with the PTAs, where about 17 (45%) of the 38 identified action items were implemented.

 

• The survey to establish the new baseline for the SA Tourism Reputation Index was conducted. The Index calculates whether stakeholders see SA Tourism as a leader in the tourism industry in South Africa. The five-year target will be calculated after establishing the baseline.

 

• The annual tourism sector performance report for the second quarter was published on time. The report is significant in keeping track of the sector’s performance and in turn plays a crucial role in informing business strategies adopted to market and grow tourism.

 

• The planned sector engagement meetings were hosted for both quarters. These meetings entailed deliberations with sector stakeholders, with a focus on activities in support of the National Tourism Sector Recovery Plan.

 

The following target was not achieved:

 

• Go-live and support (B2B and B2C portals) – for both Quarter 1 and 2 no progress had been made on the project, as it has come to a halt. The portal is to be used to develop a two-way communication with industry members. The finalisation of the project pends the outcome of a forensic investigation related to the supplier who built the B2B and B2C portal. However, the Entity reported that the forensic investigation had been concluded and the Board would advise on the way forward. 

 

A further target, which was carried over from Quarter 1, namely Number of reports assessing performance of tourism sector produced, was delayed in Quarter 1 and only published in Quarter 2.

 

1. Programme 3 - Leisure Tourism Marketing

The Entity achieved 3 (75%) of its 4 targets by the end of the second quarter and spent 31.1 percent of its budget. The delays with the launch of the global tourism brand campaign resulted in the underspending during the quarter. The report on target performance is as follows:

• The Entity was able to deliver on its target of launching domestic deal-driven campaigns for both quarters, for both the Easter and winter periods. These campaigns served as the main drivers for domestic holiday trips taken during Quarter 1. Domestic tourism continues to be highlighted as a significant pillar for the recovery of the sector. Campaigns launched also included the regional brand campaign, Come Journey with Us, which is significant for increasing intra-continental travel.

 

• Another target achieved include the preparations for tourism activation at the World Expo 2020 in Dubai. According to the Entity, a concept for the exhibition was developed in partnership with stakeholders.

 

• However, the Entity was unable to launch and implement its global tourism brand campaign. It cited restrictions resulting from the COVID-19 pandemic as a deterrent in the achievement of this target during both quarters. The campaign roll-out has been moved to quarter three. 

 

1. Programme 4 - Business Events

 

The Entity achieved all of its 4 targets by the end of Quarter 2 while spending only 26 percent of its budget. The Entity reported that:

• It was able to both develop and launch its global business events campaign. The campaign is targeted at increasing tourism’s contribution to inclusive economic growth by positioning South Africa as a business events destination. This also includes the domestic business events campaign, which is targeted at positioning South Africa as a business events destination for the domestic market.

 

• Twenty-five bids were successfully submitted, as planned for both quarters. The achievement of this target means favourable economic returns for the hosting destinations. Cape Town continues to lead as the favoured business event destination.

 

• In support of promoting inclusive development in villages, townships and small dorpies (VTSDs), the Entity piloted a national business event, the Girls and Boys Friendly Society Annual Conference at the Gariep Dam in the Free State. According to the Entity, provinces have each identified three towns for hosting events; meaning that VTSDs events will be implemented in 27 towns across the country. Three pilot events are planned for the 2021/22 financial year.

 

Due to the COVID-19 pandemic, the Africa Travel Indaba and Meetings Africa were cancelled. In response to this change, the Entity compiled and submitted a request to the Board to host a hybrid Africa Travel and Tourism Conference. The aim was to introduce a different viable platform, which would still create market access and fulfil the objectives of both Meetings Africa and Africa’s Travel Indaba. The Africa Travel and Tourism Summit was eventually hosted as a hybrid event from 19 to 21 September 2021. While this target was not due for reporting under quarter two, it was worth noting.

 

1. Programme 5 – Tourist Experience

 

The Entity achieved 4 (80%) of its 5 targets by the end of Quarter 2 and spent 50.3 percent of its budget. Programme performance entailed the following:

• The target on the Net Promoter Score (NPS) was achieved. The improvement plan was developed and approved. The NPS measures a consumer’s willingness to recommend South Africa to others. It is used to determine customer satisfaction and is also a proxy for brand loyalty. This information is sourced through South African Tourism Departure Surveys.

 

• The target on the grading of tourism establishments was achieved for both quarters. In fact, the Entity exceeded this target in the second quarter, with an achievement of 4 735 establishments graded against a target of 3 983. Grading was one of the targets excluded in the 2020/21 financial year’s annual performance plan, with the aim to lessen the financial burden on businesses in the sector. Its rebounding amidst the continued battering by the COVID-19 pandemic is positive.

 

• The target on the launch and on-boarding of small, medium and micro enterprises (SMMEs) onto the Enterprise and Supplier Development (E&SD) programme was also achieved. SMMEs were on-boarded for various E&SD initiatives led by SA Tourism, including BRICS India Trade Fair, Africa’s Travel and Tourism Summit and the World Tourism Market London.

 

• However, the Entity reports that the target on seat allocation for SMMEs at tradeshow platforms was not achieved for quarter two. This is as a result of there being no trade shows hosted during the quarter.

 

• The Entity further reported that the study to establish the baseline for the Basic Quality Verification programme was completed as planned. The programme seeks to provide basic quality support for SMME accommodation establishments by recognising new entrants in the sector who are not able to be graded at the outset.

 

1. Financial performance

 

The Entity had thus far spent R488 595 million of its budget of R1 417 622 billion for the 2021/22 financial year. The expenditure for Quarter 2 at 34 percent of the total budget was less than the forecasted expenditure of R806 663 million (61%). This shows an underspending by the Entity against its projected withdrawals. Table 3 depicts the spending of the Department in the period under review.

Table 3: Statement of Financial Performance- Expenditure per programme – Quarter 2

Programme	Annual Budget R’000	Expenditure forecast by 30 September 2021 R’000	Expenditure as at 30 September 2021 R’000	percentage of expenditure on total budget	Expenditure on forecasted expenditure to fate
Corporate Support	126 000	72 615	71 307	57%	98%
Business Enablement	84 900	45 062	36 221	43%	80%
Leisure tourism marketing	1 015 222	604 024	315 448	31%	52%
Business events	126 500	48 011	32 895	26%	69%
Visitor experience	65 000	36 950	32 724	50%	89%
Total	1 417 622	806 663	488 595	34%	61%

Source: South African Tourism 2021/22 Quarter 2 financial performance report

 

 

The reasons for the variance are highlighted as follows:

• Corporate support – the 2 percent variance resulted from the delay in the finalisation of the Business Process Automation project.

 

• Business Enablement – the movement in cumulative spend from Quarter 1 was due to the finalisation of the departure survey and insights and analytics projects.

 

• Leisure Tourism Marketing – resulted from an increase quarter on quarter, which was due to an investment in marketing activities aimed at generating demand whilst protecting the South African tourism brand.

 

• Business Events – the cumulative increase from Quarter 1 was due to Africa’s Travel and Trade Summit, which took place in Quarter 2.

 

• Visitor Experience – the variance was due to quality assurance projects executed during Quarter 2. 

 

1. Committee observations

 

After a careful scrutiny of Quarter 1 and Quarter 2 financial and non-financial performance for the Department and SA Tourism, the Committee made the following observations:

 

6.1       Observations in relation to the Department of Tourism

 

1. Expenditure patterns

 

The Committee raised concerns that at the end of Quarter 2 the Department had only spent 36 percent of its allocated budget. This painted a picture that the Department will be unable to spend the appropriated budget by the end of the financial year. However, the Committee had some comfort in the explanation by the Department explained that the reported 36 percent expenditure was only restricted to the first six months reporting period. The Committee was assured that in Quarter 3 and Quarter 4, the overall performance picture will show a much improved outlook on spending patterns. 

1. Causes of underperformance

 

The Committee observed the recurring reasons of underperformance which remain unabated. These have caused the Department to underperform against the predermined objectives which culminate in underspending. The causes for underachievement remain:

1. Change in Executive Authority – the change in Executive Authority impacted on a number of projects. The Department could have appraised the Ministry about the projects that need direct interventions and prioritised accordingly.

 

1. Court interdict – the Tourism Equity Fund is currently held in abeyance due the court interdict. This had serious implications for Programme 4.

 

1. Delays in implementing planned projects – the Department delayed in adjudicating and approving the Green Tourism Incentive Programme (GTIP) applications. This is unacceptable as this is a failure by the internal departmental processes to approve and adjudicate on applications.

 

1. Delays in appointing service providers – the Department experienced delays in appointing service providers.  This had an impact on a number of projects. Some of the affected projects are:

• Delays in appointing service providers for the community-based tourism projects. The delays in appointing two service providers for the community-based enterprises incubation programme works against the Committee’s focus in enhancing tourism development in the villages, townships and small towns. This delay means the community enterprises will struggle to recover from the impacts of the sector shut down imposed by the COVID-19 lockdowns.
• The Service provider(s) to implement the Domestic Tourism Scheme was not appointed. This works against the prospects of domestic tourism driving the recovery of the sector.
• The UNWTO Pilot Programme in Limpopo Province: Mopani and Vhembe Districts was not implemented.

 

1. Poor coordination in projects implemented with third parties

 

The Department continued to experience poor planning and coordination of projects implemented with third parties. On the implementation of the Tourism Monitors Programme nationally in line the project plans for 9 provinces, SANBI, SANParks and iSimangaliso Wetland Park Authority, the Department experienced:

• Prolonged planning process caused by the delays in signing of contracts for the 7 provinces.
• Services providers still to be appointed for the other 2 provinces and delays were due to Supply Chain Management processes.
• Induction in the City of Johannesburg for the Food Safety Quality Assurer Programme could not take place because of the delay in the conclusion of the Service Level Agreement.
• In regard to the Chef/ Professional Cookery, the following challenges were experienced:

• In the Free State, recruitment, selection was done. However, the orientation of learners could not commence since the Business Plan was not signed. The Service Level Agreement however concluded.

 

• In the North West, recruitment, selection and orientation was not done because a service provider was not appointed.

 

The Committee is concerned that these kinds of challenges with third parties continue despite numerous calls for the Department to improve on the implementation methodology.

 

1. Negative impact of underachievement of pre-determined objectives

 

The Committee was concerned that the underachievement of the predetermined objectives with the associated underspending has a negative impact on service delivery. The Committee raised the following negative impacts of underachievement:

 

1. Delays in the Policy Review Process – the delays in incorporating public comments into the discussion document has led to the target not met. This might be linked to the change in Executive Authority whilst the process was underway. The Department should work close with the Ministry to expedite the process.

 

1. The court interdict on the Tourism Equity Fund is delaying the transformation imperative as directed by the Committee. This is a matter that needs to be closely monitored by the Committee as it has a direct impact on the legacy of the work done by the 6th Parliament Portfolio Committee on Tourism.
2. The delays in adjudicating and approving the Green Tourism Incentive Programme (GTIP) has led to delays in service delivery work of the Department. Although two catch-up adjudicating meetings were held in Quarter 2, the delays should not have been incurred in the first place.

 

1. The delays in implementing the Domestic Tourism Scheme does not auger well with the Committee’s recommendation for the Department to focus on domestic tourism as a vehicle for sector recovery in the wake of weak international tourism. This may lead to the sector taking longer to recover than anticipated.

 

1. The delays in implementing the women in Tourism (WiT) Business Development and Support Programme to support 25 women-owned SMMEs per Province continues the underdevelopment plight of women in the tourism sector. This is against the Committee’s drive to uplift women in the tourism sector.

 

1. Concerns with Programme 4 performance

 

The Committee was concerned that Programme 4: Tourism Sector Support Services, continues to underperform as compared to the other three Programmes of the Department. The Committee noted that this Branch has always experienced challenges with planning, coordination and execution of the pre-determined objectives.  The major concern is that this Programme is failing to achieve its purpose of enhancing transformation, increasing skill levels and supporting the development of the sector to ensure that South Africa is a competitive tourism destination. Failure by this Programme to achieve 57.69 percent and 57.9 percent and in Quarters 1 and 2 respectively shows that, as usual, this Programmes remains the weakest link in the overall performance of the Department

 

1. Court interdict

 

The Committee raised a concern that the court interdict against the Tourism Equity Fund has affected the entire transformation agenda of the government. The Committee was of the view that a middle-ground that should be found, so that at the end of the financial year, the Department does not have zero expenditure on this allocation. The major cause for concern is that transformation is taking place at a slow pace, yet it is meant to change the plight of the sector.

 

1. Recruitment of the Chief Financial Officer

 

The Committee noted the advanced stage the Department had gone in the process of recruiting the Chief Financial Officer. It was noted that the process was half way through with the Department in possession of the Curriculum Vitae of applicants. The speedy conclusion of the process would give the Committee some comfort in eliminating the recurrence of negative outcomes by the Auditor-General. 

 

1. Policy review process

 

The Committee noted that the discussion document in the Policy Review Process was in its final clearing stage by the Policy Review Panel and would be sent to the Minister. Thereafter, the process will follow government public consultation process that will involve all South Africans, particularly interested and affected parties in the tourism fraternity.

 

1. Challenges in the Supply Chain Management

 

The Committee was concerned that most of the negative audit findings are related to the supply chain processes of the Department. the Committee noted the interventions being implemented to by the Department where the Internal Audit and supply chain personnel now attend meetings of the top management for mutual understanding where challenges are experienced. The head of the SCM is invited to attend some of the meetings to deal with pertinent issues.

 

1. Irregular expenditure and financial losses

 

The Committee noted the R960 000.00 irregular expenditure. The Department indicated that it had reached an understanding with the Office of the Auditor General, that this matter must be taken to the Office of the Chief Procurement Officer, in the National Treasury to provide guidance on how this expenditure should be treated as it pertains to the active tender that was awarded in the previous financial year.

The Committee also noted the R177 000.00 financial loss to the Department pertaining to such expenditure as for government vehicles, third party payments in case of accidents and other related expenditure The Department indicated that it does not budget for losses and the incurred amount has to be written off.

 

1.6.10   Fruitless and wasteful expenditure

 

The Committee was concerned about the continued fruitless and wasteful expenditure. It was not that with a budget of R2.4 billion, at times there would be some small degree of losses. For example, an official will book a flight and on the travelling day the person is sick. The travel agent will cancel and refund the ticket. However, the airport taxes associated costs will not be refunded. The Committee noted that sometimes the fruitless and wasteful expenditure is caused by external factors. The Committee was however satisfied with the explanation that after investigations, if it is found that there was negligence on the part of the employee, the Department recovers the wasteful expenditure.

 

1.6.11   Impact of Global Supply Chains

 

The Committee noted that some of the non-achievement of targets was due to non-availability of required goods in south Africa. Department indicated that one of the challenges experienced during lockdown, was that some of the material to be procured for goods and services had to be sourced from outside South Africa. With computers for example, although the suppliers are local, they had to source the goods from oversees manufactures. It was difficult to have such products, parts and components as they could not be received from outside the country.

 

1.6.12   Consequence management, Employee Performance Management and Development system (EPMDS)

 

The Committee was concerned about the perceived lack of consequence management in the Department. However, the Committee was satisfied with the explanation that whenever there is evidence of malfeasance by an employee, the matters are dealt with accordingly. There is evidence of some employees that have been dismissed due to the application of consequence management.

On employee performance management, the Committee noted that Performance Management and development System (PMDS) involves performance assessment of staff from Level 12 downwards. The performance assessment lies with the immediate supervisor. Where challenges are identified, the employee is assisted through providing necessary developmental assistance. When this has been done but the employees continue to underperform, and this is attributable to employee negligence, it is only then that punitive measures are takes. The EPMDS is thus developmental in its nature, not punitive.

 

1.6.13   Vacancy rate

 

The Committee is concerned about the continued vacancy rate in the Department. It was noted that there were 57 vacancies at the beginning of the year of which 34 were prioritised to be filled. However, due to budget cuts in the Compensation of Employees, not all the 34 vacancies were funded. This is a cause for concern is it caused the Department to continue operating at a sub minimal level.

 

1. Observations in relation to South African Tourism

 

The Committee made the following observation in relation to financial and non-financial performance of SA Tourism:

 

1. Leadership instability at SA Tourism

 

The Committee noted the continued leadership instability at the helm of the Entity which is caused by the many vacant critical positions. the Committee noted the Human Resource Plan discussed on the 25th January 2022, and that the intention was for the Entity to start the new financial year with a stable leadership structure. The recruitment is still work in progress.

The Committee also noted the continued position of the Acting Board Chairperson, which raises concerns as this remains an acting position in an organisation with many acting positions at the executive level. The Committee, however, understands that the tenure of the current Board is coming to the end soon. The Committee, therefore, expects that when the term ends, the Minister will be able to constitute the new Board with a Chairperson. 

 

1. Recruitment of the Chief Executive Officer

 

The Committee noted that SA Tourism is still in the process of recruiting the Chief Executive Officer. The Board had received concurrence from the Minister to continue with recruiting the Chief Executive Officer. A total of 10 candidates were shortlisted in the initial process but no one met the satisfaction of the Board. The strategy has changed to head hunting. A total of 3 candidates have been identified and a selection committee has been established. The Committee was satisfied that the process is envisaged to have been completed by the end of February 2022 and preferred candidate recommended to the Minister for concurrence and appointment.

 

1. Staffing of country offices

 

The Committee noted that with the embargo lifted on the recruitment of staff, SA Tourism had started with the recruitment process for country offices staff. It was noted that the USA market has showed signs of early recovery and was being prioritised for staff recruitment. However, recruitment was underway for all other country offices as the Board had lifted the moratorium on the appointment of new staff.

 

6.3.4     Red list

 

The Committee noted that all markets that placed South Africa on the red-list had been engaged through various means. SA Tourism had developed a market communication strategy and the Department of International Relation and Cooperation was involved. It was appreciated that the ambassadors of the countries based in South Africa were engaged and that as a result of these efforts, Germany was the first country to remove South Africa from the red-list. The Committee noted that SA Tourism intended to engage other European ambassadors in Cape Town towards the end of February 2022 to familiarise them with the South African brand offering and help them in pushing positive messages about South Africa in their respective countries.   

 

1. Events hosting in small towns

 

The Committee appreciated that the hosting of events in small towns had already started. SA Tourism had already hosted 4 events in small towns. Response received was exciting. The 27 small town were sourced through collaboration with all nine provinces. How the 27 towns were chosen, each province identified 3 towns. There was a list that went through a vigorous process to ensure that these towns can hold the small meetings successfully, for example, Parys in Free State is one such town. Going forward this would assist the Entity to have a database of the small towns that can be included in the pipeline of hosting events.

 

6.2.8     Performance management and payment of bonuses

 

The Committee noted that the Entity had changed the way it does its performance management. Since the advent of COVID-19, there are employees who have stepped up and responded to the current working conditions dictated by the pandemic. There also those who have taken advantage of the fluid situation are not responding as expected. Those who are not responding are provided with necessary support. Senior managers had not been paid any bonuses for the past four years in consideration of the dire economic situation in the country and the recent impact of COVID-19.

 

6.2.9     Enterprise & Supplier Development

  

In regard to the Enterprise and Supplier Development Programme, the Committee appreciated that the he programme deals with identification of SMMEs in consultation with provinces. This is meant to ensure end-to-end execution of a programme that culminates in on-boarding the emerging enterprises into the mainstream tourism economy. it was noted that there is a pre-selection process by provinces and that relevant selection criteria are used to identify suitable emerging businesses.

 

1. Recommendations

 

The Committee makes the following recommendations to the Minister of Tourism for responding before the end of the 2021/22 financial year:

 

Recommendations in relation to the Department of Tourism

It is recommended that the Minister of Tourism:

7.1   Ensures that the Department improves on its expenditure patterns with regard to projected budget and actual expenditure in each quarter.

7.2   Ensures that the Department improves on project conceptualisation and planning before projects are incorporated in the Annual Performance Plan, especially projects implemented through third parties.

7.3   Engages the executive management in the Department to understand the recurrent causes of underperformance against the predetermined objectives and ensure that strategies are in place to eliminate future delays.

7.4   Reviews the past and present performance of Programme 4: Tourism Sector Support Services and ensures that this is improved as non-performance in this Programme stifles tourism service delivery in the country.

7.5   Cordially engages the civil and trade unions such as AfriForum and Solidarity in raising awareness about the tourism transformation imperatives and the progressive programmes implemented by government in this regard in order to prevent future court interdicts against sector transformation interventions.

7.6   Ensures that the process of recruiting the Chief Financial Officer is concluded expeditiously to assist the Department in improving on its Annual Financial Statements and preventing possible negative finance related audit findings.

7.8     Implements measures to prevent future irregular, fruitless and wasteful expenditure.

 

7.9     Engages the Tourism Policy Review panel to expedite the process of reviewing the current tourism policy to ensure further legislative amendments.

 

 

Recommendations in relation to South African Tourism

 

7.10   Engages the Board of South African Tourism to expeditiously finalise the process of recruiting the Chief Executive Officer and Chief Operations Officer to bring stability in the executive leadership of the Entity.

 

7.11   Ensures that the Board of South African Tourism implements the measures to improve its financial management as per the Audit Action Plan.

 

7.12   Ensures that she and the Board of South African Tourism engages more ambassadors on keeping the country off the red lists and turn the ambassadors into brand ambassadors.

 

7.13   Engages the Board of South African Tourism to ensure that the National Conventions Bureau directs more business events to the twenty-seven small towns identified for this purpose.

7.14   Engages the Board of South African Tourism to ensure that more tourism SMMEs benefit from the Enterprise & Supplier Development Programme and various initiatives announced by the President during the 2022 State of the Nation Address.

 

1. Conclusion

 

The Committee acknowledges that Quarter1 and Quarter 2 of the 2021/22 financial year took place under the ruinous and constrained environment imposed by COVID-19. The sector performed satisfactorily under these untenable conditions. The Committee continues to be concerned with the poor internal processes that seem to be now entrenched in the both the Department of Tourism and South African Tourism. These poor internal controls and processes have a potential to culminate in negative audit findings at the end of the 2021/22 financial year. The Committee will continue to monitor progress and awaits an improved financial and non-financial performance from both organisations at the end of the financial year.

 

Report to be considered.